EFERT on track to finish Phase 1 of gas facility by end-August

August 5, 2025 (MLN): Aiming to stabilize gas supply for its fertilizer operations, Engro Fertilizers (PSX: EFERT) is progressing on its $300 million Production Enhancement Facility (PEF) project, with Phase 1 expected to complete by the end of August 2025 and procurement for Phase 2 already underway.

The aforesaid information was revealed by the Company's management during the corporate briefing held to discuss the financial performance for 1HCY25.

The company reaffirmed its commitment to maintaining a 100% dividend payout policy despite prevailing headwinds, including weak farm economics, climate-related disruptions, and high working capital requirements.

However, it noted that this policy remains subject to board approval.

EFERT reported consolidated earnings of Rs8.5 billion (EPS: Rs6.3) for 1HCY25, reflecting a 10% YoY decline from Rs9.4bn (EPS: Rs7.1) in the same period last year.

A cash dividend of Rs6.5/share was revealed for the half-year period.

The decline in profitability was attributed to a 23% YoY drop in industry-wide urea sales to 2.35m tons, as weak crop support prices and elevated input costs weighed on farmer demand, the management explained.

Despite sector-wide challenges, EFERT posted a strong performance in 2QCY25, which the company expects to sustain in the coming quarters.

It reported a sharp recovery in urea market share, rising to 34% in 2Q from 24% in 1Q, supported by strategic price discounts.

For 1HCY25 overall, EFERT’s urea market share stood at 29%, compared to 28% in the same period last year.

On the other hand, the company acknowledged margin pressures in its DAP segment.

EFERT’s DAP market share declined to 18% in 1HCY25 from 23% last year, as international prices surged from $640/MT in 1Q to $780/MT in 2Q, while local selling prices lagged due to subdued farmer affordability.

Losses were recorded in this segment during 1QCY25, and the company is closely monitoring margin dynamics before committing to further expansion.

EFERT flagged that urea inventory levels had climbed to 0.5m tons, its highest in five years, due to consistent production amid sluggish sales.

Management expects inventory to exceed 1m tons by year-end, which may trigger government consideration for export allowances.

The company highlighted that despite domestic headwinds, local urea prices remain at a 44% discount to international levels (Rs4,649/bag vs Rs8,280/bag).

Other income saw a notable fourfold increase QoQ in 2QCY25, reaching Rs1.3 billion, primarily due to a one-off gain from the sale of an aircraft, it added.

Highlighting its agri-connectivity initiatives, EFERT noted that it is currently operating four Engro Markaz centers, located in Sahiwal, Muridke, Bahawalpur, and Sargodha, where it provides direct fertilizer access to farmers at company-controlled prices.

In parallel, the company’s digital B2C platform “UgAi” is gaining traction by enabling doorstep delivery of fertilizers, supporting EFERT’s broader farmer engagement strategy.

As part of its inclusive financing efforts, EFERT, in collaboration with Bank Alfalah, has rolled out a Rs250m loan program aimed at providing financial support of up to Rs1m per farmer, the management further informed.

The scheme targets nearly 2,000 farmers registered under the UgAi platform and Engro Markaz network across Sahiwal, Sargodha, Bahawalpur, and Muridke.

Looking ahead, EFERT expects muted urea demand for the full year due to prolonged stress in the farming sector.

However, the company anticipates some relief in inventory buildup during the upcoming Rabi season, which begins in October.

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