Engro Urea Sales Down, Demand Slumps

Staff Report 

Islamabad: Engro Fertilizers (EFERT) held its 2Q2025 Corporate Briefing on Monday, where management discussed financial performance and outlook. Management expects industry inventory to stay above 1 million tons by Dec 2025 if exports are not allowed, with current urea inventory around 1.3 million tons. Regarding urea exports, the company shared that a meeting was held with the ministry, but this will be reviewed based on the situation going forward.

In 2Q2025, net sales fell 29% YoY, primarily due to lower urea and DAP offtakes amid depressed farmer economics. The price difference between local and international urea is around Rs3600/bag, with a 44% discount on international pricing. On the demand side, management expects lower urea demand in 2025 due to weak farm economics, citing lower crop yields and climate change as key challenges. Urea Sales Rise 4% in July 2025

Regarding the pressure enhancement facility at the Mari field, management reported completion of phase one (Scope-1), with phase two (Scope-2) expected to be completed by August 2025. The facility will not increase production capacity but will ensure continuity of current production levels. The company also opened four retail stores (Engro Markaz) during 4Q2024 to improve product supply.

Discounts on urea are offered based on market demand, sometimes small and other times larger. Dealers are also requesting better credit terms. EFERT’s DAP market share remained at 19% in 2Q2025, compared to 16% in 1Q2024. DAP prices increased by 23% during 1HY25, to $780, while market share fell to 18% in 1HY25 from 23% in the same period last year.

EFERT is currently trading at a 2025E P/E of 10.2x and a dividend yield of 9.8%.