Fauji Fertilizer Company Limited (FFC) Earnings Call Transcript

Ladies and gentlemen, we welcome you to the third corporate briefing of Fauji Fertilizer Company Limited for the year 2026. The purpose of this meeting is to interact with the shareholders and to discuss on the information disclosed for the period ended June 30, 2026. And the notice regarding this meeting has already been published on PUCARS on 31st July 2026, and the presentation has been uploaded on the portal in the website yesterday as required under the SECP directives and the PSX regulations. So the purpose of this meeting again is one of the criteria of the top 25 companies. So in order to qualify for that, this meeting is being organized here. This meeting is being presided by Chief Financial Officer, Syed Atif Ali; and Mr. Mustafa is here. [ Mr. Usman [indiscernible], Generalist Finance ] is here to assist. I now hand over the proceedings to Mr. Atif Ali to formally start the meeting.

Thank you very much, Imran saab. Thank you very much. [Foreign Language] and good morning, ladies and gentlemen. Thank you for joining this third corporate briefing. Really appreciate you taking your time out and guiding us throughout these difficult times and over the years as well. I think the session we have started, we conduct like 3 to 4 like corporate briefings throughout the course of the year. And I think we gain a lot of information and value addition from all of you, I think which we appreciate a lot. And that's what we try to inculcate in our day-to-day briefings and day-to-day course of operations. So this is like H1 update. Results you have already seen. So the idea is all the investors and analysts and brokers basically highlight or share their concerns or queries and question marks. And then we [Foreign Language] and then we go about that. So I'll hand over the platform to Mustafa, my colleague, and he's going to present the H1 presentation. Thank you, again. Mustafa, please.

Welcome, ladies and gentlemen. This corporate briefing will cover the period ended June 30, 2026. And that's how we will cover our presentation. Starting from the economic highlights, as you can see, the first half of the year has been very challenging due to global unrest, which has impacted the supply chain of the global energy markets. The disruption at Strait of Hormuz has been there. And this has impacted the international phos acid prices, which is the key raw material for the manufacturing of our DAP. On the local side, inflationary impact has been transferred. And you can see the inflation average at 7.1%, increased from last year and the headline July inflation is 9.2%. To curb this, State Bank has taken certain policy measures and maintained the policy rate at 11.5%. And this has safeguarded the macroeconomics to some level. Also, comfortable foreign exchange rates have also maintained the rupee value against the dollar. If you look at the industry status, FFC is sharing the minimal urea inventory, and our DAP inventory is at 160 KT. So this is the overall economic situation. Now going towards the business overview and starting from challenges, as already discussed, the geopolitical turmoil. So it has impacted our fuel prices, transportation cost, raw material prices, and it has overall exerted an inflationary pressure. On the fertilizer demand side, the phos acid prices may soften DAP demand, and this can impact the fertilizer agri value chain. Going towards the highlights. Against this backdrop, FFC has shown a strong performance of PKR 41.9 billion bottom line. We have increased our urea offtake from last year. Our market share has increased, and we are touching historic highs in urea, and we are maintaining our market leadership in the DAP business at 66% (sic) [ 65% ]. First tranche of PIA has been paid and our plan is going towards completion as per the defined time lines. Another update is the launch of Yara products. We have launched these products in collaboration with the Yara International of Norway. These are 6 specialty crop nutrients, which will ensure better crop yields and also farmer economics. There is another update, which is that FFC has been given a AAA long-term credit rating by PACRA, and FFC is among very few corporates to achieve this distinction. Now moving towards details of the urea market share. You can see an enhanced market share versus last year. And this is a 25% overall growth in our offtakes. Looking at the DAP business, again, our market share has increased to 65%. And you can see 276 KT has been sold in form of manufactured DAP, whereas 42 KT of imported DAP has also been sold. This is an update of Sona centers. DAP and urea numbers have enormously improved, and you can see, last year half year, we just sold 18,000 tonnes. And this year alone, 59,000 tonnes have been sold by our Sona centers. These Sona centers are helping us and the farmers to improve their pricing power and these are sold -- urea is sold at the company approved rates.

I think I just want to add that, the Yara thing, I think we have been like collaborating with Yara for over a year or so, and [Foreign Language] after taking all the necessary regulatory approvals, we have launched 6 of their foliar products, which is [Foreign Language] going to basically increase the yield by 7% to 10%. That's what is expected. And the benefit of the Sona center is, the advantage to the farmers is like we have already hired 200 agronomists, and we are basically providing all these like Yara products through this -- educating the farmers and then providing this through Sona centers. So I think [Foreign Language] we will make one of this the talk of the overall performance of the organization. So you'll see that currently, we have sold like 60-odd thousand tonnes in H1, but [Foreign Language] going forward, you'll see that the sales are going to progress. And [Foreign Language] this is going to do well. We are going to make this one-stop shop for the farmers.

