Pakistan Fertilizer Sector Faces Projected 20% Profit Decline Amid Rising Costs

Karachi: The Pakistan fertilizer sector is poised for a significant downturn in profitability, with projections indicating a 20% year-on-year decrease in earnings for the third quarter of 2025. This anticipated decline is attributed to reduced other income and heightened selling expenses, according to a recent analysis by JS Global.

The report highlights a 21% year-on-year and 48% quarter-on-quarter increase in urea offtake, reaching 1.9 million tons in the third quarter. In contrast, DAP offtake is expected to fall sharply by 50% year-on-year and 79% quarter-on-quarter, settling at 144,000 tons in the first quarter.

Average urea prices saw a 7% year-on-year and 2% quarter-on-quarter decline, largely driven by discounts from select manufacturers like Engro Fertilizers. Meanwhile, DAP prices rose by 15% year-on-year and 7% quarter-on-quarter.

Gross margins for the sector are expected to decrease to 33.3% from 35.1% year-on-year, though a slight quarter-on-quarter increase is anticipated due to higher urea offtakes.

The report also indicates a steep 53% year-on-year and 72% quarter-on-quarter decline in other income, primarily from lower dividend contributions in Fauji Fertilizer Company (FFC).

Finance costs are projected to decrease by 4% year-on-year and 8% quarter-on-quarter, attributed to reduced interest rates and borrowing. However, the effective tax rate is expected to rise, reaching 39%, with tax expenses projected at Rs16.9 billion in the third quarter.

Engro Fertilizers is expected to report a 22% year-on-year decline in earnings, while FFC is projected to see a 19% drop. Both companies are anticipated to announce dividends alongside their results, marking a continued commitment to shareholder returns despite the challenging environment.