Engro Fertilizers Limited announced its 1QCY21 financial results and there was plenty to cheer for the shareholders – as the fertilizer giant reported a tenfold increase in after-tax profits, accompanied with interim cash dividend of Rs4/share. You would be well within your rights if you mistake the last year’s same period financials for some other company. Such is the turnaround.

All good things start from the top they say. The topline almost trebled on the back of strong volumetric sales and much improved retention prices. The urea sales increased by a mammoth 244 percent year-on-year clocking in at 0.58 million tons. The company management attributes the increase to much improved farm economy and large carryforward inventory. There was significant surge in DAP off-take as well, which went up 82 percent year-on-year to 62 thousand tons for the period. The DAP prices have been hovering around all-time highs, which partly explains the fat topline growth.

There were gains to be had on other fertilizer variants such as NP and NPK, contributing towards improved gross profit margin, which went up to 39 percent, up by 560 basis points year-on-year. The reduced finance cost aided by significant reduction in interest rates and reduced working capital requirement of the company, ably supported the bottom-line.

Going forward, EFERT stands to face significant downside in the primary margins, as the concessionary feedstock gas would be discontinued. The company is reportedly in negotiations with stakeholders about possible extension of concessionary gas beyond June 2021. Improved wheat and sugarcane farm earnings are likely to keep the fertilizer demand going in the upcoming crop season.