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AKD Securities Limited – Off the Analyst’s Desk (January 30, 2023)

Karachi, January 30, 2023 (PPI-OT): FFC: CY22 Result Review

Fauji Fertilizer Company (FFC) announced CY22 result today, where it posted unconsolidated earnings of PkR20.0bn for the year, culminating into an EPS of PkR15.8. The company posted a NPAT of PkR5.2bn (EPS: PkR4.0) for the final quarter of the year, lower than the industry expectations. On the consolidated basis, earnings for the year amounted to PkR33.7bn (EPS: PkR27.0) in CY22.

Net sales for the company have clocked in at PkR30.2bn for the final quarter of the year, down by 14%YoY on the back of considerably lower DAP offtakes, while increasing by 23%QoQ as the offtakes recovered from the devastation caused by the floods which hit the country in 3QCY22.

FFC has posted margins of 37% in CY22, remaining relatively flat compared to the 36% recorded in CY21. On the other hand, margins in 4QCY22 fell to 32% vs. 33% posted in the SPLY, while declining considerably from the 39% recorded last quarter.

Financial costs for the company have risen by 36%QoQ to clock in at PkR1.6bn for the quarter, while more than doubling for CY22 as the PkR4.9bn recorded in the year is an increase of 112%YoY. Amid the high interest rate environment, the company will continue to face heightened charges unless ST debt is retired.

The company recorded bumper Other Income of PkR4.2bn in the quarter, as ST investments paid off along with possible dividend income from its investments in associates and subsidiaries.

The company has announced a dividend payout of PkR3.15/sh, taking cumulative payout in CY22 to PkR12.13/sh, ending up with a D/Y of ~12%.