Fauji Fertilizer Bin Qasim 2ndQ Jun 2024 - Financial Results
FFBL delivered impressive financial performance in Q2 2024, with net income per share surging to Rs. 4.8. This represents a substantial increase of 45.2% compared to the previous quarter.
The revenue also climbed 8.2% sequentially and 42.8% year-on-year, driven by a robust 29.1% quarter-on-quarter and 149.3% year-on-year expansion in gross profit. This translated to an improved gross profit margin of 23%, surpassing the four-quarter average of 19%.
While financial charges increased by 8.1% quarter-on-quarter, they declined significantly by 61.2% year-on-year. Notably, the effective tax rate for the quarter was 40%, lower than the four-quarter average of 48%.
The FFBL holds a significant 21.57% stake in Askari Bank (PSX:AKBL) and a controlling 63.71% stake in Fauji Foods (PSX:FFL).
There is possibility of merger of FFBL and FFC.
Notes with the Earnings Release.
FINANCIAL RESULTS - OVERVIEW
a. Economic stability resulting in a steady foreign exchange rate, higher international DAP margins and improved gas availability were the key drivers of FFBL's performance during the period under review. Higher sales volume of DAP 351 KT (including 24KT of imported DAP) (2023: 274 KT) and Urea 216 KT (2023: 180 KT) during the six months period and improvement in plant efficiency in the second quarter also contributed to the Company's financial performance. Resultantly, the company has achieved highest-ever half yearly profit after tax (PAT) of Rs. 10.6 Bn as compared to loss after tax of Rs. 4.9 Bn in the same period last year (SPLY) and Rs. 6.2 Bn in second quarter of the year as compared to Rs. 0.4 Bn PAT in same quarter last year (SQLY).
b. With the support of GoP, Management successfully managed to improve the gas supply to the FFBL. During the six months period under review gas supply improved significantly to 74% of the allocated volume as compared to 53% in SPLY, which resulted in higher production of Urea and DAP.
c. Proactive working capital management resulted in a substantial reduction in finance costs to Rs. 2.1 Bn during the six months period (2023: Rs. 5.3 Bn) and Rs. 1.1 Bn in Q2 (2023: Rs. 2.8 Bn). Bank deposit income increased by Rs. 3.9 Bn during the six months period from SPLY and Rs. 1.7 Bn in Q2 from SQLY. Other income also includes dividend of Rs. 1.6 Bn in Q2 from PMP and Rs. 0.8 Bn in Q1 from Askari Bank Limited. The Company did not incur significant exchange loss during the period, which had negatively impacted the results of SPLY by Rs. 4.7 Bn.
d. On a consolidated basis, the Group is reporting a profit after tax of Rs. 15.9 Bn, marking a significant improvement from a loss after tax of Rs. 3.2 Bn. in SPLY. This upswing is primarily attributed to the Parent Company’s (FFBL) improved profitability. The improved financial performance of our joint venture (PMP) and associate (AKBL) has also contributed a profit of Rs. 2.5 (2023: loss of Rs. 0.8 Bn) and Rs 2.3 Bn (2023: profit of Rs. 1.7 Bn) in the consolidated results during the six months period respectively.
e. The Company commends the Government of Pakistan’s strategy to continue the exemption of sales tax on Urea and the lower sales tax rate on DAP in Finance Act 2024. This approach will enhance farm economics and promote the balanced use of fertilizers.
f. The sustainability of the fertilizer sector is heavily dependent on a consistent supply of gas. To ensure this, the allocation of indigenous gas should be optimized to capitalize the natural resource. This strategy not only mitigates the risk to food security but also saves substantial foreign exchange by reducing the need for imports.