Islamabad April 28 2023: Fauji Fertilizer Company Limited, the largest fertilizer manufacturer of Pakistan, profit increased by 24 percent during the first quarter ended March 31, 2023, according to company filing to the exchange.
“However, Gas prices are expected to increase and the Government is considering application of WACOG under the premise of price unification. This would result in excessive increase of FFC’s gas cost and thereby would make this business unsustainable whereas cost of other fertilizer manufacturers is not expected to be impacted materially. The Company has been consistently contesting for a level playing field with the Government, whereas is also being asked not to pass on the impact of gas price escalation” says Company Chairman Waqar Ahmad Malik.
“The production facilities operated at a combined efficiency of 124 percent and delivered 633 thousand tonnes of Sona Urea, which was in line with the corresponding quarter of 2022. Sona urea offtake was recorded at 631 thousand tonnes which was also same as last year” Malik Added.
Cost of sales increased mainly due to higher cost of imported fertilizer besides inflation, which touched one of the highest inflation rates of around 35 percent. Soaring interest rates resulted in increased finance cost of PKR1.4 billion, higher by 37 percent compared to last year. Shortage of foreign currency reserve and persistent Pak rupee devaluation continue to cause delay in procurement of essential spares and machinery besides escalating the cost of such items. The rates of General Sales Tax have also been increased by the Government further pressurizing the cost of the Company.
The increase in interest rates enabled the Company to earn income on deposits of PKR 3.5 billion compared to PKR 2.2 billion last year. This income included an unrealized exchange gain of PKR 930 million earned on the foreign exchange deposits of Company due to devaluation of Pak rupee. The net profitability of the company thus stood at PKR 7.7 billion compared to 6.2 billion last year with earnings per share of PKR. 6.08 per share for the period under review against PKR 4.90 per share for 2022. The profitability in dollar terms however declined to USD 30 million compared to USD 35 million last year.
In view of commendable results, the Board of Director is pleased to announce first interim dividend of 42.6 percent (PKR 4.26 per share) for the period.
“The Country continues to face socio economic uncertainty and turmoil with inflation touching one of the highest levels at 35 percent, high interest rates of around 22 percent, increased GST rates of 18 percent to 25 percent, besides continued devaluation of Pak rupee, negatively impacting the costs of the Company. Shortage of foreign currency reserves have also caused delay in procurement of essential spares and machinery” Malik added.
The setting up of gas Pressure Enhancement Facility (PEF) along with our other project of laying a new pipeline to connect SNGPL network with FFC plant site Mirpur Mathelo are progressing satisfactorily. These projects, however, face the risk of delays due to shortage of foreign exchange for purchase of requisite machinery and items.