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.

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.

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