Karachi, July 25, 2022 (PPI-OT): Fertiliser – Sector’s profitability to decline by 49% during 2qcy22 on account of higher taxation

We estimate FFC’s unconsolidated earnings of PKR 2.5bn (EPS: PKR 2.0), supported by better prices and volumes. However, higher taxation on account of Super Tax and Poverty Alleviation Tax will be a key dent to sector’s earnings this quarter. Keeping up with the historical trend we expect FFC to announce a cash dividend of PKR 1.5/share.

We estimate EFERT to post earnings of PKR1.75bn (EPS: PKR1.32), down by 63%y/y during 2qcy22 when compared to same period last year the decline is primarily due to recent budgetary measures on account of Super Tax and Poverty Alleviation Tax resulting in higher taxation, we expect EFERT to announce a cash dividend of PKR1.8 per share, considering it’s recent history of payouts.

We estimate FFBL to post unconsolidated earnings of PKR1.3bn (EPS: PKR1.05), down by 47%y/y during 2qcy22 when compared to the same period last year. The decrease in profitability is primarily due to recent budgetary measures on account of Super Tax and Poverty Alleviation Tax resulting in higher effective taxation of 65%. We do not expect company to announce any cash payout.

Sector’s profitability to decline by 49% during 2qcy22 on account of higher taxation

Sector’s profitability is expected to decline during 2qcy22 by 49% yoy when compared to same period last year, with FFC is estimated to have least decline in earnings of 31%y/y during 2qcy22 and EFERT is estimated to have most decline in earnings of 63%y/y during 2qcy22.

Budgetary measures announced recently by the government which include super tax and poverty alleviation tax as well, will impact the bottom line of the sector. Elevated policy rate has contributed in increased finance cost to deteriorate the earnings further.

FFC

Fauji Fertilizer Company Limited (FFC) is set to announce its 2qcy22 result on 28th July 2022, we estimate company’s unconsolidated earnings of PKR 2.5bn (EPS: PKR 2.0), supported by better prices and volumes. However, higher taxation on account of Super Tax and Poverty Alleviation Tax will be a key dent to sector’s earnings this quarter. Keeping up with the historical trend we expect FFC to announce a cash dividend of PKR 1.5/share.

EFERT

Engro Fertilizer company Limited is set to announce its 2q’22 result on 28th July 2022, we estimate EFERT to post earnings of PKR1.75bn (EPS: PKR1.32), down by 63%y/y during 2qcy22 when compared to same period last year the decline is primarily due to recent budgetary measures on account of Super Tax and Poverty Alleviation Tax resulting in higher taxation, we expect EFERT to announce a cash dividend of PKR1.8 per share, considering it’s recent history of payouts.

FFBL

Fauji Fertilizer Bin Qasim (FFBL) is set to post its 2q’22 result on 25th July 2022, we estimate FFBL to post unconsolidated earnings of PKR1.3bn (EPS: PKR1.05), down by 47%y/y during 2qcy22 when compared to the same period last year. The decrease in profitability is primarily due to recent budgetary measures on account of Super Tax and Poverty Alleviation Tax resulting in higher effective taxation of 65%. We do not expect company to announce any cash payout.