Fauji Fertilizer Company reports 50% YoY profit increase in 9 months of 2023

Fauji Fertilizer Company Ltd. (FFC), a prominent urea producer in Pakistan, disclosed its financial results for the nine months ending September 30, 2023. The company registered a net profit of PKR 22.21 billion, marking a 50% year-on-year increase compared to PKR 14.84 billion in the corresponding period of the previous year. However, earnings in U.S. dollar terms rose modestly to USD 80 million from USD 75 million due to significant depreciation in the Pak Rupee.

Chairman Waqar Ahmed Malik and CEO Sarfaraz Ahmed Rehman attributed this performance to a record other income of PKR 12.53 billion, a figure 22% higher than the same period last year. They cited cost economization and efficiency optimization as other key drivers of the increase in profitability. These measures were deemed necessary due to the ongoing challenges of high inflation, financial costs, and a weakening local currency.

The FFC’s production facilities in Punjab and Sindh provinces were noted for their high operational reliability and commitment to health, safety, and environmental standards. Urea production for the nine-month period in 2023 was approximately 1.926 million metric tonnes, a 7% rise compared to last year. This increase was attributed to favorable weather conditions and operational enhancements, including the rescheduling of annual maintenance to the last quarter of 2023.

The company witnessed a surge in sales volume to 1.911 million metric tonnes, up from 1.795 million metric tonnes in the previous year. This was due in part to expectations of rising urea prices on the back of a looming increase in gas prices. Sales revenue for the period was PKR 116 billion, a substantial increase from PKR 79 billion in the prior year.

Despite the robust revenue, the company did face headwinds. The high rate of inflation led to a 46% increase in the cost of sales, amounting to PKR 71.21 billion, and a 26% rise in distribution costs, which stood at PKR 8.73 billion. Interest rate volatility also resulted in a 24% increase in finance costs to PKR 4 billion. These additional costs were mitigated to some extent by cost-saving measures implemented by FFC’s management.

An IMS Research report stated that FFC’s significant growth in its top line is mainly fueled by higher urea sales and increasing urea prices amid inflationary pressures in the domestic market.