Engro Fertilizers Limited (“EFert” or “the Company”) is a public listed company, incorporated in 2009.

Continual expansions and diversifications in the Company’s enterprises necessitated a broad restructuring of Engro Chemical Pakistan Ltd., which demerged to form a new Engro subsidiary – Engro Fertilizers Limited. The shareholding was gradually reduced from 100% as part of a strategic realignment to explore new opportunities in other promising sectors.

EFert, a leading name in the country’s urea producers, is primarily in the business of manufacturing and marketing urea and deals in other fertilizers. The product line of EFert comprises Urea sold under the brand name Engro Urea, NPK – complex fertilizer – as Zarkhez, Phosphate-based products – DAP and MAP as Engro DAP, and Zorawar respectively, and zinc-based fertilizers as Zingro. The Company has three production facilities, out of which two are Urea plants located in Daharki (Base and Enven Plant) and one is an NPK plant in Port Qasim, Karachi. The total designed capacity of EFert’s urea plants – base plant: 975,000 MT per annum and Enven: 1,300,000 MT per annum. NPK has a total capacity of 100,000 MT. DAP is imported. EFert has a strong countrywide distribution network.

EFert is majorly (~56.3%) owned by Engro Holdings through Engro Corporation Ltd., while insurance companies hold ~8.29%, followed by mutual funds (~2.20%) and financial institutions (~1.81%). The general public holds ~20.90%.

The ownership structure of the Company is seen as stable in the foreseeable future, as the majority of shareholding vests with the sponsors through Engro Holdings.

EFert's business acumen is characterized by its strategic foresight, operational efficiency, innovation in product development, and commitment to sustainability and corporate responsibility.

The Company gathers financial strength through a consolidated equity base of ~PKR 47bln (CY23: ~PKR 48bln) with an asset base of ~PKR 170bln (CY23: ~PKR 160bln).

The control of the Board (BoD) vests with the eight-members, including four Non-Executive Directors, three Independent Directors, including one female Director, and one Executive Director.

The Company’s Board is chaired by Mr. Ahsan Zafar Syed. He is the CEO of Engro Corporation Ltd., with an association of over three decades with the Group. Mr. Asad Said Jafar, Non-Executive Director, holds more than three decades of professional experience. He has held the position of the CEO and BoDs chairman of Philips Pakistan Ltd., and has also worked in ICI Pakistan. He currently works as a management consultant. All other members on the BoD have diversified experience and have been associated with the Company's BoD for a long span of time. T

The Board is assisted by the Audit Committee and People Committee. Both committees are chaired by an Independent Director. These committees meet quarterly, and the minutes of these meetings are well documented. 

A.F. Ferguson & Co., Chartered Accountants, has given an unqualified opinion on the financial statements for CY24. The auditor is QCR-rated and on SBP panel of 'A' category.

The Company has a well-defined organizational structure that is divided into fourteen main departments; (i) Marketing, (ii) Manufacturing, (iii) People Division, (iv) Digital Transformation, (v) Finance & Accounting, (vi) HSE, (vii) Information Technology, (viii) Engro Formulation, (ix) Public Affairs, (x) Central Procurement, (xi) Cenetral Treasury, (xii) Central Payables, (xiii) Operations and (xiv) Technical. Each departmental Head reports to the Chief Executive Officer (CEO), who then reports to the BoD. However, the Head of Internal Audit and HR reports administratively to the CEO and functionally to the respective BoD Committee. The Head of the Board Audit Committee has an indirect reporting line to the Head of Corporate Audit of Engro Holdings.

Mr. Ali Rathore was appointed as the CEO of the Company in Apr-24. He has an overall experience of 26 years in financial planning & analysis, business development, operations, and M&A, with a diverse industry background. Mr. M. Imran Khalil, Chief Financial Officer (CFO), has been associated with Engro Group for more than a decade. He is a seasoned finance professional with experience in large-scale digital transformation, risk management, and project management. He is assisted by a team of professionals.

The management is assisted by four committees, i.e., Management Committee, Pricing Committee, Corporate HSE Committee, and Capex Committee. These committees are chaired by the CEO, and meetings of the committee are held on a periodic basis to ensure efficiency and strategic planning.

EFert utilizes a completely integrated and real-time ERP solution, developed by SAP AG Malaysia, with technical services provided by IBM Global Services. The ERP enables a high level of integration between functions to ensure smoother data flow amongst related business processes.

