Engro Fertilizers Limited ($EFERT)

Okay. Let's just start. So [Foreign Language], everyone, and welcome to the first corporate briefing session for the year 2026. So again, just a refresher of the format. So we'll use the same format we've been using every time. So we have a couple of slides presenting the entire quarter. I'll go through them. It should take me not more than 15, 20 minutes. Then we will open up the questions, and people can ask online. And throughout the presentation and the session, people can always ask questions on the chat, which my team will be happy to respond also. And if there's any question which I feel that my team can respond, I'll refer them to the chat, and they can respond over there. So that's the format we've been using. I feel it'll be working fine. We've got some appreciation on that also in the past. So let's continue with that. So first of all, thank you, everyone, for joining for the first corporate briefing session for 2026. We recently met around, I think, 24, 25 days ago, which was a session for -- annual session for the last year. But now we are here again with the first quarter results. So I'll just go to my slides. I think, disclaimer, we are all aware of. So the format is somewhat the same as we have always used, some highlights of the quarter, business performance, some contributions and challenges, and then we move on to the Q&A. So I think I'll start with the right-hand side, which is the local numbers. I think we are more or less aware of the numbers. And I don't -- and the only number I could see changing from where we went last time was maybe the inflation number, which is at 7.3% year-on-year. Diesel, we all aware of the fact, has been top of the town. It surged from PKR 257, ended at PKR 336. In between, it surged to around PKR 500-plus for a couple of days, came back. So we've seen a lot of sort of yoyo in the HSD rates, and it still sort of is on the higher side. The policy rate, however, has remained unchanged. The policy and exchange rate has remained unchanged. And the stock market continues to be volatile. And we've seen, I think, many ups and downs in the stock market in that period, and we continue to see those based on the uncertainty on the global markets. And so when I talk about uncertainty of the global market, so I'm sure we all are aware of the fact crude has been one of the major drivers leading to major uncertainty. We've seen it grow from $65 to around $109 per barrel in March with a lot of yo-yos in between. We've seen the disruption of the trade routes, especially the Strait of Hormuz, which has continued to be the top of the town and as we speak, is still under pressure. And definitely, that has led to rising inflation, primarily because of the increase in fuel rates and the transportation charges. So on the global front, these 3 things have been contributories impacting us as an organization and also globally, primarily on the supply chain side. But when I talk of Q1 other than the fact, if I try and keep the Middle East crisis aside, so this particular quarter started very well. The farmer economics is much, much better than what we saw last time. The wheat prices have been higher by around 40% year-on-year from roughly PKR 2,300 last year to PKR 3,200 this year. So a lot of support by the government, great initiatives by the government, which has helped the increase in prices and the support to the farmers. So that's the positive side. Similarly, when you're talking, last year, same quarter, we were seeing challenges of water in terms of droughts coming in and supply chain, supply of water was a challenge. But as we speak, we've got ample supply of water, one of the highest maybe in many years, 7-odd years. So we feel that the shortage of water is not a challenge. So these are 2 very, very positive things if we talk of as compared to the last year -- first quarter of last year as we enter into this year. But having said that, because of the challenges of the ongoing crisis and geopolitical crisis, we do see rise in input costs and sort of stemming from all sides, in terms of chemicals, diesels and whatnot. And that is creating a slight impact on our -- definitely on the input costs. So we have taken one price increase of PKR 100 during April to cover certain elements of the cost and manage some of our cost increases. But we'll continue to monitor those as the days progress. So jumping on to the business progress and especially talking about urea sales. So if you see quarter 1, of this quarter, of 2026 versus quarter 1 of 2025, you see a slight dip in the overall sales. But if you see the entire season, the Rabi season, you will see an increase in sales by 15%. So this actually shows the fact that there were incremental sales in December, which led to the overall -- and being lower sales in January because December push helped the sales last year, and the sales in this sort of particular month was a little lower. But if you see the entire Rabi season, the sales is higher by 15%. So this is quite a positive sign for the entire industry. Similarly, Engro's share, if I look at quarter-on-quarter, so we've been 27% this quarter as compared to 24% last quarter. Inventory levels, I think we've been around the same levels as where we were, but -- and mix is, I think, somewhat the same, nothing major to talk about. So all in all, if you see the industry has picked up well. This quarter may look low, but look at the entire 6 months, you see -- also, Rabi season, you see the increase in the sales. And Engro in that particular period has been able to achieve a market share of 38%. So I think that's a positive sign also. Moving to DAP. So again, DAP has been higher by around 