Karachi: Engro Holdings has reported a significant increase in its profit attributable to equity owners, reaching Rs42.0 billion for the first nine months of 2025, a 6.6-fold rise year-on-year. This increase includes a one-off adjustment related to thermal assets. However, excluding this adjustment, the company’s profit would have been Rs15.2 billion. The reported earnings per share (EPS) for the third quarter stand at Rs5.4, with an EPS of Rs34.9 for the nine-month period.
The company’s financial results fell below expectations due to higher finance costs and an increased effective tax rate (ETR). The ETR surged to 47% in the third quarter from 12% in the previous quarter, influenced by Deodar’s inclusion and changes in the tax regime following the Finance Act 2025.
The government’s decision to raise the minimum turnover tax rate in the Finance Act 2025 has significantly impacted Engro’s LNG terminal and connectivity business segments. The LNG business saw its tax rate rise from 9% to 15%, pushing the ETR to 75-80%, while the connectivity business tax increased from 4% to 6%, reaching an ETR of 60%. Engro’s management has expressed concerns about these changes, arguing that these capital-intensive businesses warrant a different tax approach.
EFERT, Engro’s fertilizer segment, experienced a 21% decline in sales to Rs135 billion due to reduced urea offtakes and applied discounts. Urea sales decreased by 3% year-on-year to 1,280K tons. Despite this, management anticipates a recovery in fertilizer offtakes during the Rabi season, driven by improved farmer income, which could help reduce borrowing.
Meanwhile, EPCL, the company’s chemical segment, reported a 6% increase in revenue to Rs58 billion, driven by higher domestic demand, but faced a loss of Rs3.5 billion due to falling international prices and rising energy costs.
Engro Elengy and Vopak reported a 3% decline in chemical handling due to reduced demand but maintained a high availability rate of over 98% for LNG cargos. However, profitability remains constrained due to increased taxation under the new Finance Act.
EPQL saw a 70% drop in profitability to Rs851 million, attributed to lower dispatch and reduced capacity payments. The company is exploring low BTU gas sources to boost dispatch levels. Conversely, EPTL investments are proving fruitful, with improved recoveries at approximately 100%.
Engro Eximp FZE recorded a modest 1% revenue growth, with a focus on third-party trades improving their 3P ratio to 48%. FCEPL faced a 3% decrease in topline to Rs80 billion due to a slump in the packaged milk category, though profits rose by 4% due to a better product mix and cost optimization.
Engro Holdings is currently trading at a 2025E and 2026F price-to-earnings ratio of 5.2x and 6.7x, respectively.