Karachi, Fauji Fertilizer Bin Qasim Ltd. (FFBL) has experienced a significant financial turnaround in the first quarter of 2024, reporting robust earnings and outlining ambitious plans for product diversification, as per recent briefing with analysts and investors.
According to AKD Securities Limited, FFBL disclosed a standalone profit of PkR4.3 billion for the first quarter of 2024, a stark contrast to a loss in the same period last year. This recovery is primarily attributed to improved core business profitability and the financial recovery of its subsidiary PMP Morocco. The company's consolidated profits stood at PkR7.2 billion, compared to a loss the previous year, buoyed by substantial advance sales and healthy production and sales of DAP (Di-Ammonium Phosphate).
The company reported a significant increase in DAP production to 177,000 tons from 52,000 tons in the same period last year, with sales also up 41% year-on-year. This increase was partly due to the recovery from a planned plant downtime during the same period last year. Additionally, FFBL ventured into importing 10,000 tons of DAP to meet rising domestic demand, achieving favorable margins.
Management highlighted the current softening of international DAP prices, which poses a potential challenge to margins in the near future. In response, FFBL plans to manage the timing of price adjustments to mitigate the impact on their margins. On the urea front, sales decreased compared to the previous year, with production affected by high ammonia levels used in production processes.
A significant development reported was the launch of boron-fortified DAP at the end of April 2024, which is anticipated to boost crop yields by 10-23%. This product, priced approximately PkR500 per bag higher than standard DAP, does not require additional capital expenditures for its production. The company has set a sales target of 50,000 tons for this product in 2024.
Further, FFBL is exploring the introduction of zinc-coated urea, addressing zinc and boron deficiencies in the soil—critical for enhancing agricultural productivity. The company also detailed its operational efficiencies in power production, noting a mix of local and imported coal types to manage costs effectively.
The management expressed concerns about the current wheat production situation in Pakistan, noting potential economic pressures on the agricultural sector. They also anticipate a dividend from PMP this year, reflecting in the second quarter results. FFBL's future dividend policy will be closely tied to its financial health and cash flow situation, focusing primarily on reducing long-term debt.