Amalgamation Boosts Fauji Fertilizer’s Earnings Amid Increased Costs

Karachi: Fauji Fertilizer Company Ltd (FFC) reported a significant rise in its fourth-quarter earnings for the calendar year 2024, driven primarily by its amalgamation with Fauji Fertilizer Bin Qasim Limited (FFBL), despite facing higher costs and impairment charges. The company announced earnings of PkR14.2 billion, marking a 90% increase from PkR7.5 billion in the same period last year, along with a final cash dividend of PkR21 per share.

According to a statement by AKD Securities Limited, the company’s revenue surged 3.5 times year-on-year to PkR150 billion, propelled by the inclusion of FFBL’s performance. This amalgamation led to a substantial increase in urea and DAP offtakes by 41% and 68% respectively, compared to the same period last year.

Despite the revenue growth, gross margins contracted significantly to 25.7% from 44.7% in the previous year. This contraction is attributed to the increased proportion of low-margin DAP in the total sales mix following the inclusion of FFBL’s operations.

Sequentially, revenue grew by 39% year-on-year, driven by a 15% and 66% increase in urea and DAP offtakes. However, the gross margins were impacted, possibly due to higher phosphoric acid prices, though further details are awaited.

The company’s taxation remained high, with an effective tax rate of 48% in the last quarter, which is likely due to elevated deferred tax liabilities. Despite these challenges, analysts maintain a positive outlook on FFC, emphasizing the potential synergies from the amalgamation with FFBL and the continued benefit of cheaper gas for FFC’s base plants.

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