Karachi: Engro Fertilizers Ltd. (EFERT) reported a decline in its earnings for the third quarter of 2024, with earnings and dividends falling short of expectations due to lower sales volumes and increased financial charges.

According to AKD Securities Limited, EFERT posted consolidated earnings of PKR 8.6 billion, representing a decline of 11% year-over-year. The company also announced an interim dividend of PKR 2.5 per share, which is below the expected PKR 6.0 per share. This announcement brought the total cash payout for the first nine months of 2024 to PKR 13.5 per share.

The company’s sales fell by 11% year-over-year to PKR 59.4 billion, largely due to a significant drop in offtakes of urea, DAP, and NP by 33%, 14%, and 49% respectively. Despite these declines, a 41% year-over-year increase in urea prices helped mitigate some of the impact of lower sales volumes.

Gross margins were reported at 31.2%, slightly down from 31.7% in the same period last year but up from 18.1% in the second quarter of 2024. The lower gross margins in the previous quarter were attributed to higher expenses related to the EnVen plant turnaround.

Distribution expenses decreased by 43% year-over-year, primarily due to reduced transportation costs associated with the decline in product offtakes and a 10% drop in fuel prices. However, finance costs surged significantly, increasing 2.6 times year-over-year to PKR 1.3 billion, driven by a 2.4 times increase in borrowings during the period.

Overall, while EFERT’s earnings aligned with expectations, the lower-than-expected dividend was a strategic choice to balance out previous higher payouts and maintain a 100% payout ratio, following a period where the ratio exceeded 156% during the first half of 2024.