Fauji Fertilizer Company announces 48% YoY profit increase in 2023

Fauji Fertilizer Company Limited (FFC), a key player in Pakistan’s urea market, has reported its highest-ever annual profit, and a remarkable financial performance, for the 2023 calendar year. The company’s net profit surged by 48% year over year, reaching PKR 29.73 billion ($107.36mn), a significant increase from PKR 20.050 billion ($72.4mn) in the previous year. The fourth quarter alone saw a 43% rise in profitability, culminating in PKR 7.459 billion ($26.93mn). Positive financial numbers were disclosed in a recent update on the Pakistan Stock Exchange (PSX) website.

Commenting on the FFC’s results, local market analysts from Intermarket Securities Limited confirmed that the company has achieved the highest annual profit in its history. Although gross margins have recovered to their historical levels, earnings have come in lower due to high finance costs, high effective tax, and high distribution costs.

The company was affected by economic challenges in 2023, including rampant inflation, rising interest rates, and the devaluation of the Pakistani rupee against the US dollar. These factors contributed to soaring operating and financing expenses for the company. The retrospective hike in the super tax rate, from 40% to 45%, further dented profitability. Additionally, the fertilizer sector grappled with a 75% surge in gas prices. FFC, in response, absorbed a portion of these costs, opting not to fully transfer the impact to urea prices in support of local farmers. The company took additional measures to prevent unfair trade practices, promote transparency in fertilizer distribution, and encourage farmers to purchase from registered dealers at official rates.

In 2023, FFC’s urea production reached a new high of 2.521 million tonnes, representing a 5% increase on the previous year. Furthermore, its import substitution strategy yielded substantial foreign exchange savings for Pakistan, amounting to approximately $1bn in 2023 and totaling around $4.8bn over the past five years.

The company’s net sales soared by 46% year over year in 2023, driven by increased demand for urea and Di-Ammonium Phosphate (DAP). The final quarter witnessed a 44% rise in net sales, bolstered by a 109% increase in DAP sales and a 64% hike in urea prices. However, urea sales dipped slightly by 5% in the same quarter.