Ayesha Mudassar

The sales of Engro Fertilizers Limited (EFERT) grew by 10%, gross profit by 2%, and net profit by 1% in the first half (January-June) of the ongoing calendar year 2023 (1HCY23) compared to the corresponding period of the previous year, WealthPK reports. In 1HCY23, the company posted revenue of Rs82.4 billion and gross profit of Rs22.6 billion. The net profit stood at Rs5.5 billion compared to Rs5.4 billion in the corresponding period last year, resulting in the earnings per share (EPS) of Rs4.09 versus Rs4.05 in the same period last year.

The gross margins in 1HCY23 settled at 27% compared to 30% over the same period last year, indicating that the company's cost of goods increased relative to its sales. The net profit margin increased significantly from 7% in 1HCY22 to 24% in 1HCY23, which shows that the company managed to control its expenses more effectively.

Quarterly Analysis

In comparison to the second quarter of 2022, Engro Fertilizers increased its revenues marginally from Rs38.32 billion to Rs38.37 billion in 2QCY23 The gross profit of Rs11.69 billion in 2QCY22 decreased by 2% in 2QCY23.  The company reported a net loss of approximately Rs98.32 million in 2QCY22. However, in 2QCY23, it posted a net profit of Rs1.06 billion, representing a significant increase of 1178% in profitability. The EPS in 2QCY22 was minus Rs0.07, demonstrating a loss per share. However, in 2QCY23, the EPS improved significantly to Rs0.79, showing that the company generated a profit per share during this period.

Company Profile

Engro Fertilizers is a public limited company. It was incorporated in Pakistan on June 29, 2009, as a wholly owned subsidiary of Engro Corporation Limited. The company is engaged in the manufacturing, purchasing and marketing of fertilizers, seeds, and pesticides. It also offers logistics services. Engro Fertilizers is listed on the Pakistan Stock Exchange under the symbol "EFERT". It is the second-largest company registered in the fertilizer sector, with a market capitalisation of Rs102.9 billion. Engro Fertilizers anticipates significant challenges arising from political dynamics, inflationary pressures, and currency fluctuations. However, the company is determined to work closely with the industry and the government of Pakistan to overcome these challenges to ensure the uninterrupted production of urea and the long-term food security of the country.

EFERT- Historical Performance

Historical analysis of EFERT sales shows that in the last four years, the company posted the highest revenues in 2022. The company had a single dip in sales in 2020. From sales of Rs79 billion in CY19, the company's revenue declined to Rs75 billion in CY20. However, EFERT posted Rs90 billion in sales in CY21 and Rs96 billion in CY22.

Concerning net profit, the fertilizer maker's historical performance fluctuated over the years. In the last four years (2019-2022), the firm posted the highest net profit of Rs21 billion in 2021. The company’s net profit was Rs18 billion in 2019, but dipped to Rs16 billion in 2020. In 2021, EFERT posted a net profit of Rs21 billion, which dropped to Rs15 billion in 2022.

EFERT posted the highest four-year EPS in CY21. However, the company had two dips in EPS in CY20 and CY22.

Credit: INP-WealthPk