Karachi: The Pakistan fertilizer industry is poised for a significant 23% year-over-year increase in profits for the first quarter of 2026, driven by higher dividend income and the rollback of discounts, despite a decline in urea offtakes. On a quarterly basis, earnings are expected to fall by 28% due to decreased demand, according to a recent press release from JS Global.
According to JS Global, the anticipated profit surge is primarily attributed to the dividend income from Fauji Fertilizer Company's (FFC) energy business. During the quarter, urea offtakes dropped by 6% year-over-year and 59% quarter-over-quarter, largely due to advance purchases in December 2025 when record-high discounts were offered. The natural tapering of seasonal Rabi demand also contributed to the decline as the market utilized pre-stocked inventory.
The average urea price rose by 1% year-over-year but fell by 3% quarter-over-quarter, reaching Rs4,407 per bag. Engro Fertilizers (EFERT) maintained a discount range of Rs150 per bag during the quarter, which was rolled back starting April 4, 2026. FFC also withdrew discounts earlier in January 2026. Meanwhile, DAP prices increased by 18% year-over-year, averaging Rs14,270 per bag.
Sector turnover is expected to grow by 44% year-over-year but decline by 48% quarter-over-quarter, totaling Rs135 million in 1Q2026. The year-over-year revenue improvement is attributed to the removal of discounts, although urea offtakes witnessed a decline. Conversely, DAP offtakes surged by 102% year-over-year.
The sector's gross margins are projected to hover at 31.7% in 1Q2026, a decrease from 35.5% in the same period last year. Finance costs are expected to decrease by 21% year-over-year due to a lower interest rate environment, while the effective tax rate is anticipated to rise to 39%.
Engro Fertilizers is expected to report consolidated earnings of Rs2.95 per share, marking a 36% year-over-year increase, despite a 53% quarterly decline. The increase is due to lower finance costs and higher sales compared to the previous year. Sales are projected to reach Rs37.1 billion, up 23% year-over-year, and the company is likely to announce a cash dividend of Rs3 per share.
Fauji Fertilizer Company is anticipated to report unconsolidated earnings of Rs11.06 per share, a 20% year-over-year increase, driven by higher dividend income. Sales are expected to increase by 54% year-over-year, and FFC is likely to announce a cash dividend of Rs8.00 per share. On a consolidated basis, FFC's earnings are expected to rise by 27% year-over-year to Rs15.32 per share.