Karachi: Engro Fertilizer Limited (EFERT) has reported a significant 57% year-over-year increase in its earnings for the second quarter of 2024, with profits reaching PKR 1.7 billion, up from PKR 1.1 billion in the same period last year. The increase is largely attributed to normalized tax charges this quarter, compared to retrospective super tax and deferred tax charges last year.

According to AKD Securities Limited, the briefing provided by EFERT's management highlighted several challenges and operational updates. Despite the overall growth in earnings, the company faced a decline in nutrient sales due to deteriorating farm economics impacting income from wheat and maize crops. Production also fell sharply to 361,000 tons this quarter from 539,000 tons last year, primarily due to a 55-day maintenance shutdown of its EnVen plant. This resulted in a 45% drop in urea sales compared to the same period last year.

On a positive note, EFERT's market share in DAP (Diammonium Phosphate) increased to 17% from 14% last year, even as industry DAP offtakes fell by 7%. The management also discussed the financial aspects of its operations, noting that the EnVen plant turnaround cost approximately US$50 million, with a significant portion capitalized.

Further updates included progress on the Pressure Enhancement Facility, with 85% of phase one nearing completion and expected to be fully operational by the fourth quarter of 2024. The facility, which has a total projected cost of US$300 million, is essential for increasing production capacity. Additionally, management clarified that the PKR 20 billion loan facility from UBL is being used as normal running finance for operational working capital.

The management also emphasized the need for government intervention to unify gas prices across the industry to mitigate the price disparity of urea, noting a significant gap between local and international urea prices.