Engro Fertilizers expects stronger seasonal demand in the second half of 2026 to reduce elevated urea inventories and does not plan to introduce price discounts despite higher stock levels, according to the company’s Q2 2026 corporate briefing.
The company said improving farmer economics and healthier crop conditions are expected to support fertilizer demand, allowing it to increase sales volumes while maintaining its existing pricing strategy.
According to Topline Research, Engro Fertilizers does not intend to reduce its current urea price premium of around Rs. 150 per bag compared with competitors, expecting stronger market demand to support inventory clearance instead of price reductions.
Industry urea sales increased by 7% during the first half of 2026 and rose 18% in the second quarter, supported by better agricultural conditions. However, Engro Fertilizers’ market share declined due to pricing measures taken to offset higher gas costs.
The company said it remains positioned to benefit from improved demand in the coming months with its existing inventory levels.
Engro Fertilizers highlighted positive developments for the agriculture sector, including better wheat and rice prices, stable water availability and improved crop prospects. However, higher fuel prices and rising DAP costs continue to increase input expenses for farmers.
The company’s urea inventory reached 719,000 tons at the end of Q2 2026, compared with 562,000 tons a year earlier. DAP inventory also increased to 53,000 tons from 23,000 tons during the same period.
Management attributed higher DAP stocks to weak demand caused by elevated international sulphur prices and said the company is currently importing DAP from Morocco.
The company also said gas availability remains fully allocated and discussions are underway for a direct gas supply agreement with Mari Petroleum after its existing SNGPL contract expires in 2027. Any progress on the government’s gas pricing uniformity policy will be shared after further developments.
Engro Fertilizers reported revenue of Rs. 70.9 billion in the first half of 2026, down 12% year-on-year, while net profit declined 16% to Rs. 7.1 billion due to lower fertilizer sales despite pricing improvements.
The company maintained a gross margin of nearly 33% and announced a second interim cash dividend of Rs. 1.75 per share, bringing total first-half dividend payout to Rs. 3.75 per share.
Topline Research noted that Engro Fertilizers expects its higher debt levels to normalize by the end of 2026 as post-Rabi season sales improve cash flows. The company also recorded a one-time gain of Rs. 1.8 billion in Q2 related to the Sindh Infrastructure Development Cess.
