FFC: Moving Closer to Shariah Compliance

Fauji Fertilizer Company (FFC) is one of Pakistan’s biggest fertilizer companies, well-known for its strong dividend payouts and dominance in the market. Recently, the company has been working hard to become Shariah-compliant, which means its operations and investments align with Islamic finance principles.

What’s the update?

According to its June 2025 financials, FFC is not fully compliant yet, but it has made big progress:

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• Non-compliant investments (things not allowed under Shariah) have fallen to 32% of total assets, down from 40% in March 2025. This meets the benchmark of less than 33%.
• Non-compliant income (like interest-based earnings) is still a challenge. It stands at 7% of revenue, whereas the requirement is below 5%.
• Debt levels are very low, only 7% of total assets, much better than the 37% benchmark.
• Illiquid assets (like land, buildings) make up 38% of assets, well above the required 25%.

Simply put, FFC is ticking off most boxes, with only the income ratio left as the main hurdle.

Why does this matter?

Becoming Shariah-compliant could attract new investors, especially those who only invest in Shariah-compliant stocks. This is one reason the stock has already rallied 19% this year.

Dividends remain strong

Even while making these changes, FFC continues to reward investors:

• Dividend yield (DY): 10% expected in 2026
• EPS (earnings per share) is forecasted at PKR 60.44 in CY26.
• With a target price of Rs 490, analysts expect a 22% total return from here.

Fertilizer market updates

• Local DAP (fertilizer) prices have gone up by Rs1,100/bag in 3QCY25, now at Rs14,200/bag.
• International prices of raw materials like phosphoric acid have also increased. Despite this, FFC’s margins are expected to remain steady at around US$285/ton.
• On top of that, if Pakistan allows urea exports amid the current oversupply, FFC could benefit further.

Bottom line

FFC is slowly but surely moving towards becoming Shariah-compliant, a big milestone for the company and its investors. With stable dividends, a strong market position, and improving compliance, FFC continues to look attractive in the long run.

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Source: JS Global Capital Limited

⚠️ This post reflects the author’s personal opinion and is for informational purposes only. It does not constitute financial advice. Investing involves risk and should be done independently. Read full disclaimer →