Engro Fertilizer Limited reported a 14% year-on-year increase in profit for the first quarter of CY2026, posting a net profit of Rs. 3.3 billion with earnings per share (EPS) of Rs. 2.49, according to its latest financial results.

The company also announced a dividend of Rs. 2.0 per share for 1QCY26, reflecting an 80% payout ratio. However, analysts noted that this is lower than historical payouts and down from Rs. 2.25 in the same period last year, as highlighted by Arif Habib Limited.

Despite strong overall profitability, operational performance showed mixed trends. Net sales rose 25% year-on-year but dropped sharply by 63% quarter-on-quarter, mainly due to a steep 73% decline in urea offtake.

The decline follows an exceptionally strong previous quarter, when Engro Fertilizer recorded record urea sales of 1.03 million tons. This led to higher dealer inventories and softer demand in the current quarter, especially after seasonal Rabi demand normalized.

The company had also reduced urea discounts from Rs. 400 per bag to Rs. 150 per bag in January 2026 and fully withdrew incentives by April 4, 2026. As a result, its market share fell to 26.9%, compared to 40.9% in December 2025.

On the product side, DAP (di-ammonium phosphate) sales increased 62.3% year-on-year to 40,000 tons, partially offsetting weak urea performance.

Cost pressures also persisted. Distribution expenses rose 1% year-on-year to Rs. 3.3 billion, while finance costs increased 31%, driven by capex financing and higher inventory levels despite easing interest rates.

Liquidity indicators weakened during the quarter, with cash and short-term investments declining to Rs. 17 billion from Rs. 24 billion in the previous quarter. Inventories also increased significantly to Rs. 34.2 billion, reflecting slower offtake.

The company’s inventory position stood at around 386,000 tons, accounting for 48% of total industry stock, signaling a notable buildup in unsold volumes. Meanwhile, total debt rose 15% quarter-on-quarter to Rs. 77 billion.

Engro Fertilizer is currently trading at CY26 and CY27 price-to-earnings multiples of 11.7x and 9.4x, respectively, indicating moderate valuation levels despite short-term demand pressures.