Pakistan Fertilizers – Earnings to rebound amidst recovering off-take


Earnings for the fertilizer sector during 2QCY20 are expected to rebound supported primarily by recovering off-take, particularly during Jun20. Off-take during Apr20 and May20 were largely affected by the uncertainty regarding the announced subsidy on urea, compelling dealers to withhold their purchases till further clarity. Moreover, the coronavirus led lockdown also affected sales during the 2 months.

Fauji Fertilizers Company Limited (FFC) – Earnings to recover 22% Q/Q, 6% Y/Y
FFC’s earnings are estimated to recover by 22% QoQ to PKR 5,181mn (EPS: PKR 4.07) during 2Q CY20. The projected increase in sequential earnings can primarily be attributed to recovering urea off-take, which is estimated to recover by 16% QoQ to 0.69mn MT during 2QCY20. Along with the result, the company is expected to announce an interim cash dividend of PKR 3.5/sh, taking its cumulative payout to PKR 6.0/sh during 1HCY20.

Engro Fertilizers (EFERT) – Earnings to recover 9x Q/Q, 67% Y/Y
We estimate EFERT’s earnings to recover 9x QoQ and 67% YoY to PKR 5,303mn (EPS: PKR 3.97) during 2QCY20. EFERT’s earnings are projected to recover primarily on account of ~4x increase in urea sales to 0.67mn MT during the period under review. In addition, we anticipate the company to announce an interim cash dividend of PKR 3.0/sh.

Fauji Fertilizers Bin Qasim (FFBL) – Losses to come under control
FFBL is estimated to post a loss of PKR 369mn (EPS: PKR -0.39) during 2QCY20 compared with a loss of PKR 3,048mn (EPS: PKR -3.26) during 1QCY20. Losses are expected to come under control primarily on account of a 2.5x Q/Q increase in urea off-take and a 31% increase in DAP off-take during the period.

Please find attached the detailed report.

KASB Research

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