Engro Fertilizers Reports Significant Earnings Drop Amid Lower Sales and Rising Costs

Karachi: Engro Fertilizers Limited (EFERT) has announced a substantial decline in its financial performance for the first quarter of the calendar year 2025, with consolidated earnings dropping by 63% year-over-year. The company reported earnings of PKR 2.9 billion, or PKR 2.2 per share, compared to PKR 7.8 billion, or PKR 5.8 per share, for the same period last year. The decline is attributed to reduced sales volumes and increased finance costs.

The company also declared an interim cash dividend of PKR 2.25 per share alongside the earnings report. EFERT’s revenue for the quarter stood at PKR 30.3 billion, a significant decrease from PKR 73.8 billion in the same period last year. This reduction in revenue was primarily driven by a 58% and 71% year-over-year decrease in Urea and DAP offtakes, respectively.

Despite the decline in revenue, EFERT’s gross margins improved to 35.3% from 23.3% in the same period last year. The previous year’s margins were adversely affected by the high cost of imported urea acquired from the government.

Operating expenses decreased by 19% year-over-year to PKR 4.5 billion, correlating with the reduced sales volumes. However, other income saw a significant drop of 76% to PKR 313 million, due to lower short-term investments.

A notable increase in finance costs, which surged 6.8 times year-over-year to PKR 1.1 billion, was driven by higher borrowing needs. The rise in borrowings was due to increased working capital requirements amid elevated inventory levels and capital expenditures related to the Pressure Enhancement Facility.

Despite the challenges, analysts maintain a ‘BUY’ stance on EFERT, with a target price of PKR 242 per share by December 2025. The outlook is supported by anticipated recovery in sales with the onset of the Kharif planting season and the continuation of higher dividend payouts, estimated at a 13.6% yield for the year 2025.