Engro Fertilizers (PSX: EFERT) expects strong seasonal demand to reduce elevated urea inventories during the second half of 2026 and has no plans to offer price discounts, even as stock levels remain significantly higher than a year earlier, according to its corporate briefing session for Q2 2026.
The company said demand is expected to improve on the back of favorable farmer economics and healthy crop conditions, positioning it to regain market share despite maintaining a price premium over competitors. EFERT does not intend to narrow its current Rs. 150 per bag premium and expects higher sales volumes to clear inventories without reducing prices.
Engro Fertilizers’ presentation showed industry urea sales rose 7 percent during the first half of 2026 and 18 percent in the second quarter, supported by favorable farmer economics, although the company’s own market share declined because of planned pricing actions taken to offset higher gas costs. The company said it remains well positioned to capitalize on stronger demand in the second half with its existing inventory.
The presentation also highlighted positive conditions for the agriculture sector, including improved wheat and rice prices, stable water availability, and encouraging crop prospects. However, it noted that higher fuel prices and a sharp increase in DAP prices continued to raise farm input costs.
Data shared by Topline Securities showed that Engro Fertilizers’ urea inventory stood at 719,000 tons at the end of the second quarter, up from 562,000 tons a year earlier, while DAP inventory increased to 53,000 tons from 23,000 tons. Management attributed the higher inventory levels to elevated fertilizer prices and expects DAP demand to remain subdued because of high international sulphur prices. The company is currently sourcing DAP from Morocco.
Gas supply remains fully allocated and discussions are underway for a direct gas supply agreement with Mari Petroleum after the expiry of its SNGPL contract in 2027. The company added that any progress on the government’s gas pricing uniformity policy would be shared as developments emerge.
Engro Fertilizers reported first half revenue of Rs. 70.9 billion, down 12 percent year over year, while net profit fell 16 percent to Rs. 7.1 billion as lower fertilizer sales offset pricing gains. The company maintained a gross margin of around 33 percent despite weaker volumes and declared a second interim cash dividend of Rs. 1.75 per share, taking the total first half payout to Rs. 3.75 per share.
EFERT expects the company’s higher debt levels to normalize by the end of 2026 as post Rabi season sales improve cash flows and reduce outstanding borrowings. It also said Engro Fertilizers recorded a one time gain of Rs. 1.8 billion during the second quarter related to the Sindh Infrastructure Development Cess.
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