Abu Qir Fertilizers Company (AFC) has posted revenues of EGP 1,811m in the third quarter (3Q) of fiscal year (FY) 2019/20.
The latest revenue figures, released in financial statements, reflect a decline of 23% year-on-year (y-o-y) and a 10% decline quarter-on-quarter (q-o-q). The company reported net profits of EGP 695m (-26% y-o-y and 1% q-o-q growth).
The decline in revenues was attributed to several factors, including a downward trend in urea prices. Egypt’s urea spot index averaged $248/tonne in 3Q 2019/20, a decline of 6% y-o-y, but a rise of 2.2% q-o-q.
AFC revenues decline can also be attributed to the Egyptian pound’s appreciation against the US dollar, reflecting an appreciation of 10% y-o-y, and 2% q-o-q. These extenuating circumstances have, in turn, weighed down on the company’s US dollar-denominated exports.
Volumes produced the first 9 months of FY 2019/20 (9M19/20) surge, coming in at 1.67m tonnes, or an increase of 4% y-o-y. The company disclosed that it currently exports its products to 19 countries worldwide, and sells its products locally to 34 local clients; 11 cooperative associations and three major farms.
Pharos Research said, “We have reason to believe that revenues for Q4 of FY 2019/2020 will not witness a substantial recovery as current Egypt’s urea price index stands at $220/tonne, which we believe will negatively affect AFC’s exports revenues going forward.”
Pharos Research added, “We reiterate our overweight recommendation as we factor in potential and very gradual recoveries in local and global trade operations by the end of FY 2019/2020 as Egypt begins lifting precautionary measures.”
It noted that a lifting in export market trade restrictions will also contribute to a gradual recovery in operations. Pharos Research noted that AFC is currently trading at 20/21e PE of 7.75x and 20/21e EV/EBITDA of 6.8x.
Pharos Research also underlined its forecasts, projecting revenue to land at EGP 7,927m, with net profits at EGP 2,640m.
