Shams ul Nisa

Agritech Limited ended the first quarter of the ongoing calendar year 2024 with a gigantic growth of 999% in net sales to Rs9.24 billion, reports WealthPK. Additionally, a gross profit of Rs1.63 billion was earned in 1QCY24 compared to a gross loss of Rs551.27 million in 1QCY23, representing a notable spike of 396.32%.

The gross margin improved to 17.68% in 1QFY24 against a loss margin of 65.56% in the same period last year. The operating income grew by 328.85% and finance cost by 30.68% during the review period. At the end of the quarter, the company posted a loss before tax of Rs147.7 million. Despite an impressive surge in net sales, the company suffered a net loss of Rs172.6 million at the end of the quarter. However, this loss is 91.0% lower than Rs1.9 billion in the same quarter last year. The company witnessed a contraction in loss margin to 1.87% and a loss per share of Rs0.44 in 1QFY24.

Profitability ratios

The company's historical profitability ratios reflect mixed results, indicating inconsistent performance yearly and overall improvement in the ratios. The company started with a gross loss of 6.8% and a net loss of 73.76% in 2018. Similarly, the company encountered profitability and cash flow obstacles as it reported a negative EBITDA Margin to Sales of 8.84%. Additionally, a surge in variable costs compared to the revenue earned from sales was observed, as its operating leverage remained at negative 0.98%. Consequently, the shareholders lost the value of their investment in the company stocks, as the total shareholder's return stood at negative 0.098% in 2018.

In 2019, the company managed to earn a gross profit of 12.92% and a 27.74% EBITDA margin-to-sales ratio. However, the company continues with a net loss to sales of 5.36%, a negative operating leverage and total shareholders return of 1.53% and 0.002%, respectively.

The year 2020 turned out in favor of a positive EBITDA margin-to-sales, operating leverage, and total shareholders' return. The company reported a gross and net loss to sales of 20.58% and 75.39%. In 2021, only gross profit and EBITDA margin-to-sales remained positive. However, for the first time in the past six years, the profitability ratios recorded impressive values in 2023, indicating the healthy performance of the company.

Sales trend

The company's sales pattern for the last six years has followed an upward trend. Overall, Urea fertilizer sales have grown by 183.02% from 100,895 metric tons (MT) to 285,551 MT in 2023. The Urea fertilizer sales experienced a contraction of 56.51% in 2020 and 18.75 in 2023 compared to the previous year. Similarly, the company's phosphate fertilizer sales surged by 20.19%, from 66,748 MT in 2018 to 80,226 MT in 2023. The highest expansion of 48.19% was observed in 2023 compared to 54,137 MT in 2022. In terms of total sales, the company recorded a decline of 9.81% to 365,777 MT in 2023 from 405,570 MT in 2022.

Future outlook

The future demand for Urea is promising due to positive farm economics for Kharif crops, particularly rice, and a second consecutive year of coon sowing recovery. However, the demand is expected to outstrip the available capacity, necessitating additional supplies or imports. Additionally, phosphate demand recovery in 2023 is expected to continue in 2024, with year-on-year growth. The Kharif season may lead to the farmers' recovery, with positive rice and coon outlooks. Global phosphate prices may be bearish in the short term, impacting local prices. In future, the company aims to improve production and sales of Single Super Phosphate with the increase in demand for phosphate. Agritech Limited was established in Pakistan on December 15, 1959. The primary activity is the production, sale, and marketing of fertilizers. Mainly, Urea and Granulated Single Super Phosphate fertilizers are produced.

Credit: INP-WealthPk