100% in terms of last quarter. So we've seen a great pickup in DAP market from 147 tonnes last year, 296 tonnes. Our sales has been higher as compared to last quarter -- sorry, same quarter last year. But having said that, the market share is a little lower. So I think -- and primarily, market share has been lower because of the inventory levels, which Engro has, and those are primarily to the situation of the closure of the routes for DAP because you understand we are importers of DAP and these days, there is a challenge on the import side. And that sort of also translates into the numbers you see in terms of the market share. And the inventory position is again somewhat similar to the last year. So all in all, DAP has been a little lower but in terms of the industry has been higher, but our market share has been lower. So summary, in terms of summary, revenue is higher from -- as compared to last year, from 24.8% to PKR 37.8 billion. Profitability has also shown an increase by 14.5% as compared to last year. And our EPS definitely is a translation of the profitability. We have announced a dividend of PKR 2. Again, I think, important to clarify, we have been distributing 100% dividends in our previous quarters and years. And as a general rule, our Board has been deciding to declare normally 100%. But this time, the decision was again to give a little lower than what we've earned, primarily because of the ongoing geopolitical crisis, which we foresee, which we currently are in, and they have not been settled as yet. You would recall in the last quarter of 2025, we held back PKR 2 roughly dividend. And that too was related to the ongoing challenges of GIDC and all those things, which currently are still there. So we've been again, a little cautious, and we're distributing PKR 2 out of PKR 2.49. Again, but, still just to clarify, there's no change in dividend policy, and the Board will definitely decide at each quarter to see what to distribute and see how -- if we can go beyond and go back to 100%. I think some basic analysis. So higher sales revenue by 25% because of higher sales of urea and phosphates. We just saw that numbers. GP margin has gone up -- sorry, gross profit has gone up in rupee terms. The margin has slightly declined primarily because of the higher mix of DAP and the higher cost of doing business. Because the cost is increasing, and you would appreciate the fact that we haven't, as an industry, passed on price costs in the past 1 or 2 years. Rather last year, we were actually operating at a discount so we couldn't pass on cost. So that shows a little dent in our GP. But we've covered that part as part of our net profit. And we've definitely based on various austerity measures and the efficient management of our expenses, we've tried to make sure that our net profit margin has declined only by 1% as compared to 4% of our GP margin. In terms of long-term facility, we had updated the forum last time also, we've taken a long-term loan from IFC -- sorry, from SCB guaranteed by IFC. It's a long-term facility at very sort of beneficial terms for us and so fund majority of our longer-term CapEx. Moving on, a slight update on our Markaz. So I think we did talk about this in our last session also, but just some numbers. So we've been able to onboard 170 more farmers to reach 1,500 to date. We have 2 more stores in Q1 2026, and there are 4 more additional stores coming live [Foreign Language] within this quarter. So Markaz is doing well, and we continue our investment in this particular area. Moving on to the contribution of challenges. So I think we've been one of the major taxpayers for the nation, and we've again paid around PKR 5 billion of taxes and duties this quarter again. But on the right-hand side, if you see the numbers, so the discount on the -- of local urea versus international urea on an average for Q1 has been 55%. You would recall this number has been around 35% to 40% on an average for many years. But because of the increase in international prices, it has been 55% for the first quarter. But if you look at the price of 31st March alone, the number is around 70%. So the local manufacturers definitely have created a great shield for our farmers. As global prices continue to increase, we've been able to shield our farmers and provide urea at much a discount as compared to the international urea prices. And just to add on this, if you look at the numbers of maybe 17, 18 April, as the last line shows, the number has gone slightly higher. The 69% also, it has touched around 71%. I think this is the last slide. So we continuously update the forum on the pressure enhancement facility. Okay. So just to recall, the industry is investing around $300 million on this particular initiative, which is to make sure that we have decent supply and continued supply from the HRL reservoir, which is used for major gas supply. So the Scope 1 of the Phase 1 has been completed. Completed last time also, so no change. Scope 2 expected completion is Q3. Again, similar to what we had shown. And Phase 2 compressors are -- the installation is in progress. So I think the major sort of message here is that the project is on track. And I think that the major part is that we don't see any disruptions because of the ongoing geopolitical challenges in this particular area. I think that's a very positive sign for us because it is important to maintain the right pressures at the HRL field, which is the main supplier for the entire fertilizer industry as we speak. Perfect. So this covers the presentation. I think we've gone through the slides. I see some questions in the chat, which the team is responding to. And I'll just open the forum now for questions.

