Fertilizer Sector Profits to Drop 20% in 3QCY25

Pakistan’s fertilizer sector is expected to record a 20% year-on-year decline in profits during the third quarter of 2025, mainly due to lower other income and higher selling expenses, according to a report by Topline Securities. On a quarterly basis, earnings are projected to fall 14%, driven by reduced dividends from Fauji Fertilizer Company (FFC) and rising operational costs. The brokerage has, however, maintained its “Market-Weight” stance on the sector. According to Topline, urea offtake rose 21% YoY and 48% QoQ to reach 1.9 million tons in 3Q2025. The increase was supported by strong farm demand and discounts offered by manufacturers. In contrast, DAP offtake plunged 50% YoY and 79% QoQ to 144,000 tons, reflecting subdued farmer demand amid high prices. Average urea prices fell 7% YoY and 2% QoQ to Rs. 4,404 per bag, as select producers, most notably Engro Fertilizers, offered discounts averaging Rs. 210 per bag to capture market share. Meanwhile, DAP prices climbed 15% YoY and 7% QoQ, averaging Rs. 13,453 per bag during the quarter. Gross margins across the fertilizer sector are projected to settle at 33.3% in 3Q2025, compared with 35.1% a year earlier. The decline stems mainly from heavy discounting, though margins improved slightly from 32.9% in the previous quarter, thanks to stronger urea sales. Other income fell sharply, down 53% YoY and 72% QoQ, primarily due to lower dividend receipts from FFC. Finance costs eased 4% YoY to Rs3.2 billion, helped by declining interest rates and reduced borrowing. The sector’s effective tax rate rose to 39%, compared to 37% last year, with total tax expenses reaching Rs16.9 billion, the report added. Among key players, Engro Fertilizers (EFERT) is expected to post consolidated earnings of Rs4.97 per share, a 22% YoY decline driven by higher inventory and selling costs. On a quarterly basis, however, earnings could rise 19% on the back of stronger urea offtake. Topline expects EFERT to announce a third interim dividend of Rs. 5.0 per share, taking its nine-month payout to Rs. 11.5. Fauji Fertilizer Company (FFC) is projected to report unconsolidated earnings of Rs. 13.90 per share, down 19% YoY, following a 52% fall in other income and higher selling expenses. On a consolidated basis, FFC’s earnings may reach Rs. 16.46 per share, up 5% YoY, supported by stronger core operations. A Rs. 10 per share dividend is also expected, bringing total payouts for the first nine months of 2025 to Rs. 29 per share. Topline notes that while fertilizer demand remains resilient, especially for urea, pricing pressures, weak DAP sales, and lower non-operating income are likely to keep profitability constrained in the near term.