KARACHI: Profitability of listed fertiliser sector is expected to increase 20 percent year-on-year (YoY) and 7 percent quarter-on-quarter (QoQ) in the third quarter of 2026, supported by higher urea sales volumes, improved realised prices and dividend income, according to Topline Research.
The research house expects the sector’s combined turnover to increase 10 percent YoY and 46 percent QoQ to Rs200.5 billion in 3Q2026. Higher urea sales, particularly by Engro Fertilizers Limited (EFERT), and relatively higher realised urea and diammonium phosphate (DAP) prices are expected to support earnings. Fauji Fertilizer Company Limited (FFC) is also expected to record around Rs4.5 billion in dividend income during the quarter.
Industry urea offtakes increased 2 percent YoY and 28 percent QoQ to 1.9 million tonnes in 3Q2026. However, FFC’s urea offtakes declined 9 percent YoY and 6 percent QoQ to 756,000 tonnes, while offtakes for the rest of the industry increased 11 percent YoY and 69 percent QoQ. Industry urea offtakes during the first nine months of 2026 stood at 4.4 million tonnes, up 5 percent YoY.
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DAP offtakes declined 20 percent YoY but increased 41 percent QoQ to 272,000 tons in 3Q2026, reflecting lower demand amid higher prices. FFC’s DAP offtakes fell 22 percent YoY, while EFERT recorded a 168 percent increase. Cumulative DAP offtakes during January-September 2026 declined 5 percent YoY to 756,000 tons.
The sector’s gross margin is expected to reach 33.09 percent in 3Q2026, compared with 31.35 percent in the same quarter last year and 33.78 percent in 2Q2026. Topline Research attributed the expected annual improvement to higher prices remaining stable in the absence of discounts. The anticipated quarterly decline reflects a 29 percent increase in phosphoric acid prices and a change in sales mix.
The sector’s finance costs are projected to rise 44 percent YoY and 2 percent QoQ to Rs4 billion in 3Q2026, mainly due to higher borrowing-related finance costs at EFERT amid elevated inventory levels.
The effective tax rate is expected to stand at 39 percent, compared with 40.3 percent in 3Q2025 and 35.9 percent in 2Q2026. Tax expenses for the sector are projected at Rs19.2 billion, up 14 percent YoY and 22 percent QoQ.
EFERT is expected to report consolidated earnings of Rs6.45 per share in 3Q2026, up 48 percent YoY and 127 percent QoQ. Its urea offtakes increased 21 percent YoY and 175 percent QoQ to 711,000 tonnes, while DAP offtakes rose 168 percent YoY and 114 percent QoQ to 37,000 tonnes.
The company’s revenue is projected to increase 40 percent YoY and 131 percent QoQ to Rs76.4 billion, supported by higher urea and DAP offtakes and prices. EFERT’s gross margin is expected to stand at 34.5 percent, compared with 32.6 percent in 3Q2025 and 35.8 percent in 2Q2026. Topline Research expects the company to announce a cash dividend of Rs6 per share, representing a payout ratio of around 93 percent.
Meanwhile, FFC is expected to post unconsolidated earnings of Rs14.88 per share in 3Q2026, up 12 percent YoY but down 12 percent QoQ. The expected annual increase is attributed to higher gross margins and dividend income despite lower urea offtakes. The quarterly decline is expected to reflect higher phosphoric acid prices, which are projected to put pressure on DAP margins.
FFC’s sales are estimated at Rs124.1 billion, down 2 percent YoY but up 19 percent QoQ. Its urea offtakes declined 9 percent YoY and 6 percent QoQ to 756,000 tonnes, while DAP offtakes fell 22 percent YoY but rose 45 percent QoQ to 198,000 tonnes.
On a consolidated basis, FFC is expected to report earnings of Rs16.12 per share, down 5 percent YoY but up 4 percent QoQ from Rs15.42 per share in 2Q2026. Topline Research expects the company to announce a cash dividend of Rs11.50 per share, representing a payout ratio of around 77 percent.
Copyright Business Recorder, 2026