Engro Fertilizers Limited reported earnings per share (EPS) of PKR 5.33 for 1HCY26 (1HCY25: PKR 6.34). Moreover, in 2QCY26 the company reported EPS of PKR 2.85 (2QCY25: PKR 4.17). Revenue and profitability showed a YoY decline due to lower sales volumes in the 1HCY26. Profitability in 2QCY26 was supported by an accounting remeasurement gain related to GIDC (Gas Infrastructure Development Cess) following an industry-wide settlement.
This contributed approximately Rs. 1.0 per share to the bottom line. Management noted the payout ratio (approx. 60–65%) is more cautious than historical 100% payouts due to geopolitical risks and the need for cautious cash management. The debt-to-capital ratio is currently high due to the financing requirements for the high inventory levels but is expected to rationalize by year-end as stocks are sold.
Wheat and rice prices have remained favourable for farmers, with wheat open market prices exceeding Rs. 4,000. However, high input costs driven by fuel price hikes and expensive DAP (landed at PKR. 16,000–17,000) have pressured farmer liquidity and led to lower DAP uptake. Engro’s DAP market share also dipped from 19% to 13%.
Engro witnessed a sharp decline in urea market share, dropping to 21% in 1HCY26 (1HCY25: 29%) and 17% in 2QCY26 (2QCY25: 34%). EFERT’s decline in market share is a planned strategy. The company has a higher gas cost base, making its urea bags the most expensive in the market. In a balanced market, cheaper products are purchased first. EFERT currently holds 74% of the industry’s inventory.
Management refuses to offer discounts to offload stock, expressing confidence that the annual demand cycle (6.5–6.6 million tons) will necessitate the sale of EFERT’s inventory by the end of the year. Pressure Enhancement Facility is a critical USD 300 million industry-wide investment on the Mari network to ensure consistent gas pressure. Phase 1 is complete, and Phase 2 (compressor installation) is expected to be fully operational by 1QCY27. Engro continues to receive its gas from Mari. Approximately 30% of the gas for the base plant is still received at a lower price than the current policy.
Management acknowledged that gas contracts are nearing maturity next year, and they are actively engaging with stakeholders to improve gas costs and long-term returns. EFERT is exploring various B2C models and product collaborations to diversify its portfolio, similar to competitors, but will reveal specific details at a later time. Going forward, management anticipates returning to their historical market share levels by year-end as the peak demand season in the second half of the year progresses. For DAP, management warned that if global prices remain at current high levels, sales volumes may continue to be under pressure throughout the second half of the year.
Important Disclosures
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