Fauji Fertilizer Company (FFC): 2Q2018 EPS Rs2.0, +6% YoY (+24% QoQ); DPS Rs 1.4/share (In line with expectations)
- Fauji Fertilizer Company (FFC) declared its financial results for 2Q2018, where company reported EPS of Rs2.0, up by 6% YoY. A slight increase in earnings could be attributed to increase in fertilizer business revenue by 20% YoY amidst increase in urea and DAP prices by 10% and 20% respectively.
- Gross Margins of the company increased by 3.9ppts YoY to 25.3% amid better pricing of urea, as last year company was offering hefty trade discounts of Rs1.6bn on its fertilizer sales.
- Finance cost of the company declined by 41% YoY in 2Q2018 as the company has retired its short term debt obligations amidst availability of cash flows from GIDC accruals.
- Other income was down 35% in 2Q2018 as the company has recorded urea subsidy for the half of the quarter (till May 07, 2018) as per our channel checks. While discontinuation of cash subsidy on DAP during FY17-18 is also among key reasons behind lower other income.
- Effective tax rate during the quarter is 42%, that is in line with our assumptions as the company has recorded super tax. Share of profit from associates declined drastically by 89% YoY to Rs63mn in 2Q2018 amid higher losses posted by its associate company Fauji Fertilizer Bin Qasim (FFBL).
- The company announced interim dividend of Rs1.4/share, taking 1H2018 DPS to Rs3.15.
- Key risks to FFC include 1) decline in international urea prices, 2) slower than expected urea sales, and 3) poor crop season.
Fauji Fertilizer is engaged in the manufacturing, purchasing and marketing of fertilizers including the investment in other fertilizer manufacturing operations. As of Dec 31 2004, Co. had a design capacity of 2,455,000 tonnes for urea production and 445,000 tonnes for DAP production.
Topline Securities is one of the fastest-growing brokerage houses in Pakistan. It has strong Equity Brokerage, Economic/ Equity Research, Commodity Trading and Corporate Finance & Advisory functions.
Topline Securities has been endowed with numerous awards by renowned international financial organizations. The highlights of which consists of the award for ‘Best Local Brokerage House of Pakistan’ by Asiamoney Brokers Poll (the largest Asia-focused equity services provider poll) in 2016 and ‘Best Equity Brokerage House’ by CFA Society Pakistan in 2015.
Previously, Topline Securities held the title for ‘Best Brokerage House’ for 4 consecutive years (2011-2014) by Asiamoney Brokers Poll. Other awards include the ‘Best Salesperson’ award by Asiamoney for 6 consecutive years (2011-2016), the ‘Arabia Fast Growth 500’ award and ‘Pakistan Fast Growth 100’ award in 2012 and 2013 by AllWorld Network.
JCR-VIS, a credit rating agency providing independent rating services in Pakistan has assigned initial rating of “A-2” for short term and “A” for long term to Topline Securities. Topline Securities is registered as Underwriter, Book Runner and Research Entity with Securities & Exchange Commission of Pakistan (SECP).
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