Key Takeaways
- Pakistan’s listed fertilizer companies expect a 20% year-on-year decline in profits for the second quarter of 2026.
- Engro Fertilizers is projected to see a 52% drop in earnings due to reduced sales volumes.
- Urea prices have increased by Rs. 100 per bag since April, while DAP prices are up 25% year-on-year.
Pakistan’s listed fertilizer companies are bracing for a significant downturn in their financial performance, with estimates suggesting a 20 percent year-on-year decline in profits for the second quarter of 2026. This forecast, provided by Topline Securities, highlights the challenges faced by the sector amid fluctuating market conditions and rising input costs.
According to industry data, urea prices have surged by Rs. 100 per bag since April, while DAP prices have increased by a substantial 25 percent year-on-year due to higher international prices. These price hikes are expected to impact the overall profitability of the sector, despite an increase in urea sales volumes.
Engro Fertilizers is among the major players facing significant challenges, with projected earnings down 52 percent year-on-year due to reduced sales volumes. Specifically, urea sales are forecasted to decline by 41 percent and DAP sales by a staggering 68 percent. The company is also expected to end the quarter with substantial inventories of 652,000 tons of urea, indicating slower sales activity.
Fauji Fertilizer Company (FFC) faces different dynamics but still anticipates a decline in standalone earnings by 13 percent for the same period. However, on a consolidated basis, FFC’s earnings are projected to increase by 16 percent, driven by higher urea sales and improved margins. Last year’s results included exceptionally high dividend income from Pakistan Maroc Phosphore (PMP), which is not expected this time around.
The sector's mixed trends reflect the broader economic challenges faced by farmers in Pakistan. While urea demand has recovered due to stronger farm activity, higher international prices have pushed up DAP costs, reducing overall phosphate fertilizer demand and impacting profitability. The decline in DAP offtake, which fell 38 percent year-on-year, is a clear indicator of the sector's vulnerability to price fluctuations.
The earnings preview comes as Pakistan’s fertilizer market navigates these complex dynamics. Despite the increase in urea sales, overall sector revenue is expected to drop by 7 percent year-on-year. This decline is attributed to the combined effects of rising input costs and reduced demand for DAP due to higher prices.
Industry experts warn that the potential cut-off of dividend payouts among major fertilizer companies could have broader implications for investor confidence and market stability. The decision to skip dividends, if made, would be a significant move reflecting the challenging financial environment faced by these firms.
