Karachi: Pakistan's fertilizer industry is poised to experience a 20% year-over-year decline in profits for the second quarter of 2026, primarily due to reduced dividend income and lower offtakes, according to JS Global. The report highlights that while quarter-over-quarter earnings are expected to rise by 18%, the yearly contraction is notably influenced by diminished dividend income, particularly from Pakistan Maroc Phosphore (PMP). In the previous year, Fauji Fertilizer Company (FFC) recorded substantial dividend income amounting to Rs16.1 billion in the same quarter.

The fertilizer sector is projected to witness a 7% year-over-year decrease in turnover, amounting to Rs132 million in 2Q2026, attributed to declining sales volumes and rising international prices. Urea prices have surged by Rs100 per bag, impacting the market retail price (MRP) to Rs4,749 per bag for Engro Fertilizers (EFERT) and Rs4,525 per bag for FFC from April 2026. DAP prices also increased by 25% year-over-year, averaging Rs15,466 per bag, causing a 38% decline in DAP offtakes year-over-year. Despite these challenges, the sector's gross margins are expected to improve to 34.4% in the second quarter, up from 32.9% the previous year, driven by higher product prices and the rollback of discounts.

Engro Fertilizers is anticipated to report a significant 52% year-over-year decline in earnings per share, primarily due to a 41% drop in urea offtakes and a 68% fall in DAP offtakes. The company's revenue is expected to decrease by 41% year-over-year to Rs29.9 billion, although gross margins are forecasted to improve to 33.2%. Concurrently, FFC is projected to experience a 13% year-over-year decrease in unconsolidated earnings per share, although sales are anticipated to rise by 11% year-over-year, bolstered by higher urea offtakes. FFC's gross margins are expected to reach 34.8% in 2Q2026, with consolidated earnings per share increasing by 16% year-over-year. Both companies are expected to announce cash dividends, with EFERT at Rs2.00 per share and FFC at Rs10.00 per share.