So I think I see Shankar's hand raised. Yes, Shankar.

Sir, my question is regarding the gas allocation. [Foreign Language] Mari, we know there are two plants: Enven plant and base plant. [Foreign Language]. The rest of that was on swing volume basis. There were chances [Foreign Language].

[Foreign Language] Shankar, thank you for your question. [Foreign Language] That has not changed. Base plant, just to recall, [Foreign Language] before FM Pack the proposal was approved, right? In the FM Pack proposal, our allocation has now moved up to 1.05%. [Foreign Language] That's what swing volume mean. But having said that, we were getting continuous gas for the past many years. [Foreign Language] Thanks to Mari. But now under the FM Pack approval, [Foreign Language]. So the allocation is now approved by the cabinet, and so allocation for the plants have been approved. There is the procedural [Foreign Language]. That is happening as we speak. The documents are with the relevant authorities. So that's the execution part of it. From allocation, it is allocated and approved by the cabinet. So that's one thing. [Foreign Language] 30% to 40% volumes are on the fertilizer policy, which helps us also in a little lower rate on the average for the entire plant.

Okay. Sir, just a follow-up on this. [Foreign Language].

[Foreign Language] were completely operating.

[Foreign Language] So what is your revised expectations for the industry production for 2026? [Foreign Language] if you can confirm, before the war, [Foreign Language].

[Foreign Language] I'm sure they understand urea is a critical element for entire Pakistan. So preference will always be to supply gas to urea plants. And you've seen that also, right? [Foreign Language] So I'm sure the government is willing to provide gas to these plants ASAP. So I don't think [Foreign Language] I can't comment, but I can see there's interest for the government to supply them gas. I think that's I can say. On the pricing side, [Foreign Language] because MRP was always the same, which was PKR 4,649. [Foreign Language] So now MRP is over by PKR 100. So that is the change. [Foreign Language] MRP did not change. Deepa.

[Foreign Language] you're able to crack this. [Foreign Language].

[Foreign Language] Now because of FM Pack proposal or the allocation of gas [Foreign Language] consistency can be guaranteed. [Foreign Language]

Sorry. And that portion is 40% [Foreign Language].

[Foreign Language].

[Foreign Language].

[Foreign Language] would have been, I don't know, right? Because it wasn't a guarantee, it wasn't allocated to me. Though I was getting it forever, [Foreign Language] it will be with us.

It's at the PKR 580 price pre-Diwali? Okay.

Is there any other question from anyone?

Sir, am I audible?

I can hear you.

Perfect. I just have one question regarding your imports of your phosphate segment. Of course, with the Hormuz being closed as of right now, so has the company halted any imports this month or even like -- yes, for this month? And does it plan on keeping it halted for next month as well? So if you could just maybe provide some clarity on that, that would be highly appreciated.

I think if you're talking specifically about DAP, so we are -- we have placed an order. We are trying to get our order with us. Unfortunately, it is coming through the Strait of Hormuz, so we're going to see it. And we're in constant talks with the vessel, of when it will arrive and it will come or not. So I think there are certain challenges which we all have to live with. So we're trying our best to see how we can, A, maybe bypass the Hormuz if possible and where there's -- it's not possible because Pakistani ships were coming initially, right? So you also see that the decision on the strait has also been sort of volatile, right? So we could see ships coming in, then the ships stopped. So we have our fingers crossed. We still have an inventory with us. So we're not completely out of inventory. And we're quite positive that it will be able to come to us within time, and we'll be able to -- so in terms of -- but in terms of the inventory for the market, I think we've got decent inventory for this particular period. We don't see a shortage in DAP. But again, the normal supply chain has to continue. So we're working all -- we're taking all our efforts to make sure that DAP cargo arrives with us.

