Topline Flash Note: Fauji Fertilizer Bin Qasim (FFBL): Analyst briefing takeaways
- International DAP prices and margins have improved in Jul-2020 and the management believes the rising trend is likely to continue.
- Regarding Gas Infrastructure Development Cess (GIDC), after the decision of the Supreme Court, the company will go for a review petition. To highlight, company has to pay around Rs22bn on account of the Cess. The company has provided for the Cess in its accounts, thus no impact on accounting earnings.
- Furthermore, they believe that their GIDC case is different from rest of the fertilizer industry as they have not collected GIDC from consumers, specially on DAP business.
- In case, if company is required to pay GIDC, they will ask the government to set off its outstanding dues, which includes sales tax, subsidy receivable and income tax adjustment with GIDC.
- As per the company, GIDC should not be charged on new plants as government has contracted with them to not charge any tax on new investment for 10 years.
- Currently, company is in the process of rescheduling its long term loans. The details will be shared once the process is completed.
- The consumer segment has grown in last few months amid COVID-19 and they believe this segment has potential to grow further. Thus, Fauji Food Limited (FFL) will also depict significant improvement in terms of profitability in near future. To note, they mentioned that margins have also improved.
- Regarding sales tax input adjustment, talks are ongoing with the government to resolve the issue. If they fail to reach an agreement, the company will increase prices to pass on the impact.
- In a notice to the exchange, the company has informed that BOD has recommend to increase authorized capital by Rs4bn. The receipts from any subsequent raise in issued capital will be used for multiple purposes.
Regarding FFBL Power Company (Coal Power plant), no discussion has started with the IPPs negotiating committee.
Fauji Fertilizer Bin Qasim Limited is a Pakistan-based holding company. The Company manufactures, purchases and markets fertilizers. It is involved in meat, dairy and coal based energy generation sectors. It has identified its potential business segments and has undertaken investments in the areas of food, financial, power sector and wind energy projects. Its products include Granular Urea, such as Sona Urea, and Di Ammonium Phosphate (DAP), such as Sona DAP. Sona Urea is a synthetic organic compound containing nitrogen in amide form available in the form of white solid prills. It is applied to soil and also suitable in solution form as spray application. Sona DAP contains nutrient element, phosphorous besides nitrogen available in flowing granular form Granules are stronger, harder and of uniform size. It is suitable for various crops and soils recommended for initial application. It produces over 791,260 metric tons (MT) of DAP and approximately 433,610 MT of Urea.
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