Now this is our financial overview. Top line growth of 28% and the GP 19%. Overall, you can see the profitability. So looking ahead, urea market is expected to be positive. However, we feel that DAP market will be feeling some pressure due to the higher raw material pricing.

Just want to add here that -- I just want to give more on that. The profitability is [Foreign Language] good, but this is on the backdrop of like -- because at the start of the year, we had this geopolitical situation, so we had to cut our cost to the business critical only. So your expenses might have seen like slightly higher versus the last year, but this could have been much higher. So we are very meticulously basically managing our expenditure. So we are making sure that we cut our cost to bare minimum. So that's the mindset that we have. And [Foreign Language] given the situation we have on our hand right now, H2 is going to be a bit more challenging given the cost push is going to come on that. Inflation is going to hit us there as well. And then the phos acid [Foreign Language] I think it prices are skyrocketing mainly because of the sulfur thing. Sulfur Middle East [Foreign Language]. So that's one of the challenges we have. So that's why we have to like act prudently and manage our overall cost very sensibly. So that's what we are trying to do. And [Foreign Language], as you can see, we have given a good dividend. So all of these basically helped us to basically end up in that situation and give a good dividend to our shareholders and investors.

So again, this is the components of profitability, 45% of our bottom line is being contributed by the investment and dividend income.

So that's the best thing about FFC. Being -- FFC itself as a group, basically, our portfolio is -- all of the investments [Foreign Language] are now delivering. We have got dividends from Askari Bank, from PMP, from Thar Energy as well, from our wind farms. So everybody is now chipping in. The concern in previous years was like food companies. They are now delivering good profitability as well. [Foreign Language] Fauji Foods [Foreign Language]. Fresh n Freeze is also doing very well. So all are in green. So a good turnaround. And you can see like almost 50% of our profitability is coming from these investments and dividend income, and the rest is like from the core operation, and the core operations [Foreign Language] mainly because we are managing our expenditure well. So yes.

This is our financial position. Increased equity. And you can see the investment book also. A little elevated inventory levels because of the higher DAP inventory, as already explained. However, you can see the rising equity despite paying a dividend and having profitability. This is our group financial position. Again, subsidiaries and associates are contributing stable growth. Revenues at PKR 230 billion growth from last year. So every element is showing growth. This is a status update of PIA. You can see the payments have been made in terms of first tranche. And the second tranche as per the agreements will be paid in upcoming months. The project is continuing according to its time lines. So this is the overall situation. And FFC's PKR 30.6 billion investment has been recorded in the books. Currently, consortium has basically acquired 66.67% of PIA shareholding.

So with this, we move to the Q&A session, and I hand over the mic to Mr. Adil.

Thank you, sir. We'll start the question-and-answer session. Our first question is from Muhammad Waleed, Maple Leaf Capital. What is the current gas supply situation for the Port Qasim and Agritech plants? And can you provide breakup of the dividend received by the company in year 2026?

The gas situation is good. Port Qasim [Foreign Language]. Agritech is like [Foreign Language]. I think they have given a notice to stock exchange as well on that. So as soon as the gas is resumed, they will communicate it to stock exchange as far as I'm now -- like as per my knowledge, Agritech plant [Foreign Language]. Dividend income's breakup...

Power [indiscernible] PKR 12.5 billion, Askari [Foreign Language] spot rate PKR 3.4 billion, and PMP PKR 3 billion.

That's the breakup of the dividend.

Is the management looking for possibilities of further increasing urea price?

No, no. Urea price, basically, the cost push was much higher. So we just tried to -- we waited for a couple of months, war to settle down, but it escalated, the cost push was much higher, but we have passed on the minimal impact. And it all depends on the situation. We don't have any like plan to do it. But if things escalate and go out of our hands, so if inflation is that much, so then we'll think about it. But currently, we don't have any plans to increase prices.

There is another question from Muhammad Waleed, Maple Leaf Capital. Is there any plant TA expected in second half of 2026?

[Foreign Language] Mirpur.

Another question from [ Manahil Securities ]. What is the expected industry offtakes for current year 2026? And what were the average DTP and MRP for urea and DAP during the quarter?

I think, overall year, we are targeting like 6.6 million tonnes. So that's what we are targeting [Foreign Language]. And DTP [Foreign Language]?

[Foreign Language].

Same, I think, 4160 [Foreign Language] DTP.

Next question is from Zayan Babar Khan from Arif Habib Limited. Does the company see any recovery in DAP offtakes and international prices?