AMONG the country’s fertiliser companies — all of whom concentrate on producing and selling urea — Fauji Fertiliser Bin Qasim holds the distinction of being the sole producer of di-ammonium phosphate.

DAP is an essential farm ingredient that, together with urea, helps fields yield bumper crops.

Fertiliser Bin Qasim Ltd (FFBL) meets 46pc of the domestic demand for DAP. However, the company, which held Rs49bn in assets by end-March, has decided to diversify into a host of new areas, extending from meat to power to dairy products.

The company is diversifying into other areas as its core fertiliser business suffers from curtailed supply of gas

“This is to hedge against the severe curtailment of gas — which dents earnings from our current line of products — and to beat competition in other profitable areas that we have ventured into,” Syed Aamir Ahsan, FFBL’s CFO, told Dawn last Wednesday.

The company’s board of directors approved a raft of new ventures last week. They included the Fauji meat project, acquisition of a 38.25pc stake in the dairy-product producer Noon Pakistan and the setting up of coal-based and wind energy projects.

FFBL’s subsidiary Fauji Meat Limited will set up an export-oriented processing facility, which is slated to come on line by the end of this year. The project’s cost of Rs7.5bn has been approved.

Ahsan said FFBL is also setting up a 118MW coal-based power project through the FFBL Power Company Ltd at a cost of $265m, with a debt-to-equity ratio of 75 to 25. FFBL’s equity investment would be $49.68m. The plant is expected to begin supplying power by the end of next year; 58pc of the power produced would be supplied to the national grid and the remaining will be utilised by the company.

In the dairy segment, the company has acquired 51pc shares of Noon Pakistan, which produces milk and butter products under the ‘Nurpur’ brand.

“Besides, we have also acquired 270 acres of agricultural land in Pindi Bhityan, Punjab, for setting up own dairy producing project,” said Ahsan. Some of the company’s other projects include the installation of two wind power projects of 50MW each and its earlier acquisition of a 22pc stake in Askari Bank.

FFBL itself is a subsidiary of Fauji Fertiliser Company (FFCL), which commands a controlling stake of 51pc, followed by Fauji Foundation, which holds 17pc of the company’s paid-up capital of Rs9.34bn.

Releasing its financial results for the first quarter of the year (1QCY15) last week, the company reported an after-tax profit of Rs98.12m, which translated into earnings-per-share of Rs0.11. Earnings were down 47pc from Rs186.31m and eps of Rs 0.20 in the corresponding period of the previous year.

“On a sequential basis, after-tax profit for 1QCY15 is down 96pc over earnings of Rs2.24m in the fourth quarter of CY14. This is mainly due to the first quarter being off-season for FBL’s flagship product [DAP],” commented Munib Mujeeb Jilani, an investment analyst at AKD Securities.

The key highlights of the results showed that while price of DAP rose 9pc over the same period last year, the company’s topline reduced by 4pc to Rs5.8bn owing to lower volumetric sales.

Secondly, there was a 50pc quarterly increase in finance costs as the company entered into different new ventures. Moreover, an operating loss of Rs56.46m was recorded in 1QCY15 against a profit of Rs118m in 1QCY14, as the price of raw materials rose by 20pc, dampening margins by 149 basis points.

However, the company benefitted from a big leap in other income, which rose to Rs570m from Rs187m. Analyst Munib attributed this to mainly dividend income from Askari Bank. FFBL’s board of directors did not declare any interim dividend with the quarterly results, in line with market expectations.

Commenting on the first quarter performance, the company’s directors explained in their report that “gas curtailment continued and affected the overall production of ammonia, urea and DAP in terms of installed capacity. However, some improvement in gas curtailment was observed during the quarter”.

The average curtailment was 46pc as compared with 54pc in the corresponding period last year. The company’s ammonia, urea and DAP plants remained closed for 40, 76 and 30 days respectively.

The production of ammonia (at 39,000 tonnes) and DAP (at 142,000 tonnes) was higher by 8pc and 43pc respectively. However, urea production of 16,000 tonnes was lower by 27pc when compared with the same period last year.

Lower production resulted in FFBL urea (G) sales dropping 29pc to 15,000 tonnes during the quarter. Sona DAP sales amounted to 85,000 tonnes, down from 90,000 tonnes last year.

Published in Dawn, Economic & Business, May 4th, 2015

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