A point to be noted is that local urea manufacturers have an installed capacity of 7 million tons per annum as against estimated offtake of around 6 million tons. This clearly indicates that the industry can earn substantial foreign exchange by operating plants at optimum capacity utilization. However, to achieve this uninterrupted supply of gas has to be guaranteed. This requires dedication of Mari field to the fertilizer industry. Although, this decision was made in Fertilizer Policy 2001, some power plants are still getting gas from this field.
FFBL: A bumper year
Fauji Fertilizer Bin Qasim (FFBL) is expected to post 4QCY21 unconsolidated profit after tax of PKR3.6 billion (EPS: PKR2.78), taking the cumulative CY21 earnings to PKR9.74 billion (EPS: PKR7.54) as compared to net profit of PKR2.2 billion (EPS: PKR1.7) for same period a year ago, (up 344%YoY) despite a 10%YoY decrease in DAP offtakes. The increase in earnings is expected on the back of global fertilizer shortage, sending the prices of the commodity higher, thereby expanding the primary DAP margin. With 60% of the DAP imported, the prices in local arena have also followed the suit. The current local price of DAP is quoted at PKR9,800/bag. During the year, the primary DAP margins in international markets were reported at an average of US$150/ton as compared to last 5-year average of US$45/ton. Lastly, the company has already recorded PKR2 billion impairment losses on Fauji Meat (FML) in addition to over PKR3 billion expected credit losses and PKR850 million exchange losses. Hence, analysts expect the other expenses to stay on the lower side for the quarter under review.
FFC: Earnings to remain high
Fauji Fertilizer Company (FFC) is anticipated to post net earnings of PKR6.6 billion (EPS: PKR5.21) for 4QCY21, taking the cumulative CY21 earnings to PKR22.5 billion (EPS: PKR17.7) from earnings of PKR20.8 billion (EPS: PKR16.36) for same period a year ago, (up 8%YoY). The earnings increase is expected on the back of PKR125/bag hike in urea price post GIDC elimination, taking the gross margin to 35%. In addition to this, analysts attribute an increase of 30%YoY in other income to: 1) 25%YoY higher income from financial assets, and 2) a 60% hike in dividend income on the back of higher dividend from AKBL. The Company is also expected to announce a final cash dividend of PKR4.15/share, taking the full year payout to PKR14.0/share.
EFERT: Higher offtakes to keep earnings upbeat
Engro Fertilizers (EFERT) is projected to post net profit of PKR5.0 billion (EPS: PKR3.79) for 4QCY21, taking the cumulative CY21 earnings to PKR19.9 billion (EPS: PKR14.96) as compared to net earnings of PKR18.1 billion (EPS: PKR13.58) for CY20, (up 10.2%YoY). On core basis, the profitability is expected to be 21%YoY higher on the back of: 1) an expected increase in urea offtakes, and 2) a PKR125/bag cumulative hike in urea prices post GIDC elimination. The end of concessionary GSA in 2HCY21 has resulted in an adverse impact of PKR1.5/share on the bottom line. Lastly, analysts expect a rebound in other income to PKR2.3 billion as against PKR1.7 billion in CY20. The Company is also expected to announce final cash dividend of PKR2.5/share, taking full year payout to PKR14.0/share.
FATIMA: Earnings to spike
FATIMA Fertilizer Company (FATIMA) is expected to post earnings to PKR3.1 billion (EPS: PKR1.47) for 4QCY21, taking the cumulative CY21 earnings to PKR17.1 billion (EPS: PKR8.18) as against earnings of PKR13.3 billion (EPS: PKR6.32) for CY20, up 29.4%YoY. The increase is expected on the back of: 1) a 37%YoY higher expected offtake in CAN, and 2) a 32%YoY higher offtake in NP. Additionally, the impact of higher prices of DAP has also been passed on through NP – positive for FATIMA. Lastly, analysts expect the company to announce a dividend of PkR4/share, translating into the dividend yield of 9.4%.