Fauji Fertilizer explores coal gasification as alternative to natural gas

Fauji Fertilizer Company Ltd. (FFC) on Thursday said it is working on a coal gasification project as an alternative to natural gas to reduce reliance on imported energy and make use of Pakistan’s domestic coal reserves.

The project is still in its early stages, and the company said updates will be shared once significant progress is made.

Speaking at a corporate briefing, the management said it expects industry-wide urea offtake to reach 6.3 million tons in 2025, with inventory likely to remain below 1 million tons by December. For 2026, the company anticipates a rebound in fertilizer demand in the first half of the year, supported by improved farm economics for wheat and cotton.

The management clarified that no discussions are currently underway with the government regarding urea exports and that the company has no plans to export urea at this stage.

Sales performance and market share

FFC’s urea and DAP offtakes rose 42% and 27% quarter-on-quarter, respectively, during the third quarter of 2025, driven by improved farmer liquidity and better crop outlook, particularly for wheat.

As of September 2025, FFC’s urea inventory stood at 294,000 tons and DAP inventory at 110,000 tons, compared to industry-wide stocks of 1.16 million tons and 380,000 tons, respectively.

The company’s urea market share declined to 47% from 51%, while its DAP share rose to 69% from 66% during the first nine months of 2025.

FFC also offered a discount of PKR 70 per bag on urea during the third quarter, which management said was significantly lower than competing offers.

Financial performance

To recall, FFC reported an unconsolidated profit of PKR 19.2 billion for the third quarter of 2025, down 22% year-over-year and 24% quarter-on-quarter.

Earnings per share were PKR 13.5, bringing nine-month profits to PKR 57.6 billion (EPS: PKR 40.5), up 14% from the same period last year.

The company also announced a third interim cash dividend of PKR 9.5 per share, taking total payouts for the nine months of 2025 to PKR 28.5 per share, representing a 70% payout ratio.

Management said discussions are ongoing on a proposal to shift the fertilizer industry to the Mari gas network, which would help improve gas supply reliability and reduce input costs.

The company’s debt-to-equity ratio improved to 15:85 as of September, compared to 19:81 in December 2024, reflecting strong cash generation and low leverage.

Meanwhile, phosphoric acid, a key input for DAP production, was quoted at $1,290 per metric ton in the international market.