Karachi, July 26, 2019: Fauji Fertilizer Bin Qasim (FFBL) posted a loss of Rs0.55 per share on consolidated basis due to decline in GP margins by 2 points YoY to 16 percent and increase in finance cost by 98 percent YoY to Rs2.3 billion for 2Q2019.
The Food business of the company (Fauji Foods) posted a gross loss of Rs444 million (or 39 percent of sales) in 2Q2019 vs. Rs29 million in the corresponding period of last year due to increase in the cost of production owing to rupee devaluation and tough competition from peers, we believe.
However, GP margins in fertilizer business witnessed an increase of 3 points YoY to 11 percent amidst better urea pricing. Finance cost increased substantially amid an increase in the interest rate and borrowings of the company.
“The Share of profit from associates/JV increased 450 percent YoY. Higher profit under this head could be attributed to a positive contribution from Foundation Wind Energy I and II,” according to topline research.
Further, the company booked a tax reversal of 19 percent in 2Q2019 vs. tax expense of 37 percent in 2Q2018.
The Key risks topline research’s forecast includes, change in regulatory structure in Milk segment, increase in coal and gas prices beyond our assumptions (the primary raw material), the barrier to entry in export countries for meat segment and unfavourable GIDC decision.