Fauji Fertilizer Profit Dips to Rs. 20 Billion in 2022

Pakistan’s largest urea manufacturing company, Fauji Fertilizer Company Limited (FFC), has announced its financial results for the year ending December 31, 2022.

The company posted a profit after tax of Rs. 20.05 billion during the calendar year 2022 (CY22) compared to a profit after tax of Rs. 21.89 billion reported in the previous calendar year. The decline in profit, which came at 8 percent, was owing to the imposition of a super tax.

The company reported earnings per share (EPS) of Rs. 15.76 in CY22 compared to EPS of 17.21 reported in the previous year.

The company’s profitability in 4QCY22 went down by 13 percent on a year-on-year (YoY) basis to Rs. 5.2 billion. The EPS for the fourth quarter came in at Rs. 4.09. The company also announced a final cash dividend of Rs. 3.15 per share in 4QCY22.

The net sales of the company witnessed an uptick of 1 percent YoY in CY22, settling at Rs. 109 billion on the back of the surge in urea and DAP prices by 25 percent and 77 percent YoY, respectively. However, urea and DAP offtake declined by 2 percent and 66 percent YoY, respectively, according to a report by Arif Habib Ltd.

The gross margins during CY22 improved by 84bps YoY to 36.6% on account of high urea prices and lower DAP offtakes.

The financial charges of the company surged by 112 percent YoY, clocking in at Rs. 4.86 billion in CY22 compared to Rs. 2.29 billion in CY21 on the back of higher interest rates.

Other income of the company soared 82 percent YoY, clocking in at Rs. 14.4 billion in CY22 owing to improved income on deposits tagged with higher divided from group companies.

In a notice to Pakistan Stock Exchange (PSX), the company said that 2022 was full of challenges ranging from socioeconomic, geopolitical, governmental, and environmental factors. The year witnessed galloping inflation, double-digit interest rates, and severe devaluation of the Pakistani Rupee besides heavy floods during the second half of the year, negatively impacting the costs of the company.

The profitability was further impacted by the levy of the super tax resulting in an effective tax rate of over 40 percent, besides the exemption of output GST.

The company said that the acute shortage of foreign currency reserves in the country poses severe challenges to the import of essential materials, spares, chemicals, and other inputs required for maintaining urea production levels.

The company highlighted that in view of declining gas pressures, it has, along with other fertilizer manufacturers and gas suppliers, undertaken a gas press enhancement facility (PEF) project which involves significant capital outlay and is essential for sustained fertilizer production.

It said that the timely availability of foreign exchange is critical for the timely implementation of the sustainability project and continue plant operations.

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