According to a report by Topline Securities, fertilizer sector of Pakistan has posted cumulative growth of 48%YoY in their earnings during 2Q2019 due to: 1) increase in gross profit margin by 2%YoY, 2) decrease in selling and distribution cost by 13%YoY and 3) increase in other operating income by 31%YoY. While urea sales of four major companies went down by 9%YoY, overall sector volumes went up by 3%YoY to 1.5 million tons due to resumption of operation by Agritech and FatimaFert (181,000 tons). DAP offtake of three companies (EFERT, FFBL and FFC) depicted growth of 23%, while overall sector witnessed increase to 457,000 tons, up by 44%YoY. The four major listed companies are: Fauji Fertilizer Company (FFC), Engro Fertilizer Company (EFERT), Fatima Fertilizer Company (FATIMA), and Fauji Fertilizer Bin Qasim (FFBL). The brokerage house has taken consolidated income statement of EFERT and FATIMA, while for rest companies it has taken unconsolidated accounts to depict core fertilizer dynamics. Net sales of the sector registered growth of 35%YoY to Rs89.5 billion, despite declining volumetric sales by 11%YoY to 1.5 million tons as urea and DAP prices jacked up by 23%YoY and 11%YoY, respectively. Gross margin of manufacturers surged to 31% during 2Q2019 from 29% last year due to better retention on urea. FFC outperformed its peers with margins accretion of 10pptsYoY owing to better retention price and decline in relatively lower margin DAP sales by 24%YoY during 2Q2019. Administrative expense increased by 26%YoY owing to inflationary pressure, while selling and distribution cost was decreased by 13%YoY during 2Q2019 due to decline in volumetric sales. Other operating expense increased by 155%YoY due to exchange loss incurred by companies on foreign payables and increase in WPPF expense amid higher profitability. Other income increased by 31%YoY, where FFC outperformed its peers (adjusted for subsidy) followed by EFERT due to hefty cash and short term investment and one time gain on sale of land to EPCL. Finance cost depicted a growth of 142%YoY due to the hike in policy rate and increase in borrowings by the sector.