Engro Fertilizers reports mixed 9M2024 results amid market challenges

Engro Fertilizers Ltd. (EFERT) disclosed a consolidated net profit after tax (NPAT) of PKR 8.55 billion ($30.77 million) for the third quarter of the calendar year 2024 (3QCY24), marking an 11% decline year-over-year (YoY). Despite the quarterly downturn, the company showcased resilience with a substantial increase in its NPAT for the first nine months of 2024 (9MCY24), which surged by 20% YoY to PKR 17.98 billion ($64.72 million). This increase was primarily attributed to a significant reduction in the effective tax rate, which decreased from 49% in 9MCY23 to 37% in 9MCY24.

Alongside its financial results, EFERT announced an interim dividend of PKR 2.5 per share, culminating in a cumulative dividend of PKR 13.50 per share for 9MCY24. According to IMS Research, the company’s earnings align closely with market expectations, reflected in an earnings per share (EPS) estimate of PKR 6.33. Noteworthy is the quarter-over-quarter (QoQ) revenue increase of 414%, primarily driven by a low-base effect subsequent to the turnaround of its urea (EnVen) plant in the second quarter of 2024 (2QCY24).

The financial report further highlighted several fluctuations in the company’s operational metrics. Net sales fell by 11% YoY in 3QCY24 to PKR 58.64 billion, largely due to reduced fertilizer sales, yet rose by 16% YoY to PKR 171.84 billion over the first nine months. Conversely, finance costs surged by 155% YoY in the third quarter to PKR 1.27 billion, largely due to increased short-term borrowings, growing by 63% YoY in 9MCY24 to PKR 2.66 billion.

Selling and distribution costs were reduced by 43% in the third quarter to PKR 2.0 billion and showed a slight 2% YoY decrease over nine months to PKR 8.04 billion. The subdued outlook for the upcoming quarter’s earnings is influenced by various factors, including disappointing agricultural yields, anticipated reductions in wheat cultivation for Rabi 2025, and potential policy shifts regarding the Minimum Support Price Regime for key crops.

Engro Fertilizers also noted the increase in gas prices for certain fertilizer companies by the government in March, from PKR 580/MMBtu to PKR 1,597/MMBtu. While recognizing this as a positive step, the company continues to advocate for a unified gas price across the industry to foster equitable growth and sustainability.