Engro Fertilizers earns Rs6.1bn profit in three months

July 31, 2024 (MLN): Engro Fertilizers Limited's (PSX: EFERT) profits surged 139.7% YoY in the second quarter of 2024 to Rs6.09 billion [EPS: Rs2.29], compared to a profit of Rs2.54bn [EPS: Rs1.9] in the same period last year (SPLY).

Along with the results, the company announced an interim cash dividend of Rs3 per share for the second quarter ended June 30, 2024.

This is in addition to the interim cash dividend already paid at Rs8 per share.

In January 2024, Ministry of Industries and Production requested the fertilizer industry to procure higher cost government of Pakistan imported urea and sell it at a lower price, similar to locally produced urea.

To recover the additional cost of imported urea, the fertilizer manufacturers increased the price of locally produced urea to the extent that additional cost is recovered in 12 months.

Although Engro Fertilizers sold its entire stock of imported urea during March quarter, the additional cost of imported urea was amortized on a pro-rata basis in the profit and loss and unamortized portion of Rs5.32 billion was retained in the balance sheet as at March 31, 2024, to be amortized over the remaining period.

During review of half-year financial statements, the management reassessed the above treatment and in order to better reflect the transaction in accounting terms, the entire unamortized portion of Rs5.32bn (post-tax impact of Rs3.02bn has been charged in the profit or loss for the period ended March 31, 2024.

Going by the results, the company's top line slipped 2.5% YoY to Rs29.7bn as compared to Rs30.45bn in SPLY.

The cost of sales rose by 17.7% YoY but was higher than proportionate to sales decline, which worsened the gross profit by 44.0% YoY to Rs5.58bn in Q2 2024.

The gross margins worsened to 18.8% as compared to 32.7% in SPLY.

During the period under review, other income went up by 190.6% YoY to stand at Rs6bn in Q2 2024 as compared to Rs2.06bn in SPLY.

On the expense side, the company's administrative expenses rose 116.8% YoY to Rs1.77bn, selling and distribution expenses fell 37.3% YoY to Rs1.3bn, and other operating expenses rose 37.3% YoY to Rs784.28m.

The company’s finance cost soared by 76.3% YoY and stood at Rs1.13bn as compared to Rs639.17m in SPLY, mainly due to higher interest rates.

On the tax front, the company paid a lower tax worth Rs683.83m against the Rs5.08bn paid in the corresponding period of last year, depicting a decrease of 86.5% YoY.

Amount in thousand except for EPS

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