Export ban may hurt revenue in 2Q22
1Q22 PATMI broadly met our / consensus expectations. FR’s 2Q22 results may be impacted by the recent export ban as we estimate 50-60% of its monthly sales volume is affected by the export ban; potentially only playing catch-up in 2H22. As for forward sales commitment, we understand it is now within normal percentage range done in the past. We make no changes to our earnings forecasts. FR remains a SELL with unchanged TP of SGD1.94 on 12x FY23E PER at -1SD of its 5Y mean.
A decent start despite export restrictions
FR provided an executive summary of key financial and operational information on its 1Q22 performance. Its 1Q22 headline PATMI of USD74m (+736% YoY, -3% QoQ) met 32%/31% of our/consensus full year estimates. Stronger YoY earnings were boosted by higher revenue of USD304m (+54% YoY, -1%) and the absence of forward sales commitments with punitive tax implications suffered a year ago. Overall sales volumes were impacted by export quota imposed by the Indonesian government (for the month of Feb and first half of March) that led to a net inventory build-up of 31,000t in 1Q22 (1Q21: net drawdown of 4,000t). In 1Q22, fertiliser applied was behind schedule at <25% of full-year’s requirements.
A slow start to 1Q22 nucleus output
In terms of production, its 1Q22 FFB nucleus output of 645,383t (-8% YoY, -11% QoQ) met just 21% of our full-year forecast (Fig.2). FR is keeping its 0-5% YoY FFB growth forecast for FY21E (MIBG: +3% YoY) as it is expecting a normalisation of industry output with 1H:2H ratio at 45:55 (2021: 50:50).
Procured 60-70% of full-year fertilizer requirements
The length of the export ban (the came into effect on 28 April) will have an impact on FR’s 2Q22 performance. FR still has storage capacity to last more than a month. Although the ban may be short-lived, the potential bottleneck at the port once the ban is lifted may delay shipments and sales
recognition into 3Q22. As for unit cash cost, guidance is unchanged at USD270-290/t (+8%-16% YoY) as FR has thus far procured 60%-70% of its fertilizer full-year requirements (fertilizer cost has averaged +60% YoY).