Engro Fertilizers Limited (EFERT) Earnings Call Transcript
October 23, 2026
Earnings Call Speaker Segments
Let's take a start. I think it's 4:00. So everyone, and thank you all for joining the corporate briefing session for the third quarter for Engro Fertilizers. So as per our routine process, we have a basic presentation covering certain matters, which I will be very quick in explaining, and then we will open the floor for questions. Again, you have options. You can raise your hand, ask the question here on the chat and my team will respond to it. Just a request, again, please identify yourself before you ask the question. Thank you very much. So we'll take a start. So this is the important disclaimer. I think it's something which you all know. It's always been there. So we've got 4 areas which for discussion of the 3 and the fourth is Q&A. So we look at the highlights, we look at business performance, then sort of the contributions and challenges done by Engro Fertilizers, and then we'll open the floor for questions. Okay. So I'm going to start with a brief synopsis and a view of how the global and local economic overview looks like. So I think we are all aware of the geopolitical shocks, many things much is happening across the globe from the state of alarm, starting from the state of harm, then there was a deal which got signed, but then the deal did not hold to long. And then the war again sort of reignited. Having said that, there's been recent attacks on the Saudi soil, which definitely has raised certain new challenges as you see because this was an area which was initially not as much impacted as the other areas. So this is something which is the recent challenge. And definitely, the routes continue to remain disrupted. We do see supplies coming in, but you understand the supply chain is low and the cost impacts are still high. This is quite evident from the Brent prices, which did average around $90 per barrel, but as we speak, the spot has gone over $100. And so this is a reflection of the geopolitical challenges. Similarly, during this year, urea peaked to a level of around $900, especially when the war broke out in Q2. But now because of supply coming in from China, especially, it has come down and back to the normal levels of 450-ish. So urea has eased. However, DAP remains on the higher side because sulfur and ammonia costs are still high. And DAP did peak around $930 and it's currently around $910,90, which is roughly the same as quite close to the peak. So the phosphates area remains still on a higher level because of the geopolitical challenges. And -- but urea has quite of eased off. The temporary spike, I would say, a temporary spike is now over. If you look at the local dynamics, inflation year-on-year has been definitely been higher. Great to see the challenges. Q2 and Q3, even though Q2 -- Q3 is lower than Q2 because Q2 was the main when the war broke out. policy rates remain stable. Exchange rate has remained stable. And the stock market, I think it is currently around the same levels as what we were at Q2, but still it has shown ups and downs because of the geopolitical challenges. So overall, in terms of Pakistan, so I think the government has continued its efforts to maintain domestic stability amidst all these geopolitical challenges and volatility, and it has helped the Pakistan sector remain resilient and the fertilizer industry has made sure and ensured availability of fertilizers throughout this tough times when the world was going through. And we have, as an industry made sure based on the gas -- consistent gas supply that fertilizer remains available for our farmers at the right price. Moving forward. So a little on the farmer economics. So we've seen good levels of pricing in terms of farmer in terms of maize prices, paddy, cotton. So I think on the farmer side, the farmer economics have seen good progress, and we've seen good prices, which will help the farmers going forward also. In terms of water availability, I think water has also not been a challenge this year. And we see the favorable weather conditions also as we move forward. So from the farmer economic side, from the water avail side, I think it has been positive for the farmers generally as we speak and I think mainly to do with the government intervention and their policies, which is helping the farmers. On the flip side, input costs, yes, have gone up primarily because of the fuel escalation in the fuel prices and the DAP price because DAP, you understand is quite dependent on the imports and imported grades, both in terms of raw material or in terms of the finished product. So that has shown a sharp increase. So these 2 elements have -- are the negative in terms of the farmer. However, the other 2 water and farm e products remain positive. So -- but all in all, because of the positive crop returns and water avails and availability, we are quite confident that the farmer confidence will remain positive, and it will offset the elevated input costs for the farmer. So jumping on to the business performance. So this is -- we start with urea. So I'll sort of focus on the quarterly sales. So if you see the quarter-on-quarter sales for urea, so we were 27% Q1 -- we saw a sizable dip in a 17% market share in terms of Q2 and Honda in our 38% market share in terms of Q3. So -- and in terms of the market, if you see the market, the market is roughly the same levels as compared to last year for the total urea market. But you would recall, this is something which we had explained also in our earlier briefings also that we do understand our sales is low. We do understand that our uptakes are low. We are holding a major chunk of inventory. Even today, we are holding a major chunk of inventory because our urea remains at a higher price as compared to the industry. So those dynamics have not changed. But we were -- as I always mentioned that if you -- if we can enter on an annual urea market of around 6.5 million tonnes, urea, our urea will eventually get sold. It is -- will be slower because we are more pricey than the others, but it will get sold. And Q3, [indiscernible] is a great testament of what we were -- what we had planned, what our hypothesis was. And so you can see that the benefit coming in and resulting in higher sales for urea in Q3. DAP business, as I mentioned, because of the higher prices, you see a sharp increase in prices. The DAP business has shown a dip and not only for us, -- if you look at the industry, the industry has seen a dip from Q3 last year. So our market share has gone -- has shown an increase from last year. But again, I think DAP is a story which remains low for this year for the industry. So even though -- and this is