Engro Fertilizers posts 8% profit increase in FY24

Engro Fertilizers (EFERT), a fertilizer industry leader, has reported a profit of PKR 10.2 billion ($36.4 million) during the quarter ended December 31, 2024, bringing the total earnings for the year to PKR 28.2 billion, an 8% increase from the previous year’s earnings of PKR 26.1 billion.

In 4Q2024, EFERT saw a sharp increase in selling and distribution expenses, which rose by 102% to PKR 9.8 billion, as compared to the same period last year. This surge was primarily driven by a significant rise in urea offtakes, along with a one-time discount of PKR 140/bag offered during the quarter.

The discount helped boost sales, allowing the company to move 412,000 tons of urea in December alone, effectively lowering inventory levels.

However, this aggressive strategy impacted profitability, with earnings per share (EPS) for the quarter coming in at PKR 7.7, below analysts’ expectations. As a result, investors are closely monitoring how EFERT will manage its margins in the coming quarters.

On the bright side, EFERT maintained a strong dividend payout, announcing PKR 8/share for the quarter. This brought the total dividend for the year to PKR 21.5/share, meaning the company paid out more than 100% of its earnings to shareholders.

On the flip side, the company faced challenges, with gross margins slipping to 35% in 4Q2024, down from 38.7% in the same period last year, though improving from 31% in 3Q2024.

For the full year, margins were recorded at 28% in 2024, a decline from 32% in 2023, reflecting higher costs and competitive pricing pressures.

Financial charges also recorded a yearly jump of 116%, mainly because of the turnaround of the Enven plant this year and an increase in short term borrowings.

For investors, the big question is whether the EFERT’s strategy of boosting sales through discounts was sustainable. While the company maintained its position in the market, profitability pressures were growing. The next few quarters would reveal if this trade-off was worth it.