KARACHI: Fatima Fertilizer Company Ltd. (FATIMA) has reported a remarkable surge in its financial performance for the second quarter of calendar year 2024 (2QCY24), with consolidated earnings reaching PkR5.2 billion, translating to an earnings per share (EPS) of PkR2.5. This represents a 4.4 times increase compared to the same period last year (SPLY), where the company reported earnings of PkR1.2 billion (EPS: PkR0.57). The impressive growth is attributed to significant improvements in gross margins, increased other income, and the absence of the super tax impact that affected the previous year’s results.
According to AKD Research, despite the strong earnings, FATIMA’s topline for the quarter fell by 10% year-over-year (YoY) to PkR42.3 billion, down from PkR47.2 billion in the SPLY. This decline was primarily due to reduced sales volumes across key product lines, with Urea, Calcium Ammonium Nitrate (CAN), Nitrophosphate (NP), and Di-Ammonium Phosphate (DAP) sales dropping by 61%, 34%, 30%, and 45% YoY, respectively, despite an increase in product prices.
The company’s gross margins, however, saw a significant improvement, rising to 38.2% in 2QCY24 from 31.0% in 2QCY23. This margin expansion was driven by higher end-product prices, although the quarter-on-quarter (QoQ) comparison showed a contraction due to the full impact of revised gas prices and a decline in DAP prices.
Operating expenses for the quarter surged by 57% YoY to PkR7.2 billion, up from PkR4.6 billion in the SPLY. This increase was driven by higher distribution expenses resulting from the implementation of axle load regulations, as well as increased administrative expenses amid rising inflation.
FATIMA’s other income also witnessed a substantial rise, increasing by 3.3 times YoY to PkR2.1 billion, primarily due to a 2.4 times YoY increase in cash and investments during the period. Additionally, the company’s finance cost decreased significantly to PkR810 million, down 48% YoY from PkR1.6 billion in 2QCY23, largely due to a reduction in borrowings. As of March 2024, the company reduced its borrowings to PkR8.1 billion, compared to PkR17.4 billion in March 2023.
Overall, Fatima Fertilizer’s earnings for the first half of CY24 (1HCY24) accumulated to PkR6.47 per share, compared to PkR2.49 per share in the SPLY.
Looking ahead, the company has a favorable outlook, with a ‘Buy’ stance on its stock and a target price of PkR61 per share by June 2025. This offers a potential capital appreciation of 17%, along with an expected dividend yield of 12% for CY24.
