Pakistan fertilizer majors drive profits in 1H
Major fertilizer companies in Pakistan increased their profits in the first half of 2021 compared with 2020, as higher fertilizer prices raised margins.
Profits after tax of companies Engro, Fauji and Fauji's FFBL subsidiary rose on the year, with Engro more than doubling its earnings over the period.
Engro sales volumes up, profits doubled
Engro's fertilizer division reported profits of 10.5bn rupees ($63.9mn) for January-June, compared with Rs4.5bn in the first half of 2020. Gross profits rose by 53pc over the period to Rs21.4bn.
Engro sold 1.2mn t of fertilizers in January-June, data from the country's national fertilizer development centre (NFDC) show. This marks an increase of 14pc, largely because of higher urea quantities, which rose by 138,000t and accounted for over 80pc of Engro's sales.
Domestic offtake of DAP fell to 96,000t, down from 109,000t in 2020. Engro imported around 165,000t of DAP in January-June, up from 68,000t in 2020, according to the NFDC.
Fauji earnings rise, but quantities down
Fauji's (FFC) fertilizer division achieved overall profits after tax of Rs11.6bn in the first half, up by 18pc on the year.
Sales quantities declined on the year, falling by 9pc to 1.2mn t, mainly because of a drop in urea offtake, which stood at 1.1mn t.
Fauji produces urea domestically, but also imports DAP and other fertilizers such as MOP and SOP. Urea production was stable at 1.2mn t in the first half. DAP sales accounted for 65,000t, up from 42,000t in 2020.
The firm's FFBL subsidiary, which operates a DAP and urea plant in southern Pakistan, posted profits of Rs1.9bn, compared with a loss of Rs3.2bn in the first half of 2020. FFBL's profits turned positive in the third quarter of 2020 after several years of losses.
FFBL sold almost 450,000t of fertilizers in the first half, split evenly between DAP and urea. Sales were down by 13pc on 2020, reflecting lower output at the Bin Qasim plant. Fauji produced 343,000t of DAP and 230,000t of urea, with total amounts falling by a third.
Private companies drive DAP market share
In the domestic DAP market, the three companies collectively lost market share to privately-owned importers.
Total country-wide DAP offtake was 601,000t in January-June, up from 555,000t a year earlier. Of this, Engro and the two Fauji companies accounted for two thirds of all DAP sales in the first half of this year, compared with 73pc in 2020.
Higher domestic selling prices for fertilizers, which have driven sales revenues, are reflective of overall higher fertilizer prices this year. DAP ex-Karachi prices began the year around Rs1,000/50kg bag higher than last year and rose by another Rs1,100/bag to around Rs5,500/bag by the end of the period, while they were broadly stable in January-June last year. The difference to 2020 prices is equivalent to almost $260/t at the current exchange rate. At the same time, DAP import prices were an average $216/t higher this year than in 2020, averaging $530/t cfr in January-June.
| Half-year results | mn $ | ||
| 1H20 | 1H21 | ±% | |
| Engro | |||
| Sales | 248 | 337 | 36 |
| Gross profit | 85 | 130 | 53 |
| Profit/Loss after tax | 27 | 64 | 136 |
| FFC | |||
| Sales | 283 | 283 | 0 |
| Gross profit | 102 | 107 | 5 |
| Profit/Loss after tax | 60 | 70 | 18 |
| FFBL | |||
| Sales | 191 | 235 | 23 |
| Gross profit | 29 | 59 | 99 |
| Profit/Loss after tax | -20 | 11 | na |
| — Engro, Fauji, Argus | |||
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