Fauji Fertilizer expects decline in urea offtake amid challenging farm economics

Fauji Fertilizer Company (FFC) anticipates a decline of 0.3 to 0.4 million tons in annual urea offtake this year due to challenging farm economics.

This was discussed during FFC's 9MCY24 analyst briefing, where the company reviewed its financial results and future outlook.

The industry is expected to carry a similar level of inventory into the next year.

Urea offtakes in the industry declined by 7%, reaching 4.604 million tons in 9MCY24 compared to 4.945 million tons in the same period last year.

Similarly, DAP offtakes decreased by 3%, totaling 0.96 million tons in 9MCY24. FFC recorded a market share of 43% in urea and 6% in DAP.

The company announced that Phase-I of the PEF project has been completed, and the import of a compressor for Phase II is underway, with completion expected by the end of CY25. On MARI gas prices, management expects current prices to remain unchanged.

Regarding the amalgamation of FFC and FFBL, management shared that approvals from the Competition Commission of Pakistan (CCP) and the company's shareholders have been obtained.

The merger will be completed once all regulatory requirements are met, with a court hearing scheduled for November 18, 2024.

In terms of AGL's acquisition, management disclosed that shares have been acquired from the Bank of Punjab (BOP) and National Bank, increasing their total holding to 30%.

A public offer for share acquisition has also been announced, with the acquisition expected to conclude by the end of January 2025. Management highlighted that any tax benefit will be recorded on AGL's books.

Overall, FFC's management remains optimistic about the company's future, despite the anticipated decline in urea offtake and the challenges faced by the agricultural sector.

FFC reported a profit after tax (PAT) of PKR 42.6 billion (EPS: PKR 33.5) in 9MCY24, up 92% from PKR 22.2 billion (EPS: PKR 11.5) in the same period last year. This increase was driven by higher fertilizer prices and increased other income.