Efert xploring the possibility of exporting urea, subject to government approval.

Engro Fertilizers Limited (EFERT) conducted its analyst briefing on 24th Apr’25 to discuss the company’s performance for the 1QCY25 and future outlook.

Brief Takeaways

The company reported a profit after tax of PKR 2,898 million (EPS: PKR 2.17), marking a significant 63% decline year-over-year (Yoy), which is attributed to a decrease in the volumetric offtake of both urea and DAP, along with higher finance costs arising from increased short-term borrowings. On the positive side, gross margins improved to 35% in 1QCY25 compared to 25% in the SPYL. This improvement was primarily due to adjustments made to imported urea in SPLY.

Weak farm economics dent offtake

The management highlighted several challenges in the agricultural sector that negatively affected fertilizer demand. These included the absence of announced support prices for wheat, lower purchasing power of farmers following the wheat crisis last year, rising input costs such as diesel, seeds, and land rentals, and unfavourable weather conditions (particularly droughts and limited water availability during the winter season). These factors collectively contributed to weak agronomic conditions, resulting in lower fertilizer consumption across the board.
Consequently, EFERT’s market share in urea declined to 24% in 1qcy25 from 30% in the previous year. Urea sales fell by 52% year-over-year (Yoy) to 260,000 tons.
The company’s urea inventory ascended sharply to 407k tons towards the end of Mar’25 compared to just 59k tons last year, owing due to the suppressed demand.
A similar trend was observed in DAP, where EFERT’s market share declined to 18% in 1qcy25, compared to 29% in the corresponding quarter of the previous year.
Towards the end of 1qcy25, the local market retail price of urea stood at PKR 4,649 per bag, significantly lower than the international price of PKR 7,920 per bag.

PEF project

On the project front, management shared that the second scope of Phase I of the Pressure Enhancement Facility (PEF) is currently in progress and is expected to be completed by the second quarter of the calendar year 2025.
For Phase II of the project, procurement of compressors is currently underway.

Strategic Initiatives

Looking ahead, EFERT expects the total industry-wide urea offtake for CY25 to fall within the range of 6.2 million tons to 6.5 million tons, which is down from the 6.6 million tons recorded in CY24.
The company is also exploring the possibility of exporting urea, subject to government approval.
Despite the elevated inventory levels, EFERT does not plan to shut down its plant operations temporarily.

Courtesy – AHL Research