Fauji Fertilizer Company Limited (FFC) announces Q3 financial results

Posted by: KSEStocks News 12

Fauji Fertilizer Company Limited (FFC) announces Q3 financial results

Akseer Research has just released an update on FFC’s recent quarterly results. Here are the important points from the FFC earnings announcement:

Strong Growth in Net Sales and Profit

FFC, a leading fertilizer company, reported robust performance in the first quarter of CY24. The company’s unconsolidated EPS increased by 24% year-over-year (YoY) to PKR 8.27. Alongside this, FFC declared an interim cash dividend of PKR 5.50 per share for the quarter.

Net sales surged by an impressive 60% YoY, reaching PKR 58.4 billion. This significant increase was driven by better urea prices (up 41% YoY) and higher volumetric sales. Notably, urea sales rose by 5% YoY, with the company also handling 94,000 tons of imported urea during the quarter.

Margin Pressure Due to Cost Factors

Despite the strong revenue growth, gross margins declined to 29.6% in 1QCY24, down by 2.0 percentage points from the previous year. This reduction was attributed to the contribution of lower-margin imported urea sales and higher gas prices, despite a notable increase in fertilizer prices.

Distribution costs rose sharply by 70% YoY to PKR 5.2 billion during the quarter. This increase was mainly due to higher transportation expenses, driven by the implementation of axle weight regulations and rising fuel charges.

Other Income Boosts Bottom Line

FFC saw a substantial increase in other income, reaching PKR 10.2 billion, up by 2.9 times YoY. This growth was attributed to better returns on investment portfolios and higher dividend income from power ventures, including the commencement of dividends from AKBL and FFBL.

Financial Costs and Tax Impact

Finance costs grew modestly by 3% YoY to PKR 1.5 billion in 1QCY24, reflecting increased borrowing and higher interest rates. The effective tax rate increased to 42% compared to 34% in the previous year’s first quarter, primarily due to higher super tax charges.

Analyst Recommendation

Despite the margin pressures and rising costs, Akseer Research maintains a ‘BUY’ recommendation on FFC. The report sets a December 2024 price target (PT) of PKR 162 per share, offering an upside potential of 14% along with a dividend yield of 17%.

Financial Performance Overview

The summary of FFC’s financial performance for the first quarter of CY24 compared to the same period last year:

Financial Highlights (PKR mn)1QCY231QCY24YoY Change
Net Sales36,40658,407+60%
Gross Profit14,57517,287+19%
Distribution Cost3,0565,193+70%
Other Income3,54510,276+190%
Finance Cost1,4641,505+3%
Profit Before Taxation11,94318,027+51%
Net Income7,73010,522+36%
Source: Company Accounts, Akseer Research

Key Financial Ratios

Key Financial RatiosCY21ACY22ACY23ACY24ECY25FCY26F
EPS Growth5.2%-8.4%48.0%33.9%-3.8%8.7%
Dividend Yield10.0%8.4%10.7%16.5%15.8%18.4%
Source: Company Accounts, Akseer Research

Valuation Basis

Our price target (PT) for Fauji Fertilizer Company Limited (FFC) is based on the Sum of the Parts (SOTP) method, where the Free Cash Flow to Equity (FCFE) is used to value the core fertilizer business. To calculate the cost of equity, we used a risk-free rate of 15%, a beta of 1.0, and a market risk premium of 6%, resulting in a cost of equity of 21%.

Investment Thesis

We maintain a ‘BUY’ recommendation on FFC with a PT of PKR 162 per share, offering an upside potential of 14% along with a dividend yield of 17%. Our positive outlook is driven by:

  1. Higher fertilizer prices
  2. Sustainable volume growth


Despite our bullish stance, it’s important to consider potential risks:

  1. Gas supply curtailment
  2. Lower-than-estimated fertilizer demand
  3. Decrease in fertilizer prices below expectations

Company Description

Fauji Fertilizer Company Limited (FFC) engages in manufacturing, purchasing, and marketing fertilizers and chemicals. Additionally, the company invests in other sectors including energy generation, food processing, and banking operations.

Income Statement (PKR million)

Income Statement (PKR million)CY21ACY22ACY23ACY24ECY25FCY26F
Net Sales108,651109,364159,472236,252251,464260,703
Cost of Sales69,77269,31795,220162,772177,891183,705
Gross Profit38,87940,04664,25273,48073,57376,997
SG & A8,40910,10812,68416,34515,33716,123
Operating Profit30,47029,93951,56857,13558,23560,874
Other Income7,91914,44217,09721,07914,58616,686
Other Charges2,9463,0375,4345,5705,3915,826
Finance Cost2,2924,8685,6246,5904,7463,622
Unwinding of GIDC Liability2,4412,1191,16075500
Profit before Tax30,33933,68753,54765,30062,68568,112
Profit after Tax21,89620,05029,67339,73838,23841,548
Source: Company Accounts, Akseer Research

Balance Sheet (PKR million)

Balance Sheet (PKR million)CY21ACY22ACY23ACY24ECY25FCY26F
Other LT Assets50,75056,66655,47755,48254,93654,847
Non-Current Assets74,73784,29791,617101,329112,237110,970
Current Assets126,270155,825109,502132,203117,348108,519
Total Assets201,007240,122201,118233,532229,585219,489
Non-Current Liabilities41,32327,52512,7464,0964,5485,034
Current Liabilities112,169161,762127,548158,629144,602125,848
Total Liabilities153,492189,287140,294162,725149,150130,882
Total Equity & Liabilities201,007240,122201,118233,532229,585219,489
Source: Company Accounts, Akseer Research

These tables summarize the financial performance and position of the company across various years, as well as the projected figures for future years.

Cashflow Statement (PKR million)

Cashflow Statement (PKR million)CY21ACY22ACY23ACY24ECY25FCY26F
Net Income21,89620,05029,67339,73838,23841,548
Non-cash Charges2,4352,4152,9143,2284,9655,594
Operating Cash Flows37,33225,99454,04344,95732,87138,372
Net Borrowings7,9416,605-62,63212,361-1,859-8,022
Net Change in Cash1,1531,1901,5202,44035,17034,392
Closing Cash1,1901,5202,44035,17034,39235,941
Source: Company Accounts, Akseer Research


The information in this article is based on research by Akseer Research. All efforts have been made to ensure the data represented in this article is as per the research report. This report should not be considered investment advice. Readers are encouraged to consult a qualified financial advisor before making any investment decisions.

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