Fauji Fertilizer Bin Qasim Limited (FFBL) was incorporated in 1993 as FFC-Jordan Fertilizer Company. FFBL is in the business of manufacturing, purchasing and marketing of fertilizers. It is a subsidiary of Fauji Fertilizer Company Limited, which has 50.88% interest in the company. Its major products include granular urea, di ammonium phosphate (DAP) and ammonia.
The company has installed annual production capacity of 551,100 tons of urea and 600,000 tons of DAP. It also has ammonia manufacturing facility with daily production capacity of 1270 tons of ammonia. The company has received ISO 9001 certification for its Quality Management System, ISO 14001 certification for its Environmental Management System and OHSAS 18001 certification for its Occupational Health its Safety Assessment Series.
The sales of the company has declined in the last 12 months (LTM) due to shortage of gas supply in the summer season which will start to ease in the last quarter of the year. This shortage has had an adverse impact on the bottom line profitability of the company. However, this is a short-term issue as the company is considering alternative sources of energy.
Overall the business has maintained operating profit margins of over 20% and a return on equity of over 25% for the last 5 years reaching 74% ROE in the LTM.
Risk profile of the company can be rated as medium with current ratio of 1 time and D/E ratio of 2.5 times
P/E ratio has been consistent around 4x for the last few years while Earning yield and Dividend yield have average over 20% and 18% for the last 5 years, respectively.
Growth Prospects
The company has stakes in two joint ventures, namely, Pakistan Maroc Phosphore S.A, (PMP) Morocco and Fauji Cement Company Limited (FCCL). PMP is a joint venture between Fauji Fertilizer and the industrial group of Kingdom of Morocco. PMP supplies phosphoric acid to Fauji Fertilizer, which is a raw material for the production of DAP. Its another joint venture FCCL operates in the cement business.
The gas shortages risk is a short-term risk being mitigated by the company meanwhile income from these joint ventures will provide sufficient support to the earning capability of the company.
