Engro Fertilizers Limited is a subsidiary of Engro Corporation and a renowned name in Pakistan’s fertilizer industry. It is traded on the stock market under the symbol ‘EFERT. Engro holds a vast, countrywide production and marketing infrastructure and produces leading fertilizer brands optimized for domestic cultivation needs and demand. Engro is also a leading importer and seller of phosphate products, which are marketed extensively across Pakistan as phospatic fertilizers. Engro Fertilizers is poised to become the leading urea manufacturer in the country following major upgrading of its manufacturing capabilities. ENVEN 1.3–a tremendous expansion in Engro’s urea manufacturing facility went into production in November 2010 and looks set to end Pakistan’s near-term urea imports, leading to advantages of an expanded domestic urea base and savings in national exchequer.
EFERT registered a comprehensive profit of Rs 9.3 billion in the year closed December 31, 2016, down 37 percent as against with Rs 14.8 billion in the previous year. Earnings per share (EPS) fell to Rs 6.98 as against with an EPS of Rs 11.14 in the period under review.
The company’s revenue fell despite an uptick in urea off-take (seasonality and government measures), which rose by 8 percent yearly. Distribution cost increased by 45 percent year-on-year to Rs 3.2 billion in the fourth quarter of 2016, which was higher than predictions given fertilizer off-take during the period and translated into operating profit of Rs 2.3 billion in the fourth quarter of 2016.
Other income, which includes subsidy on urea of Rs 156 per bag along with Rs 300 per bag subsidy on Di-ammonium Phosphate (DAP) sales, was below predictions (based on off-take numbers for Urea and DAP for fourth quarter of 2016). This along with higher distribution costs contributed towards decline in bottom line of 32 percent year-on-year. During 2016, revenue of EFERT registered a fall of 19 percent while gross margins fell by 10 percentage points to 25 percent because of a substantial decline in urea retention prices and fall in urea off-take. DAP off-take jumped by 36 percent year-on-year for 2016, but failed to support profit because of low margin on imported stocks.
UREA SALES IN PAKISTAN
Experts recorded that the sales of urea sharply declined in February 2017 on subdued demand, while off-take of DAP increased on inventory buildup by the dealers following a rise in the international prices of fertilizer. Urea sales declined 38 percent month-on-month (MoM) and 20 percent year-on-year (YoY) to 251,000 tonnes in February. It is also said that urea sales could largely be attributable to excessive buying in the preceding months and less working days in February.
On the other hand, DAP sales in February clocked in at 92,000 tonnes, up 51 percent compared to January and up 30 percent as against with February 2016. Rise in DAP sales was mostly because of aggressive buying by the dealers in anticipation of rise in local DAP prices amid growing global DAP prices.
On a cumulative basis, urea sales remained equal at 657,000 tonnes during the first two months of 2017, while DAP increased 3 percent to 153,000 tonnes in the January-February period. The closing inventory of urea with the local producers reached at 941,000 tonnes as of February 28, while total urea’s closing inventory was registered at 1.178 million tonnes.