ISLAMABAD: Engro Fertilizers (EFERT) revealed its financial results for the third quarter of 2024, showcasing a consolidated profit of Rs8.5 billion and an earnings per share (EPS) of Rs6.41. While the EPS reflects an 11% decrease year-on-year, it marks a substantial recovery with a 5.1x increase compared to the previous quarter.
According to Topline Pakistan Research, for the first nine months of 2024, EFERT reported total earnings of Rs17.9 billion, translating to an EPS of Rs13.47, a notable 20% increase from the same period last year. However, the company announced a cash dividend of Rs2.5 per share, falling short of market expectations, which had projected dividends in the range of Rs5-6 per share. This brings the total cash dividend for the year to Rs13.5 per share, maintaining a full payout ratio.
Despite the yearly decline in earnings, the results exceeded industry expectations, attributed to robust gross margins and lower finance and distribution costs. Gross margins remained stable at 31% for the quarter, with elevated urea prices offsetting the impact of rising gas costs.
Net sales decreased by 11% YoY to Rs58.6 billion, primarily due to a 33% decline in urea offtake as prices surged compared to competitors. However, net sales saw a significant 49% increase QoQ, driven by a 52% rise in urea offtake, aided by the resumption of operations at the EnVen plant after a turnaround in the second quarter.
Selling and distribution expenses were reduced by 43% YoY, reflecting lower offtakes. Conversely, other income fell by 48% YoY to Rs383 million, impacted by reduced cash balances and falling interest rates. The finance cost rose to Rs1.3 billion, a 2.5x increase YoY, largely due to higher short-term borrowings.
Tax expenses were recorded at Rs5.5 billion, with an effective tax rate of 39%, slightly lower than the previous year’s 39.3%.
Market analysts maintain a “Buy” stance on EFERT, noting its attractive valuation with a projected P/E of 6.8x for 2025 and a dividend yield of 14.5%. As the company navigates challenges in the fertilizer sector, its resilience and strategic adjustments have positioned it favorably for future growth.
