Engro Fertilizers Limited (EFERT) held its 2QCY2026 Corporate Briefing Session yesterday, wherein the management discussed financial performance and outlook.

 ·         To recall, Engro Fertilizers Limited (EFERT) reported 2QCY26 earnings of PKR 3.8bn (EPS: PKR 2.85), reflecting a decline of 32% YoY, while registering a sequential increase of 15% QoQ. The reported earnings were materially supported by a one-off gain of PKR 1.96bn on account of the remeasurement of the SIDC provision. Excluding this non-recurring item, normalized earnings stood at PKR 1.8bn (EPS: PKR 1.38), indicating that underlying operational performance remained weak during the quarter. The company also announced a second interim dividend of PKR 1.75/share, taking cumulative 1HCY26 payout to PKR 3.75/share.

·         The YoY decline in profitability was primarily driven by lower urea and DAP offtake, alongside margin pressures amid a challenging demand environment. Urea volumes declined by 22% YoY to 537k tons, while DAP volumes fell by 17% YoY to 67k tons during 1HCY26. Despite an industry-wide urea offtake increase of 18% YoY in 2QCY26, EFERT’s market share dropped sharply to 17% (vs. 37% in SPLY), with the company accounting for 74% of total industry urea inventory. Similarly, DAP market share declined to 13% (vs. 19% SPLY), reflecting weak demand amid elevated international prices.

·         On a sequential basis, earnings recovery was supported by partial normalization in sales volumes and operational factors following a weaker preceding quarter. Gross margins improved to 35.8% during the period (vs. 31% SPLY), largely due to pricing actions aimed at preserving margins amid a higher gas cost structure. The company maintained average realized prices at PKR 4,535/bag for urea and PKR 16,285/bag for DAP.

·         During the briefing, management highlighted that sector dynamics remain subdued, with demand-side pressures continuing to weigh on volumetric growth, particularly in the urea segment. Elevated inventory levels (urea: 719k tons vs. 562k tons SPLY; DAP: 53k tons vs. 23k tons SPLY) reflect weak offtake and higher pricing. However, the company reiterated that it does not intend to offer price discounts and expects inventories to normalize through stronger seasonal demand in 2HCY26. Management is targeting full-year industry urea demand of 6–6.6mn tons and remains optimistic about regaining market share.

Sources: AL Habib Capital Markets