And I just have one more follow-up question, just clicked to my mind. So ever since the closure of the strait, if you're able to put a number to it, how much of the dollarized cost per tonne has increased ever since the beginning of the war, if you're able to comment any number on that? Of course, if not -- I understand, if not.

I can tell you some numbers because as I said, we did take a price increase of PKR 100 just recently, right? So I'll talk in rupees because [Foreign Language]. And as I mentioned that we did some calculation. And you understand the cost -- when you talk about the cost, [Foreign Language], the cost is actually a subset or actually [Foreign Language] how long the entire system will continue, right? And also the fact there are certain things which you see today, and there are certain things which you'll see tomorrow because of today, right? So for example, diesel [Foreign Language], you could see the impact happening immediately, right? But there are multiple other things where the cost will come to us maybe a month from now, which today, I may not have visibility. Like in a month from now, [Foreign Language], you'll see the price has hiked , right? I'll give you an example, [Foreign Language], for argument sake, it jumped to around over PKR 100. And why? Because the raw material also was expensive. So now [Foreign Language] So but maybe the bags will take time. And by that time, some other chemical may have been expensive. Why? Because [Foreign Language] chemical supply chain was impacted maybe a month ago, [Foreign Language] I don't know. So there are multiple sort of ways, right? But long story short, if I say, so [Foreign Language] portion passed on by PKR 100. There are still multiple other expenses, which we haven't touched as of yet. But we continue to monitor those. And we'll see, based on this, [Foreign Language]. Shahzain.

[Foreign Language].

[Foreign Language] That's what same volume means. But now with allocation, now it's my right, so I will get them in any case. Is there any other question from -- Mehruz.

[Foreign Language] Sir, like you mentioned [Foreign Language] it is straight forward. It is clear. But on the pricing front, [Foreign Language].

[Foreign Language] remaining will not be on fertilizer policy. Major portion will be on petroleum policy, and the portion around 40% will be on fertilizer policy. So that's the mix. It will not be completely on fertilizer policy.

Okay. Following on that, sir [Foreign Language] certain multifaceted cost spike, which is somewhat has been translated in the increase in the prices of the product in the month of April. So [Foreign Language] transportation is one of the major cost in terms of these commodities. [Foreign Language].

Mehruz. See. Thank you for that. There are certain assumptions we've used to compute this PKR 100. Unfortunately, [Foreign Language]. I can tell you, this is just a portion of the costs we see. Because, as I said, [Foreign Language] they're up by roughly around 40% on a consistent basis. [Foreign Language] that price is up by around 100%, right, on an average. [Foreign Language] I think you understand these are decent components for our entire cost of production.

Obviously.

Gas definitely is the major contributor but freight is -- definitely freight and everything is a decent size. [Foreign Language], which is just 2% in terms of numbers. So I think anybody can do the math, this is a small number, right? It is not something which we've passed on everything now. But as I said, we're also cautious. We're also looking at the scenario. We don't want to be -- we don't want to jump on to things and take massive increases. But on the same hand, we don't want -- on the other side, we don't want to make sure [Foreign Language]. So we're continuously monitoring those. And as we speak, as time progresses, we will see [Foreign Language], but those will also be based on some assumptions. Because as I said, for argument's sake, even if, let's say, [Foreign Language] if war ends tomorrow, nobody can guarantee [Foreign Language]. There will be still a lot of increases [Foreign Language] until a certain period.

Second-round effects.

This is very similar to what we've seen in the COVID era. [Foreign Language] it will continue to come gradually. Shankar. [Foreign Language]

Sorry. My question, again, if we can go back to the production, [Foreign Language] the war is now -- I think today is the 56th. [Foreign Language]. So we must have seen some production loss on the urea side as well. [Foreign Language]. So considering that situation, [Foreign Language]. So what level of production we might see? [Foreign Language], this would go around 300,000 to 400,000 tonnes.

