Karachi: Engro Fertilizers (EFERT) reported a significant rise in urea and DAP sales for the third quarter of 2026, despite facing increased input costs. The company's management discussed these details during a recent Corporate Briefing Session, highlighting financial performance and future expectations.
According to JS Global, EFERT's urea sales increased by 21% year-on-year and 2.8 times quarter-on-quarter, reaching 711,000 tons in the third quarter of 2026. DAP sales also saw a substantial rise, with a 2.7 times year-on-year and 2.1 times quarter-on-quarter growth, totaling 37,000 tons. Despite challenges from high fuel and DAP prices due to global supply disruptions, the company remains optimistic about maintaining strong demand through favorable farm economics.
Management forecasts industry-wide urea sales to hit approximately 6.5 million tons in 2026 and anticipates strong sales volumes in the fourth quarter. The company aims to secure a healthy market share while ensuring profitability and has decided against reintroducing any discounts, which were withdrawn earlier this year. Currently, dealer margins for urea stand at Rs225 per bag.
Projected DAP sales for the year are around 1.3 million tons, with future demand contingent on DAP prices and farmer economics. Rising crop prices and an 11% increase in water availability during the Kharif season supported farmer returns, crop sowing, and yield prospects, although rising DAP and fuel costs constrained affordability.
Geopolitical tensions in the Strait of Hormuz and attacks on Saudi energy infrastructure have kept freight and insurance costs high. Additionally, international crude oil and fertilizer input prices remain elevated. The company's distribution costs also rose during the quarter, primarily driven by higher fuel prices.
EFERT's borrowings increased due to working capital needs and expenditure on the Pressure Enhancement Facility. Despite these factors, management expects to maintain healthy dividend payouts, with no changes planned for the dividend policy. The company has also established a new entity focused on technology development in the fertilizer sector as part of its capital investment strategy.
EFERT reported a consolidated quarterly profit after tax of Rs9.1 billion, with earnings per share of Rs6.83, marking a 12% year-on-year and 2% quarter-on-quarter decline. The profit after tax for the first nine months of 2026 was Rs16.2 billion, with earnings per share of Rs12.17, representing a 6% year-on-year decrease.
The company maintains a BUY stance, trading at a 2026 estimated price-to-earnings ratio of 8.3x and a dividend yield of 11%.