EUR 10.00 For Business Accounts Only

Fauji Fertilizer Bin Qasim (FFBL): 4Q2018 EPS of Rs1.4, down 23% YoY; DPS of Rs1/share (Above expectations)

• Fauji Fertilizer Bin Qasim (FFBL) reported profit of Rs1.3bn for 4Q2018, down 23% YoY, still above our expectations mainly due to higher profitability reported by its associates and JV companies (Foundation Wind Power), we believe. This translates into per share earnings of Rs1.4. Result also accompanied cash dividend of Rs1/share for shareholders.
• In its fertilizer business (unconsolidated) the company’s gross margins clocked in at 14.3% during 4Q2018 (vs. 15.4% in 4Q2017), slightly higher than our expectations of 13.6%.
• Net revenue of the company from fertilizer business was in line with our expectations and recorded 6% YoY decline amidst 25% and 34% YoY decline in sales volume of Urea and DAP respectively, while prices of both commodities were higher by 25% and 30% YoY respectively. Overall revenue (consolidated) was also down 6% YoY.
• Finance cost swelled 49% YoY to Rs1.6bn for 4Q2018, mainly due to 425bps increase in policy rate in 2018 and increase in debt borrowing of company.
• For 2018,  other expenses of the company grew by 165% YoY to 1.7bn on back of exchange losses incurred on foreign payables.
• Key risks to our forecast includes: 1) change in regulatory structure in Milk segment, 2) increase in coal and gas prices beyond our assumptions (the primary raw material), 3) barrier to entry in export countries for meat segment and 4) unfavorable GIDC decision.