EFert maintains an effective control environment with clear reporting lines, predefined authority limits, and well-defined policies and procedures. The review and accountability function runs through the entire organizational structure.

The Fertilizers industry is oligopolistic, dominated by three players, i.e., Fauji (post FFC and FFBL merger in Dec-24). Engro and Fatima. Urea and DAP remain the primary fertilizers by volume. While Pakistan is self-sufficient in Urea, gas shortages necessitate Urea imports (~0.2mln MT in CY24). DAP is largely imported, as FFBL is the only local manufacturer. Total fertilizer production averaged ~9.1mln MT (CY20-24) vs offtake of ~9.9mln MT. In CY24, production rose ~6.9% YoY, while offtake dipped ~1.1% YoY. Urea led production (~53.6%), while Urea and DAP formed ~65.6% and ~16.2% of the total offtake, respectively. DAP imports surged ~80.4% in CY24, likely driven by Punjab’s Kissan Card Scheme of ~PKR 75bln. Overall, the sector's outlook remains stable.

EFert has been significantly contributing to the urea market (~31%) and is the second largest player in the fertilizer industry.

The Company’s urea production stood at ~2,147 KT in CY24 (CY23: ~2,313 KT). In CY24, standalone revenue stood at ~PKR 187bln (CY23: ~PKR 162bln), achieving a sales growth of ~15.5%. This increase is primarily due to price impact as the sales volume of urea decreased to ~2,026 KT (CY23: ~2,327 KT). In 1QCY25, the Company witnessed a sharp decline of ~55% in revenue reported at ~PKR 24.3bln (1QCY24: ~PKR 53.8bln) due to a reduction in demand for fertilizers.

In CY24, gross profit margins declined to ~33% (CY23: ~37%), due to the treatment of imported urea. Similarly, operating margins declined to ~22% (CY23: 27%) due to a significant increase in selling and marketing expenses. However, the net profit margin improved slightly to ~16.2% (CY23: ~15.9%) due to the inflow of non-operating income along with tax efficiencies. During 1QCY25, gross margin witnessed an improvement reported at ~41% (1QCY24: ~24%). The Company's ability to control marketing and selling expenses resulted in an improved operating margin of ~24% (1QCY24: ~15%). The effect trickled down, and the net profit margin was reported at ~16.2% (1QCY24: ~10.7%).

The Company continues to explore new avenues, particularly in pesticides and agri-farming sectors, which are expected to yield positive results in the long run. Moreover, the Company is actively evaluating alternate sources of gas with the Government to mitigate the risk of depleting gas reserves.

As of CY24, inventory days increased slightly to ~17 days (CY23: ~16 days) due to an increase in finished goods days. Trade receivable days increased to ~8 days (CY23: ~7 days), leading to a gross working capital of ~25 days (CY23: ~22 days). However, net working capital days remained stable at ~6 days (CY23: ~6 days) due to an increase in trade payable days to ~19 days (CY23: ~16 days). However, the borrowing cushion remains stretched. As of 1QCY25, gross working capital days increased significantly to ~86 days (1QCY24: ~15 days), due to an increase in finished goods days reported at ~54 days (1QCY24: ~2 days), demonstrating lower fertilizer demand. In 1QCY25, inventory levels remain elevated across the industry, particularly at EFert. This is attributed to seasonal factors, expecting normalization over the next six months. Consequently, net working capital days were stretched and reported at ~59 days (1QCY24: (1) day).

As of CY24, the Company reported FCFO of ~PKR 12bln (CY23: ~PKR 33bln) due to an increase in taxes paid. Consequently, FCFO/Finance Cost cover is reported at ~3x (CY23: ~17.3x). The FCFO stood at ~PKR 3.5bln (1QCY24: ~PKR 2bln-loss), resulting in FCFO/Finance cover of ~3.4x (1QCY24: (~12.3x)).

The leveraging ratio stood at ~42% (CY23: ~12%) due to a significant increase in borrowings reported at ~PKR 34bln (CY23: ~PKR 6bln). Shareholders equity slightly increased to ~PKR 46bln (CY23: ~PKR 45bln) due to profit accumulation. The leverage ratio increased to ~57% (1QCY24: ~13%) due to an uptick in total borrowings reported at ~PKR 53bln (1QCY24: ~PKR 6bln). Increased reliance on short-term borrowings is tied to the inventory build and the related pressure. While long-term leverage remains low, prudent management of short-term debt is essential. The shareholders' equity has reduced slightly to ~PKR 39bln (1QCY24: ~PKR 43bln) due to dividend payout.