Engro Fertilizers Limited (EFERT) held its analyst briefing today, revealing a consolidated profit after tax (PAT) of PKR 22.6 billion (EPS: PKR 16.95) for the calendar year 2025, reflecting a 20% year-on-year decline. The company’s performance in the fourth quarter also declined, with profits falling 19% to PKR 8.4 billion (EPS: PKR 6.26).

In conjunction with its earnings report, EFERT announced a dividend per share (DPS) of PKR 15.00 for CY25, down from PKR 21.50 the previous year, with a fourth-quarter DPS of PKR 4.00. The significant drop in profitability was attributed to a PKR 2 billion super tax, higher financial costs stemming from elevated inventory, and an additional PKR 2 billion in freight and logistics expenses incurred to manage these challenges.

The company opted to distribute approximately 89% of its earnings—slightly below its typical distribution of around 100%—to maintain liquidity amid ongoing uncertainties, including the super tax and potential liabilities from the Gas Infrastructure Development Cess (GIDC).

Looking ahead, EFERT management maintains a stable-to-positive outlook for the balance sheet, reporting no changes in cash or debt levels or adjustments to its payout policy. The management stated that industry-wide discounts, largely lifted since January, have continued to impact pricing, with the company offering discounts of about PKR 150 per bag due to its relatively higher cost structure driven by elevated gas prices.

Future discounts will hinge on market dynamics and competitive conditions. In terms of farmers’ economics, EFERT noted that while farmers faced early 2025 challenges due to a drop in wheat prices to around PKR 1,800 per maund, prices later rebounded to approximately PKR 3,500 per maund, aided by government support and improved water availability following rains and snowfall. Input costs have remained stable during this period.

The fertilizer industry reported record urea sales nearing 6.7 million tons in CY25, with EFERT’s market share rising to 34%, an increase from 31%, peaking at 41% in the fourth quarter. Year-end industry inventory normalized to over 200,000 tons, with EFERT’s inventory share decreasing to 23%, indicative of stronger sales and effective inventory management in favorable farming conditions.

EFERT anticipates robust demand for the upcoming kharif season, bolstered by improved farmer economics and better water availability. However, the company faced challenges in the DAP sector in CY25, with international prices fluctuating between USD 600 and 800 per ton, which negatively impacted market share, which fell to 13% from 19%, though it remained around 14% in the fourth quarter. EFERT currently holds sufficient DAP inventory but may explore alternative supply arrangements if geopolitical disruptions persist. DAP is primarily sourced from Saudi Arabia, Morocco, and China. The outlook remains cautiously optimistic despite the challenges, with the company prepared to navigate the evolving market landscape.