Karachi: Engro Fertilizer Limited (EFERT) reported a decline in third-quarter earnings for CY24, with profits falling to Rs8.6 billion, an 11% decrease year-over-year. The company attributes this downturn primarily to a 33% drop in Urea sales, influenced by adverse farming conditions, including increased temperatures and economic challenges in the agricultural sector.

According to JS Global, the financial results were presented during a corporate briefing where EFERT discussed its 3QCY24 performance and future outlook. Despite the year-over-year decline, the company saw a substantial sequential recovery, with bottom-line growth multiplying by over four times compared to the second quarter, driven by the resumption of operations at its Enven plant, which had been closed for maintenance.

The briefing also covered the ongoing issues of gas tariff disparities that have unfavorably impacted EFERT’s competitiveness in Urea pricing. Currently, EFERT’s Urea is retailed at a premium of Rs100-150 per bag over its competitors, prompting the company to implement a discount of Rs100 per bag in October 2024 to align dealer transfer prices and regain market share, which has diminished by 8 percentage points year-over-year to about 30%.

Additionally, the company continues to progress on its Pressure Enhancement Facility project, crucial for ensuring consistent gas supply essential for fertilizer production, with phase one expected to conclude by the second quarter of CY25. EFERT, in collaboration with other fertilizer entities on the Mari Petroleum Co network, has committed approximately US$100 million to this infrastructure project.

EFERT remains a preferred defensive stock with a stable dividend outlook and an expected dividend yield of 14% for CY25. While a recovery in Urea volume is anticipated next year, price disparities due to gas tariffs are likely to persist.