Karachi: Engro Fertilizers Ltd. (EFERT) revealed a significant earnings increase in its second quarter of 2024 financial results, despite facing higher maintenance costs. The company posted consolidated earnings of PKR 1.7 billion, up 57% from the same period last year, attributing the growth to a normalized tax charge and announcing an interim dividend of PKR 3.0 per share.
According to AKD Securities Limited, the growth comes even as EFERT navigated some financial adjustments and increased plant maintenance costs. Notably, the company restated its first quarter results to account for the total cost of imported urea sold at negative margins, previously amortized over 12 months. This revision lowered the previously announced earnings for 1QCY24 from PKR 8.1 per share to PKR 5.8 per share. Despite a 36% annual decline in urea offtakes due to the maintenance shutdown of the EnVen plant, a significant 61% increase in average urea prices helped offset the impact, with total revenue for the quarter slightly increasing to PKR 39.4 billion.
Gross margins declined significantly to 18.1% from 29.8% in the same quarter last year, mainly due to unexpected costs associated with the EnVen maintenance. Meanwhile, distribution expenses decreased by 25.5% due to lower company offtakes, and finance costs rose by 74%, driven by higher borrowings, including PKR 20 billion in financing secured from United Bank Limited during the quarter.
Overall, first-half earnings for 2024 increased to PKR 7.1 per share, up from PKR 4.1 per share in the same period last year. AKD Securities maintains a 'BUY' stance on EFERT, with a target price of PKR 193 per share by June 2025, anticipating a dividend yield of 15% for the calendar year 2025.