Karachi: Engro Fertilizers Limited (EFERT) held a corporate briefing today to discuss its performance in the second quarter of the calendar year 2026, revealing a notable decline in earnings and sales volumes. The company reported consolidated earnings of Rs3.8 billion, a 32% year-over-year decrease, resulting in an earnings per share (EPS) of Rs2.85 compared to Rs4.17 in the same period last year.
According to JS Global, EFERT's topline fell by 34% to Rs33.1 billion during the quarter, driven by significant drops in urea and DAP sales volumes, down 40% and 29% respectively. The company maintained a gross margin of 33%, but net profit decreased by 16% in the first half of the calendar year. A one-off remeasurement gain of Rs1.8 billion was recorded from the SIDC provision.
The briefing highlighted that global prices for urea and DAP have reached unprecedented levels since 2022, influenced by geopolitical tensions, with prices hitting US$900/ton and US$933/ton respectively. High sulfur costs, at US$1,095/ton, continue to impact DAP prices.
EFERT's market share in the urea segment dropped by 18 percentage points year-over-year to 18%, largely due to elevated pricing affecting volumes. Despite this, management expressed confidence in regaining market share by the end of the year as urea demand is expected to normalize with the Rabi season's offtakes.
The company acknowledged a substantial inventory of 694,000 tons at the quarter's end but remains optimistic about demand recovery, choosing not to offer discounts to clear stocks currently. Management projects urea demand to remain robust at 6.6 million tons, while DAP demand is likely to stay pressured due to high prices.
EFERT's debt to capital ratio rose to 56% from 50% in December 2025, alongside increasing finance costs. However, management expects these costs to decrease as offtake numbers improve by the end of the year. The current market retail price for EFERT's urea stands at Rs4,749 per bag, significantly lower than the international landed cost of approximately Rs12,700 per bag.
The company plans to maintain its dividend policy, aiming for higher payout ratios compared to the 61% recorded in the second quarter. Progress on the Pressure Enhancement Facility was also reported, with Phase 1 Scope 1 completed and Phase 1 Scope 2 expected to finish by the third quarter of 2026. Phase 2, involving the construction and installation of gas chambers, is projected for completion by the first quarter of 2027.
Management addressed ongoing gas challenges, including the impending expiration of their SNGPL contract next year, and indicated a strategic shift to the Ghazij reserves, alongside the sector, once HRL reserves diminish.