FFBL says 4-week power outage to affect urea production

KARACHI: Fauji Fertilizer Bin Qasim Limited (FFBL) on Monday said its urea production might be affected due to a 4-week power disruption from FFBL Power Company Limited (FPCL) on a technical fault.

The company shared the development in a notice to the Pakistan Stock Exchange (PSX). “The company hereby informs that its power supply from FFBL Power Company Limited has been discontinued due to a technical fault. This outage is expected to last for about 4 weeks,” FFBL company secretary informed through the notice.

FFBL operations were being managed through self-generation power and steam using costlier fuel, it added. “Urea production will be partially affected depending on volume of national gas availability from SSGC [Sui Southern Gas Company Limited]. However, the DAP plant is operating normally.”

“This is expected to hurt FFBL’s margins as SSGC will charge company on RLNG tariff for fuel gas,” said Insight Securities, in a note. “Similarly, lower gas volumes might result in lower urea production as well.”

Meanwhile, the management of FFBL held a corporate briefing session on Monday to discuss the Q1CY23 financial result and future outlook, according to Arif Habib Limited. In the briefing, the company posted a loss after tax of Rs5.4 billion (LPS: Rs4.20) in Q1CY23, against a net profit of Rs1.6 billion (EPS: Rs1.26) in SPLY.

“The loss was recorded amid massive exchange loss (Rs4.6 billion) and higher finance cost owing to hike in interest rate,” the brokerage said. The company's market share of DAP improved to 54 percent in Q1CY23 compared to 47 percent in SPLY since private imports reduced during the quarter. Meanwhile, DAP sales ascended by 10 percent year-on-year (YoY) to settle at 127k tonnes in the first quarter against 115k tonnes in the same quarter last year.

FFBL market share in urea declined to 6 percent in Q1CY23 from 8 percent in SPLY, while the sales reduced by 24 percent YoY to clock in at 88k tonnes. The production plummeted by 26 percent YoY on account of gas curtailment during the Q1CY23 for 36 days.

According to the management, the average prices of phosphoric acid is expected to reduce to $970/tonne in Q2CY23 from $1,050/ton in Q1CY23, the brokerage reported. “The management informed that the dealer transfer price of DAP stands at Rs10,621/bag. The management expects the domestic DAP prices to climb up further owing to Pak rupee devaluation against the greenback.”

The company was contemplating to sell 25kg bag of DAP in order to minimise the impact of higher DAP prices, Arif Habib Limited stated.

FFBL is a public limited company incorporated in Pakistan under the Companies Ordinance,1984 (now replaced by the Companies Act, 2017). The principal objective of the Company is manufacturing, purchasing and marketing of fertilisers.