[Foreign Language]. As I mentioned, three plants went down. One is back up. The other is partially up. And one plant is currently down. If I recall the numbers correctly with me, the plant which is current -- the Fatima plant, which is currently shut down, [Foreign Language]. I think I'm sure Fatima can give exact numbers. [Foreign Language]. Unless and until, as I said, [Foreign Language]. And with the inventory numbers today, [Foreign Language], and the inventory if you're looking -- because it's not only us, the ministry also monitors these on a regular basis. So there's comfort in terms of supply for the time being. But as I mentioned, I'll reiterate the fact, I'm sure the government is looking towards giving gas to these plants ASAP. Even though it's a smaller number, it may not impact the overall equation as we speak in the short. [Foreign Language]. I think from an industry perspective, I see these plants will come back online as soon as this first opportunity with the government. [Foreign Language], unless and until these plants go down for a very longer period.

Okay. Sir, one last question. You just mentioned during your presentation, PKR 100 [Foreign Language], there were some cost factors as well. Diesel price [Foreign Language] I'm sure. So what percentage of cost increase recently because of the war that would be offset with the increase in MRP? [Foreign Language], not the exact number but in percentage terms?

[Foreign Language]. Let's understand the fact that [Foreign Language] just to 2%. [Foreign Language] so you arrive at a number which is higher than this number, right? So I think it's just a small percentage which we've passed on. As I mentioned, [Foreign Language] the numbers could have been higher also. The first step we've started, we have passed on a number because we've taken -- because [Foreign Language] if the war should end soon [Foreign Language]. So there are assumptions we've taken. I said it's not something which we passed out everything. As I said, we continue to monitor and we'll see the right time. And when -- and if we need to pass on, we will continue to pass on. Aman.

[Foreign Language].

[Foreign Language] definitely to maintain the plant and to make sure the plant remains efficient. [Foreign Language], which is pressure enhancement facility, which is the PEF. [Foreign Language] definitely a certain portion will go towards financing that entire PEF project. So that is the major CapEx in our balance sheet in this year [Foreign Language] by the end of the year. So that's the major thing you'll see. So that's why you see this increase. Is there any other questions from anyone? Mehruz.

[Foreign Language] You guys are targeting to complete this project in this current year. However, [Foreign Language].

[Foreign Language] by the entire global disruption. So [Foreign Language], it will be completed on time. Any other questions from anyone? [Foreign Language]. Mina. [Foreign Language].

[Foreign Language].

[Foreign Language].

Mina Arshad. [Foreign Language], with your dividend policy and with finance cost so high, [Foreign Language] to keep your cash flows steady?

[Foreign Language] And dividend policy, as I mentioned, we have no specific intentions to hold back on the dividend as we speak. Definitely, it's a decision which is taken by the Board, every Board meetings. I can't guarantee [Foreign Language] . But historically, we've been an organization which continues to distribute 100% dividend. [Foreign Language] we're very close to distributing 100%. We are at 80% as we speak -- over 80% even in this quarter. [Foreign Language] the sales has been higher as compared to last quarter -- last year. So it is improving. But yes, there will be times because it's not a short market anymore. So we will be [Foreign Language] finance cost is a phenomenon, which you will see normally now. [Foreign Language] I think it is all as per plan, what is happening. We understand there will be [Foreign Language]. So it will be a cycle. So I don't think there's anything to be concerned about as we speak. I think if there are no further questions, can we -- I think we should be able to end because there's just 10 minutes left. Maybe I can just give 10 more seconds. Is there any final question? Else we can end this call. So I'll just wait for 5, 10 seconds. Perfect. So thank you, everyone, for your time. Thank you for joining. So let's hope that things get better. [Foreign Language] I think let's just hope and pray. [Foreign Language] we will see you with quarter 2 numbers [Foreign Language] in the next couple of months. Thank you, everyone, for joining. [Foreign Language].