📰 National Fertilizers (NFL) Q2 FY2025-26 Results: Revenue Surges 54% YoY, Profit Impacted by Subsidy Timing and Input Costs

National Fertilizers Q2 FY2025-26: Revenue Soars, Profits Impacted by Cost Pressures

National Fertilizers Limited (NSE: NFL), India’s second-largest urea producer and a key public sector enterprise under the Ministry of Chemicals & Fertilizers, announced its Q2 FY2025-26 financial results, showing a sharp increase in revenue driven by strong fertilizer demand and operational efficiency.

The company reported total consolidated revenue of ₹6,763 crore for the quarter ended September 30, 2025, compared to ₹4,390 crore in Q2 FY2024-25, marking a 54% year-on-year growth. Sequentially, the top line also rose significantly from ₹3,534 crore in Q1 FY2025-26, reflecting better production, sales volumes, and favourable realization in urea and industrial chemicals.

However, despite robust revenue, profitability remained under pressure due to higher input costs, subsidy recognition timing, and temporary margin compression. The company reported a consolidated net loss of ₹35.8 crore, compared to a profit of ₹12 crore in Q2 FY2024-25. On a standalone basis, NFL posted a net loss of ₹10.2 crore, indicating operational strain in certain fertilizer units and subsidy accounting adjustments.

📊 Quarterly Comparison Table — National Fertilizers (NFL)

Source: National Fertilizers Limited Q2 FY2025-26 financial statement, BSE filings, and market summaries.

Performance Breakdown: Strong Volume Growth Offset by Input Volatility

NFL’s financial report reflects a revenue-led quarter with strong fertilizer demand supported by the Kharif season, but the benefits were partially offset by rising natural gas costs, imported feedstock prices, and subsidy delays.

The company’s urea production and sales volumes saw double-digit growth compared to the previous quarter. Favorable rainfall and increased government fertilizer disbursement helped sustain demand. Industrial products like ammonia, nitric acid, and carbon dioxide also contributed to the top line.

However, EBITDA margins declined due to high energy costs and delayed subsidy receipts from the government. Subsidy income — which forms a large portion of NFL’s revenue — is often recognized in later quarters based on government approvals, which impacted reported profits in Q2 FY26.

Management Commentary: Focusing on Efficiency and Expansion

In its investor note, NFL’s management emphasized that the company remains financially stable and committed to long-term growth through capacity expansion, cost optimization, and energy efficiency upgrades.

“The revenue growth reflects the strong operational momentum during the Kharif season. However, the bottom line was impacted by higher gas input costs and timing of subsidy receipts. We expect margins to normalize in H2 as receivables and production stabilize,” said the company’s management in a post-results commentary.

The management also reiterated its focus on energy-efficient fertilizer production, with planned capital investments in plant modernization and the new Namrup-IV ammonia-urea project through an investment of ₹572.45 crore in its subsidiary, AVFCCL. This project, once operational, will enhance domestic urea capacity and reduce import dependence.

Segment Performance: Fertilizers Lead the Charge

🌾 Fertilizer Division (Core Business)

• The fertilizer segment remained the dominant contributor to revenue, accounting for nearly 85% of total sales.

• Urea dispatches increased due to favorable monsoon and timely government subsidy disbursement.

• However, profitability dipped slightly due to higher gas input costs, which form the largest share of production expenses.

⚗️ Industrial Products Division

• NFL also saw steady performance in industrial chemicals such as nitric acid, methanol, and CO₂.

• The segment contributed nearly 10–12% of total revenue, with steady margins and improved utilization rates.

🧱 Trading & Other Activities

• NFL’s trading division, which handles non-urea fertilizers and imported raw materials, showed modest growth.

• Margin contribution from trading remains limited but adds stability to cash flows.

Financial Overview and Key Ratios

• Operating Profit: Despite a sequential rise in sales, operating profit remained moderate due to cost pressures.

• Debt & Interest Costs: NFL’s debt levels remained stable, with improved short-term borrowing efficiency.

• Working Capital: Delayed subsidy receipts increased working capital requirements temporarily.

• Return Ratios: ROE and ROCE declined YoY, in line with sector trends, but expected to recover in H2.

Management Guidance for H2 FY2025-26

The management expects financial performance to improve in the second half of FY26 as subsidy flows normalize and gas input costs stabilize. Key highlights from guidance include:

• Revenue Outlook: Expecting mid- to high-single-digit revenue growth in H2 FY26.

• EBITDA Margin: Targeting a margin rebound to 3–4% by Q4 FY26.

• Subsidy Flow: Improved subsidy disbursement to reduce working capital strain.

• Capex: Focused on modernization, energy efficiency, and participation in new urea and green ammonia projects.

• Sustainability: Continuing alignment with India’s “Atmanirbhar Bharat” fertilizer self-sufficiency vision and green hydrogen roadmap.

Comparative Analysis: Q2 FY26 vs Q2 FY25 vs Q1 FY26

Analyst and Market View

Market analysts described NFL’s Q2 FY26 results as a “revenue strong but profit-light” quarter. Most brokerage reports maintained a neutral-to-positive outlook, citing the company’s consistent production growth, solid balance sheet, and strategic expansion in ammonia-urea capacity.

Analysts noted that while subsidy timing continues to distort quarterly profits, the core operating health of NFL remains solid. As subsidy flows stabilize in H2, margins and cash flows are likely to normalize.

“NFL’s Q2 FY26 results reaffirm its leadership in urea production. The company’s investment in energy-efficient capacity and upcoming Namrup-IV project will drive margin recovery and long-term value,” said a leading analyst at ICICI Securities.

Key Challenges Ahead

1. Raw Material Volatility: Rising natural gas prices continue to pressure margins.

2. Subsidy Delays: Working capital tied up in government dues impacts liquidity.

3. Regulatory Changes: Policy shifts in nutrient-based subsidy (NBS) schemes could alter pricing structures.

4. Competition: Private fertilizer players expanding capacity pose medium-term margin risks.

Conclusion: NFL’s Growth Story Remains Intact Despite Short-Term Challenges

National Fertilizers Limited’s Q2 FY2025-26 results underscore a period of high growth with transient profitability headwinds. The company’s revenue performance is a testament to its strong operational capacity and market presence in the fertilizer industry.

While subsidy delays and cost inflation weighed on profits, NFL’s long-term fundamentals remain robust — backed by modernization initiatives, diversification into green ammonia, and government support for fertilizer self-reliance.

With Q3 and Q4 expected to benefit from improved subsidy inflows, cost normalization, and stable demand, NFL is poised for a rebound in earnings momentum in the second half of FY26.

For long-term investors, the company remains a steady play in India’s agricultural infrastructure and energy-efficient fertilizer manufacturing story.