Fertilizer Slump Hits Engro Holdings’ Earnings, Dividend Omitted

Karachi: Engro Holdings Ltd. (ENGROH) has reported a significant decline in its first-quarter earnings for the calendar year 2025, with consolidated earnings falling to PKR 1.8 billion, or PKR 1.47 per share, compared to PKR 4.0 billion, or PKR 3.34 per share, in the same period last year. This 56% year-over-year decrease is primarily attributed to a downturn in the company’s fertilizer business.

The lackluster performance in the fertilizer sector, Engro Fertilizers (EFERT), saw its earnings plummet by 63% year-over-year to PKR 2.9 billion. This decline was caused by a significant drop in offtakes and a sharp increase in finance costs. Despite these challenges, EFERT reported improved gross margins, a positive shift from the previous year when margins were adversely affected by costly imported urea.

In a contrasting trend, Engro Polymer and Chemicals (EPCL) showed a 9% year-over-year reduction in losses, amounting to PKR 825 million for the first quarter of 2025. The improvement was driven by enhanced gross margins and a reduction in finance costs. The company benefited from higher offtakes and an increase in caustic prices, alongside a decrease in benchmark interest rates.

Engro Foods (FCEPL) recorded a profit contribution of PKR 433 million, a rise from the PKR 265 million seen in the same period last year. This increase was attributed to better gross margins due to higher product prices and reduced finance costs following a decline in the Karachi Interbank Offered Rate (KIBOR).

Looking ahead, Engro Holdings plans to reclassify its energy business, Engro Energy, from ‘held for sale’ to a continuous profit generator. This change comes after the termination of thermal asset sales, with anticipated profitability for Engro Energy expected to reach PKR 5.0 billion in the coming quarter.

Despite the challenges faced in the first quarter, analysts maintain a ‘BUY’ stance on Engro Holdings, citing potential improvements in the fertilizer business, expansion in the telecom tower segment, and declining interest rates as favorable factors that could bolster future earnings.