How well did Fatima Fertiliser perform in 2QCY24?

Fatima’s 2QCY24 financial performance reflects a challenging quarter, marked by a significant decline in profitability and revenue.

Despite these challenges, the company’s gross margins show some resilience, while various expenses and income streams have fluctuated considerably.

Down the stream

Fatima reported a consolidated profit after tax of PKR 5.19 billion for 2QCY24, translating to an EPS of PKR 2.47.

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This marks a substantial 38% YoY decline from PKR 8.40 billion (EPS: PKR 4.00) reported in the same period last year.

The reduction in profitability was primarily driven by a 10% YoY drop in net sales, which clocked in at PKR 42.3 billion compared to PKR 47.0 billion in 2QCY23.

The revenue decline was even more pronounced on a QoQ basis, with a 36% decrease from the previous quarter’s PKR 66.0 billion.

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The drop in revenue can be attributed to lower offtakes, which impacted the company’s top line.

However, despite the revenue decline, Fatima’s gross margins improved by approximately 7 ppts YoY, reaching 38% in 2QCY24.

This improvement in margins was primarily due to higher product prices.

On a QoQ basis, however, gross margins decreased by 4 ppts, likely due to lower fixed cost absorption as a result of reduced sales volumes.

Expense and income trends

Fatima’s operating expenses showed mixed trends during the quarter.

Selling and distribution expenses nearly doubled YoY, rising by 99% to PKR 3.14 billion.

This significant increase indicates higher marketing and distribution costs.

Meanwhile, administrative expenses increased by 21% YoY to PKR 2.47 billion.

However, on a QoQ basis, both selling and distribution expenses and administrative expenses saw a decrease, with the latter dropping by 28%.

Other income, which includes earnings from investments and other non-core activities, showed a remarkable 230% YoY increase, reaching PKR 2.1 billion.

This surge helped cushion the blow from the lower core earnings.

Nonetheless, other income experienced an 8% QoQ decline, possibly due to a decrease in cash and short-term investments.

Financial charges remained stable on a QoQ basis at PKR 810 million, showing a muted impact from interest rates during the quarter.

However, the effective tax rate remained high at 49.2%, only slightly lower than the previous quarter’s 49.5%.

Source: Insight Securities

⚠️ 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 →