Karachi: The fertilizer sector is witnessing a significant downturn in sales, primarily due to extended monsoon rains and diminishing farmer incomes influenced by falling crop prices and increased costs, including higher land lease amounts and elevated diesel prices. Urea and DAP sales saw substantial declines in August 2024 and the first eight months of the fiscal year.

According to AKD Securities Limited, urea sales decreased by 14% year-on-year in August 2024, with similar trends noted across other key nutrients. Engro Fertilizers Limited (EFERT) reported a 30% drop in urea sales during the same period, attributed mainly to stiff competition and higher product prices compared to its peers, notably Fauji Fertilizer Bin Qasim Limited (FFBL) and Fatima Fertilizer Company Limited (FATIMA), who benefited from better gas availability. Despite the overall reduction in nutrient sales, EFERT maintained its DAP market share at 13%.

Fauji Fertilizer Company (FFC) saw its urea market share increase to 40% from 38% the previous year, mainly due to lower selling prices and a maintenance shutdown at EFERT. Conversely, FFC’s DAP sales plummeted by 81% year-on-year, significantly reducing its market share in the segment.

The report further highlighted the challenges faced by FFBL, whose DAP market share fell to 57% from 75% due to eased import restrictions and a decrease in international prices. However, FFBL’s urea sales volumes saw a substantial increase, boosted by improved gas availability.

The Mari network companies, including FFC and FATIMA, continue to benefit from lower gas prices, leading to better gross margins compared to their competitors on the Sui network. AKD Securities maintains an overweight stance on the fertilizer sector, anticipating stable earnings and attractive dividend yields due to sustained demand and production dynamics.