because there were route disruptions, the import challenge. But even then effort made sure that we have the product availability with us, we've ensured regular imports through multiple options, multiple channels so that we are able to serve in the Kasali market. Even though it's been a higher price, but the availability has been insured by us. But because of affordability, affordability challenges, farmers have not bought as much as DAP as expected. But again -- and definitely because of these reasons, the margins have remained on the lower side. So jumping on to the financial highlights. So another great quarter, PKR 80-odd billion of revenue for this quarter, up by 45% from last year. Profitability around PKR 9 billion for this quarter only, up from -- up by 27% from last year. So [Foreign Language], I think, as an organization, we've -- Q3 has been much better than our earlier quarters. And again, as I repeat, it was primarily because what we had planned also that this -- the second half of the year will be better for the organization because eventually, U.S. sales will happen once the market sort of stay 6.5. And we've declared a dividend from an EPS of PKR 6.8, we've declared around 80% of dividend at PKR 5.5 for this quarter. There are always questions, should we be declaring 100% or not? We've always responded. There's no change in policy. The organization intends to distribute as much dividend as possible. But we again remain cautious because there are certain challenges still around the industry, including cases like GIDC and stuff. So we remain a little cautious and we are trying to hold back some part of the dividends for the organization to be able to sort of safeguard itself or have some cushion available in case of those decisions. But having said that, we've distributed a major part of our earnings for this particular quarter. Very brief analysis of our P&L 9 months versus 9 months. So sales revenue increased because of higher sales and higher pricing, phosphates revenue on account of higher prices. It has not translated into profits, but because of higher prices, definitely the revenue has increased. Gross profit margin has shown an increase primarily because of we've taken back the discounts which were there last year -- throughout the year. And this year, there were no discounts after first quarter of 2026. Net profit has increased primarily because of these reasons. There's also a one-off gain of infrastructure development step, which came last quarter. That remains that is a one-off, which has also contributed in terms of increase in profit. Debt to capital level as compared to December has increased to PKR 279 billion, primarily because of working capital and other sort of business requirements. So -- but that's primarily attributable to our working capital and our higher inventory levels as compared to December. So a brief update on Mark. Mark, as you understand, is a brick-and-mortar setup. So we've opened our own outlets across multiple cities of Pakistan. So we're still not a large number. We still have only 6 stores as we speak. But I think the more important number to see is the number of farmers onboarded in Q3. So you see a sizable shift in that number and it is a testament of the efforts being done by the teams involved at our Mercers and the confidence which is being spread through our platforms to the farmers who are coming in more and more, and they want to take benefit of the Mercers because it allows you access to direct interaction with the organization and availability of product. So it has been a great quarter from that aspect also for -- so contributions and challenges also as an organization, we've continued to contribute to the go, et cetera, in terms of multiple taxes. It has been a decent number. And on the other side, import substitution has been still as an industry, I think we are providing that cushion to the farmers, and we're operating at a discount of around 60%, 56% to be exact as compared to our MRP. Last but not least, I think we always give update on the pressurized facility, which is the PEF facility. And PEF remains on track. Scope 1 is completed. Scope 2 is in progress, and the benefits have already started to flow in, and we have -- gas pressures have not declined. So that's why we've been able, as an industry, we've been able to provide the adequate amount of urea for the farmers. And the scope 2 completion is expected in Q1 2027. So equipment has reached us and installations and other activities are in progress [Foreign Language] to be completed by Q1 2027. So we don't see any challenge in terms of gas pressures for the industry in the near future. Perfect. So this covers the presentation. And so I'll open up the floor for questions. I think we do have certain questions on the chat, which are being responded by the team. And over to you.
[Operator Instructions] So we've got a lot of questions on chat, which has responded. We've got first question from [indiscernible].
Am I audible?
Yes, we can.
[Foreign Language]
[Foreign Language] Okay, first of all, there are no plans to do discounts. I think I've been -- we've been clear on this from start of this year. Once we pulled back all the discounts in the start of Q2, so Sibi, will not give any discounts even though you did see inventory piling up in the second quarter, but we did not give any discount even today after inventory rational. So there's no need for us to discount and there's no plans. So that's the first thing. The after short-term investment Saski, those are more liquidity management we have. there were certain investments tied up with the SIC there's a settlement by the entire multiple sectors of Pakistan those are the 2 reasons. And subsidiary [Foreign Language]. So we've made a very small investment as a capital investment we formed the company to especially focus on the tech side for the fertilizer industry. [Foreign Language] So companies basically form here, but then the more we will keep the people involved and informed as we move forward. Asad?
[Foreign Language].
[Foreign Language]. Bilal?
[Foreign Language]
[Foreign Language]. Matter is subject to -- with the court. [Foreign Language]. So we will wait for the decisions to come. And so it's a industry wide [Foreign Language]. So we will see when the decision come on GIDC. So I think we as an industry wait for that. [Foreign Language] That's a provision which we have. [Foreign Language] because of [indiscernible] pricing challenge got pending that provision that we did as a separate case altogether and once the case [Foreign Language]. As of now there is no purpose of that. But there are 2 separate cases. GIDC is different and this is different. Mr. Muhammad Mehdi?
