The management of Engro Fertilizer Limited (EFERT) held an Analyst Briefing session on 12th Oct’22 to discuss the company’s performance and future outlook.

Brief Takeaways

·        To recall, the company posted a consolidated net profit of PKR 9,595mn (EPS: PKR 7.19) in 9MCY22 compared to PKR 14,921mn (EPS: PKR 11.17) in 9MCY21, down by 36% YoY. The decline in earnings comes on the back of: i) volumetric decline in urea and DAP offtake, and ii) super tax imposed on the profit before tax of CY21 and 9MCY22 alongside higher deferred tax adjustment.

·        During 9MCY22, the company’s urea sales reported a decline of 13% YoY, settling at 1,522 KT owed to flash floods across the country. While the urea production remained stable at 1,568 KT despite breakdown at EnVen Plant in Jul’22. Meanwhile, DAP sales declined by 18% YoY, settling at 162k tons in 9MCY22 owed to surge in DAP prices.

·        Local urea prices are currently trading at PKR 2,150/bag against international landed price of PKR 9,153/bag.

·        The management shared that the company’s urea market share during 9MCY22 dropped to 32% compared to 37% in SPLY.

·        Regarding the concessionary gas extension case, the company told that there is no progress as yet, and the stay order from Sindh High Court still holds.

·        The management told that the company plans to challenge the super tax imposition in the Court of law after reviewing legal options. 

·        The company’s sales tax refund has reached PKR 12.4bn by Sep’22. Whereas, subsidy receivable stands at PKR 6.5bn.

·        The management informed that it has commenced scheduled maintenance of Base plant from 27th Sep’22, which is expected to last till 60 days. As per the management, the estimated CAPEX for the maintenance is more than USD 50mn.

·        For the new Fertilizer Policy, the management has announced some proposals such as: i) uniform gas rate without any subsidy, ii) full de-regulation of ur

Courtesy – AHL Research