Fauji Fertilizer Profit Up by 48% in 2023

Fauji Fertilizer Company Limited (PSX: FFC) has announced its financial results for the year that ended on December 31, 2023, (CY23), wherein the company posted an unconsolidated profit after tax (PAT) of Rs. 29.67 billion, up 48 percent year-on-year (YoY) from Rs. 20 billion in the same period last year (SPLY). Along with the result, the company announced a final cash dividend for the year of Rs. 4.1 per share which is in addition to interim dividends already paid at Rs. 11.39 per share. In a brief commentary, FFC said earnings in dollar terms registered negative growth compared to 2021 and stood at the level of 2017. FFC also continued its significant contribution towards the national exchequer through taxes and levies of Rs. 36 billion compared to Rs. 30 billion last year. In CY23, the net sales of the company arrived at Rs. 159 billion, up by 46 percent YoY. Gross margins clocked in at 40.3 percent during the 12 months. Other income has increased by 18.4 percent YoY to Rs. 17 billion in CY23, while the finance cost of the company surged by 16 percent YoY to Rs. 5.6 billion during the period in review. FFC paid Rs. 23.8 billion in taxes during the 12 months. The Company also enabled savings of around $1 billion in foreign exchange to the country via import substitution during 2023 with aggregate savings of around $4.8 billion during the last five years. The company posted earnings per share (EPS) of Rs. 23.32 in CY23. At the time of filing, FFC’s scrip at the bourse was Rs. 118.48, up 0.36 percent or Rs. 0.43 with a turnover of 591,858 shares on Friday. FFC said the year 2023 faced high inflation and interest rates while the Pakistani Rupee also continued its downward trajectory against the US dollar, resulting in higher operating and financing costs for the Company. The retrospective increase in Super Tax levy led to a higher effective tax rate of 45 percent compared to 40% last year, further pressurizing Company profitability. Gas prices for the fertilizer sector also increased significantly by 75 percent, however, the Company only passed on a partial impact in urea price during 2023, to offer urea at the most economical rates to the farmers. Urea selling prices exhibited significant variations within the fertilizer industry, with FFC offering urea at lower selling prices by around Rs 200-500 per bag most of the year. Sona urea prices towards the close of 2023 stood at around Rs. 3,400 per bag in contrast to international prices hovering around Rs. 6,200 per bag. FFC recalled that it ensured fertilizer supply across the country through its nationwide network of warehouses and dealers, and also to avoid unscrupulous practices by some elements through equitable fertilizer distribution and real-time monitoring of fertilizer shipments and dealer stock. Dealerships were sensitized to market fertilizers at FFC-suggested rates, while the farmers were also made aware to purchase products through registered dealers at prescribed rates. To further ease urea availability and pricing issues for the farmers, the Company along with the Industry has coordinated a plan with the Government to import urea and distribute it in 2024. Urea production stood at an outstanding 2,521 thousand tonnes, 5 percent higher than last year while maintaining high-reliability factors and optimum standards of Health, Safety, and Environment. The profitability for 2023 barely covers the Company’s requirement to build up reserves for the capital-intensive and foreign exchange-denominated nodal compression project in addition to essential maintenance of plants at the world-class level. The Company is about to kick off phase II of the critical Nodal Compression Project with a capital outlay of over $100 million.