Fertilizer companies are expected to report an increase in gross level performance for the third quarter of the calendar year 2022 on a year-on-year (YoY) basis over better retention prices following price adjustments post budgetary measures announced in June 2022.
According to JS Global, earnings are also expected to report higher on a sequential basis over a one-time 10 percent Super Tax charge in 2QCY22 based on CY21 income.
FFC is estimated to witness a 35 percent YoY decline in earnings in 3QCY22 to Rs. 3.30 per share (9MCY22E EPS: Rs. 10.85) owing to higher finance and tax expenses and one-off repair and maintenance charges. Earnings are however expected to report a noticeable improvement of 25 percent on a quarter-on-quarter (QoQ) basis mainly due to the absence of 10 percent Super Tax during the outgoing quarter, said the report.
The report does not rule out additional support from higher other income due to dividends from wind power plants. Moreover, a higher income on deposits is expected in the ongoing higher rates environment. The company is expected to announce a cash dividend of Rs. 2.50/share for 3QCY22, taking 9MCY22 DPS to Rs. 8.30.
EFERT’s consolidated earnings for 3QCY22 are projected at Rs. 3.53 per share, a 7 percent YoY increase. Earnings are expected to increase despite 55 percent YoY higher finance costs estimated during the quarter as gross margins are estimated to improve by 3.9ppt YoY to 30 percent.
Earnings are expected to improve sequentially due to the lower base of 2QCY22 set by the one-time 10 percent Super Tax charge. Moreover, the company had booked higher other expenses in 2QCY22 owing to exchange loss on DAP shipments to the tune of Rs. 700 million which may not be the case in 3QCY22 over immaterial imports in 3Q.
After skipping dividend in 2QCY22 due to loss in the quarter, we expect cash dividends to resume from 3Q where we expect an interim cash dividend of Rs. 3.75 per share in 3QCY22, which will take 9MCY22 DPS to Rs. 9.25.
The company is expected to post unconsolidated earnings of Rs. 2.4 billion for 3QCY22, translating into an EPS of Rs. 1.84, up 4 percent YoY. Key reasons for a better expected bottom line are sustained DAP margins amid price hikes and dividend income from Fauji Power Company. The company is also likely to book an exchange loss during 3QCY22 on phosphoric acid payables over PKR depreciation against US$ of 11 percent. The company is not expected to post any dividend with the results.
As per the latest provisional data, Urea sales in September 2022 are expected to clock in at 508,000 tons, up by 4 percent YoY. For the month of September 2022, FFC and EFERT are expected to post urea sales volumes of 190,000 tons and 164,000 tons, respectively. Fauji Fertilizer Bin Qasim‘s (FFBL) offtake is expected at 47,000 tons. This would take the cumulative 9MCY22 offtake to 4.7 million tons, 2 percent higher compared to the same period last year.
DAP offtake for September 2022 is expected to clock in at around 48,000 tons depicting a 78 percent YoY decrease. FFBL, the sole manufacturer of the product, is expected to post an offtake of 22,000 tons during September 2022. FFC and EFERT on the other hand, are expected to post DAP sales volumes of only 2,000 tons and 19,000 tons during the same period, respectively. Offtake for 9MCY22 is expected to clock in at 725,000 tons, depicting a 40 percent YoY drop.
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