Fertilizer Sectors’ Profit Likely to Jump 2.7x in Q3

Pakistan’s fertilizer sector is likely to post a substantial 2.7 times surge in earnings during the third quarter of CY2023, reaching Rs. 21 billion.

The growth is attributed to a significant uptick in retention prices and volumetric sales within the sector.

According to the latest report released by Topline Securities, quarter-on-quarter (QoQ) earnings are projected to more than triple, primarily fueled by a notable reduction in tax expenses. The previous quarter’s earnings were impacted by the imposition of a 10 percent super tax while the pre-tax earnings are up by 72 percent QoQ.

The cumulative after-tax earnings for the first nine months of 2023 are estimated at Rs. 34.7 billion, reflecting a robust 33 percent YoY growth, while pre-tax earnings stand at Rs. 72.9 billion, marking a substantial 35 percent YoY increase for the sector.

Fauji Fertilizer Company Limited (FFC)

Topline Securities expects FFC to witness a robust performance in 3Q2023, with anticipated unconsolidated earnings of Rs. 6.8 per share, marking a significant 61 percent YoY increase.

The growth is fueled by heightened Urea and DAP sales, coupled with an upswing in Urea retention prices. Earnings are projected to surge by 64 percent QoQ, primarily attributed to reduced tax expenses. Alongside the results, FFC is expected to declare an interim cash dividend of Rs. 5.75/share, bringing the 9M2023 dividend to Rs. 13.16/share.

Courtesy: Topline Securities

Engro Fertilizers (EFERT)

EFERT is likely to post projected consolidated earnings of Rs. 6.1 per share, reflecting a substantial 95 percent YoY increase. This growth is attributed to higher fertilizer prices and 54 percent and 63 percent increases in Urea and DAP sales respectively, said the report.

On a sequential basis, earnings are expected to rise significantly due to increased sales, improved gross margins, and lower tax expenses. EFERT is expected to announce an interim cash dividend of Rs. 6.0 per share, bringing the 9MCY2023 dividend to Rs. 12.5 per share, the report added.

Fauji Fertilizer Bin Qasim (FFBL)

FFBL is poised for a positive turnaround in 3QCY2023, with an expected unconsolidated EPS of Rs. 3.4, compared to a loss per share reported in 3QCY2022, Topline expects.

The anticipated improvement is driven by a 4.7 multiplied by 6 percent YoY increase in DAP and Urea Sales, an expected rise in gross margins, and higher other income. On a QoQ basis, earnings are also expected to improve, with no dividend announcement anticipated with the 3Q2023 result, said the report.

Urea and DAP Overview

The Urea and DAP overview for 3Q2023 highlights a robust performance in the sector. Urea sales are expected to increase by 19 percent YoY and 22 percent QoQ to 1.8 million tons, while DAP offtake is projected to rise by 210 percent YoY and 76 percent QoQ to 483,000 tons.

Courtesy: Topline Securities

The sector’s cumulative Urea and DAP sales for 9M2023 are estimated at 4.9 million tons (3 percent YoY increase) and 1.0 million tons (36 percent YoY increase), respectively.

Average Urea prices during 3Q2023 increased by 45 percent YoY to Rs. 3,490 per bag, while DAP prices declined by 18 percent YoY to an average of around Rs. 10,200 per bag, in line with international DAP prices and currency fluctuations against the US dollar.

Source: Pro Pakistani