I had a few questions. Firstly, regarding mergers, how many further branches are you planning to expand in the next quarter and the next year? What are the cost of first time establishing it? What are your running costs? And what prices are being offered? Is the -- what are the margins? Are there any discount being given to them for any selling and distribution additional coming up because of those sales? And lastly, regarding [indiscernible] plant, there were rumors that they had a technical fault and it's been shut down. So could you verify that? And if it is true, then when can we expect the plant to restart production?
[Foreign Language] In terms of workers, so we currently, as you mentioned, we are around 6 to 7. Initially, we'll go to 10 and then we'll move forward. We are in the process of planning and the idea is to increase them as much as possible, and we will move forward towards it. As of now, because it's a new concept. So we don't see [Foreign Language]. It will be an area which will be negative for the organization, but nothing major, nothing material for the organization. And that's the reason we're going very slow in this. [Foreign Language] So we're gradually opening up are gradually opening up. [Foreign Language] gradually becoming more and more better [Foreign Language]. So we see good progress. We see good sort of excitement from the farmers. So based on that, we will adequately adjust our sales. And as of now, gradual increase there. And -- but having said that, it continues to contribute in red to the bottom line, but nothing material for anyone to be worried about in terms of the numbers of Engro Fertilizers. [Foreign Language] So as an organization, Engro Fertilizer, I think, has always been a responsible organization. You will always see notices in -- on the exchange whenever our plant goes down, right? [Foreign Language] something which is not material for us to report. But whenever there is any shutdown, which is material, which always gets reported. So rest assured to everyone, whenever there's anything which we need reporting, we'll always report to the exchange. But as we speak, the plants are running, just for clarity. [indiscernible]?
[Foreign Language] I wanted to ask that in 2027, the gas contract [Foreign Language]?
[Foreign Language] And definitely there is something which we will keep everyone posted as things transpire. I think it is too early to say anything on this particular front. So I'll just wait for another 1 or 2 minutes if there's any other questions from anyone or else then we can sort of close this call. So I'll just wait for 1 more minute if there's any further questions from anyone. [ Yousuf ]?
[Foreign Language]?
[Foreign Language]. They understand the criticality and the importance of [ AP4 ] agriculture industry and fertilizers feasibility [Foreign Language]. So the government is working, and we are working closely with the government as soon as any sort of procedures come out, definitely, we will be there to support them. So I think we're just waiting for those final things to come out. And I think there's some procedural things which are happening. So we're just waiting for those. The other thing [Foreign Language] that exact number [Foreign Language], but as I mentioned, as an organization and we are quite confident on the urea industry for the year being around 6.5 million tonnes. So -- and we are very hopeful and we -- based on our outlook, we see that, that number should be achieved. So based on that, we do see a healthy sales number for Q4 [Foreign Language] if everything goes well. From Al Habib Asset Management?
This is [indiscernible] from Al Habib. My question is that in the news, there was a report that for the rabi season, around 3.5 million tonnes of urea would be demanded for the ongoing rabi season. And the availability would be around 3.9 million to 4 million tonnes. So by the end of the rabi season, there would be inventory of around 400,000 tonnes. So my question is that currently, you have around 5 lakh to 6 lakh tonnes of inventory with you, what is the demand you're expecting for your urea because since you said that your price is lower -- higher than the industry, so most probably the inventory at the end of the year, you would be carrying for the industry. So what sales do you expect during the quarter given this information?
As I mentioned, you're right, this season numbers are floating around. And again, just to reiterate my point, the 6.5 million tonnes [Foreign Language] and if you see -- if you -- if there's a number around 300,000 to 400,000 ending inventory for the industry. So definitely, our efforts will be to have as low as share in the inventory levels by the year-end. So definitely, we'll make all the efforts. But again, as I said, we still are the most expensive in the market. So preference wise we'll be a little low. But definitely, the idea is to maxim price on the demand for the next 2 months. Exact number is very difficult for me, but I said, 6.5 million tonnes to 6.6 million tonnes, you can do the math yourself in terms of the numbers available in the market and the production levels [Foreign Language] in the months to come for the industry players. If there are no further questions, so I think we should be able to end this call. And so thank you all for joining. We are always available. And of course, you have questions you can always get in contact with us. And thank you for your time [Foreign Language] now we will see you all post our annual results [Foreign Language]. So thank you, everyone, for your questions. Thank you for coming.
Read the full transcript via the API
You're viewing the first half of this call. Get the complete Engro Fertilizers Limited transcript - plus 257,000+ transcripts from 12,000+ companies, speaker segments and full-text search - through the EarningsAPI REST API or hosted MCP server.
Get an API key View API docs →For developers and AI pipelines
Programmatic access to Engro Fertilizers Limited earnings transcripts and 257,000+ others is available through the
EarningsAPI REST API and the hosted MCP server.
Quarterly plans from $145 - full transcripts, speaker segments, full-text search,
and the /api/v1/transcripts/recent polling endpoint for ETL pipelines.