Karachi, February 09, 2023 (PPI-OT): EFERT: CY22 Result Review

Engro Fertilizer Limited (EFERT) reported its CY22 earnings earlier today, where the company posted a NPAT of PkR6.4bn (EPS: PkR4.8) for the final quarter of the year, up by 4%YoY and 53%QoQ. This takes total earnings for the year to PkR16.0bn (EPS: 12.0), down by 24%YoY. The result has exceeded industry expectations on the back of bumper Other Income along with a tax reversal recorded in the quarter.

Net sales for the company have clocked in at PkR46.4bn, up by 16%YoY amid higher prices for products, while up by 29%QoQ owing to the higher DAP offtakes in the final quarter of the year. To recall, the company sold 414k tons of urea and 102k tons of DAP in 4QCY22, compared to 424k/51.2k tons sold in previous quarter respectively.

Gross margins for the quarter have been recorded at 22.9%, considerably lower when compared to the 27.3% recorded in 3QCY22 and 32.9% in SPLY. This takes cumulative margins for CY22 to 27.3% vs. 33.3% recorded in CY21. To counter this, EFERT has recently increased its prices of Urea and DAP offerings.

EFERT has posted a bumper Other Income of PkR1.0bn for the quarter, compared to PkR261mn in the earlier quarter. The higher other income is likely being driven by hefty returns on the company’s short-term investments, along with other factors that would be clarified once the detailed accounts are published.

The company has surprisingly recorded a tax reversal of PkR888mn for the quarter, likely owing to higher taxes paid in the earlier quarters. This takes ETR for CY22 to 40%, in-line with the Supertax charge imposed in the year.

With a final cash dividend of PkR5.0/sh announced along with the result, EFERT’s total dividend payout has clocked in at PKR13.5/sh for the year, culminating into a D/Y of 16.3% on last close.