The management of Engro Fertilizers Limited (EFERT) today disclosed the financial result for 1HCY23, posting a consolidated profit after Tax (PAT) of PKR 5,464mn (EPS: PKR 4.09) against PKR 5,413mn (EPS: PKR 4.05) in 1HCY22, an uptick of 1% YoY. Whereas consolidated earnings in 2QCY23 clocked in at PKR 1,060mn (EPS: PKR 0.79) compared to a loss of PKR 98mn (LPS: PKR 0.07) in SPLY. In addition to the result, the company announced a cash dividend of PKR 3.00/share (PKR 6.50/share in 1HCY23).

Financial Result Highlights                                    

·        Net sales in 1HCY23 clocked in at PKR 82,366mn, up by 10% YoY amid a surge in urea and DAP prices by 44% and 6% YoY, respectively. Meanwhile, urea and DAP offtake decreased by 6% and 27% YoY, respectively. Every quarter, topline during 2QCY23 remained stable at PKR 38,375mn owing to a jump in urea and DAP prices by 43% and 2% YoY, respectively, offsetting the 12% and 2% YoY decline in urea and DAP sales, respectively.

·        Gross margins in 1HCY23 settled at 26.95% compared to 30.01% in SPLY because of a revision in feed and fuel gas (PP12) and delay in passing on the impact via higher urea prices in 1QCY23 whereas gross margins in 2QCY23 arrived at 29.77% (down by 74bps YoY) owed to i) lower urea offtake and ii) higher repair and maintenance costs given the closure of the base plant for one month.

·        Other income depicted an increase of 6% YoY, settling at PKR 1,164mn in 1HCY23, owing to higher income from cash and cash balances. However, in 2QCY23, the other income came out to be PKR 447mn, showcasing a fall of 24% YoY owing to a decline in short-term investments.

·        Finance cost ascended by 8% YoY to PKR 1,138mn during 1HCY23 amid higher interest rates. Whereas, the finance cost in 2QCY23 swelled by 21% YoY, reaching PKR 702mn given the aforementioned reason. 

·        The company booked effective taxation at 85% in 2QCY23 vis-à-vis 101% in 2QCY22. The taxation during the quarter includes an additional 6% super tax levied on the profit before tax of CY22 and 1HCY23, respectively, coupled with deferred tax liability adjustment.

Courtesy – AHL Research