Fertilizer Firms Profits May decline 20% in 3Q2025: Topline

Topline Research has projected fertilizer firms earnings to decrease by 20% YoY due to lower other income coupled with higher selling cost. On sequential basis, profits are down by 14% QoQ due to aforementioned reason coupled with lower taxation charged recorded in 2Q2025.

Urea offtake is expected to increase by 21% YoY and 48% QoQ to 1.9mn tons in 3Q2025. Similarly, DAP offtakes are expected to decrease by 50% YoY and 79% QoQ to 144k tons in 1Q2025.Govt increases gas prices for Fatima Fertilizer

Average Urea prices during 3Q2025 declined by 7% YoY and 2% QoQ to Rs4,404 per bag led by discounts offered by select manufacturers. To highlight, Engro Fertilizers maintained a avg. discount of ~Rs210/bag during the quarter to capture the market share. However, DAP prices increased by 15% YoY and 7% QoQ to average at around Rs13,453 per bag, respectively.

Gross margins of the sector are expected to settle at 33.3% in 3Q2025, compared to 35.1% in 3Q2024 and 32.9% in 2Q2025. The decrease in gross margins on YoY basis is due to higher discounts offered during the quarter while on QoQ basis, margins are expected to increase due to higher urea offtakes.

Other income of the sector expected to decline by 53% YoY and 72% QoQ due to lower dividend contribution in FFC.

Finance cost of the sector during 3Q2025 is expected to decrease by 4% YoY to Rs3.2bn primarily due to lower interest on YoY basis while on QoQ basis, it is expected to decline by 8% due to decline in borrowing.

Effective tax rate of the sector is expected to clock in at 39% in 3Q2025 vs 37% in 3Q2024 and 35% in 2Q2025 . In absolute term, tax expense of the sector is expected to record at Rs16.9bn in 3Q2025.

We maintain our Market-Weight stance on Pakistan Fertilizer sector,” Topline analysts said.

Engro Fertilizers (EFERT): EFERT is expected to post consolidated earnings of Rs4.97/share, down 22% YoY in 3Q2025 compared to Rs6.40/share in 3Q2024. The decrease in earnings is due to higher inventory holding and selling cost coupled with elevated finance cost. To highlight, company’s urea and DAP offtakes increased by 26% YoY and 37% QoQ during 1Q2025. Gross margins are expected to clock in at around 35.6% in 3Q2025 vs 31.2% in 3Q2024 amid higher urea offtakes during the quarter.

On a sequential basis, we expect earnings to increase by 19% QoQ due to recovery in urea offtakes by 37%. Similarly, on QoQ basis, gross margins are likely to inch up by 412ppts despite the higher avg discount of ~Rs210/bag during 3Q2025 due to aforementioned reason.

Along with the result, we expect company to announce third interim cash dividend of Rs5.0/share, taking 9M2025 payout to Rs11.5/share.

Fauji Fertilizer Company (FFC): FFC is anticipated to report unconsolidated earnings of Rs13.90/share, down 19% YoY in 3Q2025 mainly led by 52% YoY decline in other income coupled with higher selling expense. Other income of the company expected to clock in at Rs6.0bn, down by 52% YoY and 71% QoQ.

Similarly, on sequential basis, we anticipate earnings to decline by 21%, due to 71% QoQ decline in other income, as no major dividend contribution is expected during this quarter. Gross margins of the company are expected to arrive at 32.3% in 3Q2025 compared to 33.7% in 2Q2025.

On consolidated basis, FFC is expected to record earnings of Rs16.46/sh, up by 5% YoY and 19% QoQ due to higher contribution from core operations.

Along with the result, we expect company to announce cash dividend of Rs10.0/share in 3Q2025, taking 9M2025 payout to Rs29.0/sh