Karachi: The fertilizer industry in Pakistan is projected to experience a 20% year-on-year increase in profits during the third quarter of 2026, largely driven by higher urea sales volumes and increased prices for Urea and DAP. Engro Fertilizers (EFERT) and Fauji Fertilizer Company (FFC) are expected to be key contributors to this growth, despite facing challenges such as fluctuating demand and rising costs.

According to JS Global, the Topline Fertilizer universe is set to see a 7% quarter-on-quarter profit rise in 3Q2026, supported by stronger sales and higher realized prices. Urea offtakes improved by 2% year-on-year and 28% quarter-on-quarter to 1.9 million tons, although FFC saw a decline in its offtakes. Conversely, EFERT recorded a notable increase in both urea and DAP offtakes.

Industry-wide turnover is anticipated to grow by 10% year-on-year and 46% quarter-on-quarter, reaching Rs200.5 billion. Gross margins are expected to improve to 33.09% in 3Q2026, slightly higher than the previous year, despite a decrease from the previous quarter due to increased phosphoric acid prices and changes in the sales mix.

EFERT is projected to post significant earnings growth, driven by a recovery in sales volumes and higher pricing, while FFC's performance is expected to be bolstered by dividend income despite a decrease in urea offtakes. Both companies are likely to announce cash dividends reflecting their strong financial returns in the quarter.