A great company is built when all stakeholders come together. Which is why, we believe that together we will build more value and create positive impact in the world.
2014 has been a watershed year for Engro. It concludes a 3 year journey of collective ambitions, recovery, promise of delivery and an absolute transformation. Through these years my team has managed to bring Engro out of severe difficulties as the Company was on the verge of defaulting on its bank loans, facing high attrition, and severe succession and performance issues across our flagship businesses. These factors altogether posed dual challenges: one to turn around the businesses and the other to enhance the capability and capacity of the organization.
I am very pleased to report that through dedicated efforts we have come out successfully and 2014 has been a year of strong progress for us. We delivered double digit revenue growth closing the year with a record turnover of PKR 176 billion – up by 13% from last year. The fertilizer business posted the highest ever topline in its history of PKR 61 billion declaring a record-breaking profit of PKR 8.2 billion. With company’s issues now resolved, it has gained a 32% market share in 2014 alone and continues to increase its production year on year. Our foods business too continued to reflect a strong turnaround demonstrating 36% volumetric growth ultimately becoming the market leader in the Ambient UHT category for its brand Olper’s pointing to better times ahead.
The energy business remained an area of development throughout the year where a series of successes were achieved. In 2014 we remained on-track on our contractual agreement of constructing an LNG terminal in world record time of 300 days– an investment that will bring in much needed LNG into the country equivalent to 1/3rd of the total gas deficit in Pakistan and also help alleviate the debilitating energy crisis. Excellent progress was made on Thar coal mining and power projects with initiation of work on the ground. In 2014 we also commissioned our first international project in the power space – an 84 MW captive power plant for Nigeria’s largest oil refinery.
Over the course of the past 3 years we set out a prudent capital management strategy, to strengthen our balance sheet and improve our risk profile as demonstrated by improvement in our long-term PACRA rating from A to AA- and a satisfactory gearing ratio of close to 50% compared to over 70% at the time when I took charge of the company’s affairs.
As a result of our concerted efforts we have been successful in declaring cash dividends of PKR 6/share with a three-year annualized return of 49% and a consolidated three-year total return of 230%. I am also pleased to share that our strong performance during the year culminated in a market capitalization of PKR 116 billion, up from PKR 81 billion in 2013.
In the fast changing global environment successful companies like ours, increasingly have a dual role. We must continue to deliver positive returns to our shareholders and be a force for good which reinforces the returns to shareholders through greater sustainability and opportunity.
During the year our core focus was to address the clarity of purpose in each organization. If I look at our foods business, I reckon we now have more clarity in terms of what we intend to do for the next 3- 5 years which is to dominate the dairy sector – the largest part of the consumer wallet spend.
Similarly, in Engro Fertilizers too we have taken the decision to bring the DAP business under one roof so that it can be housed in one place. I am sure that this step will grow the business by 30-40% and help us become the leader in the farm-inputs space.
On the energy front we intend to continue increasing our footprint first through LNG and then through Thar to power Pakistan. Furthermore, we are also venturing into gas to power both from LNG and natural gas in Pakistan & beyond.
I am of firm belief that with singularity of purpose we are now capable of addressing the big problems like the energy crisis, food security and consumer nutrition facing Pakistan and other emerging countries. It is by finding the solutions to these big problems that we will together change the world.
I believe that if we are to remain true to our purpose of being a change agent then our leadership must evolve with the changing world. Throughout the year we remained committed to our people and we strengthened our investments in training, personal development, safety and other employee support programs.
The most encouraging and promising aspect of all these successes over the past 3 years is how we have invigorated the organization and have empowered teams to work together in addressing these underlying issues which plagued us.
When I took charge the most worrying of these issues was the state of our HR. Our employee engagement levels had plummeted below 38%; our talent pipeline was weak and we were faced with high attrition levels. Despite these challenges, what surprised me was the welcoming attitude of the employees. Even when the organization was faced with a difficult time we all came together and set our minds to work collectively to bring Engro back to full glory. As a result we have demonstrated remarkable improvements in our employee engagement index which currently stands at 62% - which is one of the best in the region; our talent pipeline is now twice as strong as it was 3 years ago; and our attrition rate has decreased dramatically to acceptable levels.
Another key focus area for me has been rebuilding capacity and debt restructuring for the company. Over the past three years we have rapidly paid down our debts and by the end of 2015 we will be in a very comfortable debt to equity ratio of high to mid-30s.
In addition, we have also worked to make Engro a very caring organization that it has always been. In 2014, we donated 11,000+ volunteer hours through our Envison Volunteer Program which makes us the number one volunteer for most major charities in Pakistan. On CSR front our work with the communities has grown manifold where we have enhanced our focus on health, education and livelihood programs. These are all the ways in which we genuinely display care for the communities we operate in.
We ensure that we have equality and fairness in our workplace so we put a huge emphasis on having diversity in our workforce we set targets and our female employee numbers have been growing very substantially every year with an increase of 19% in 2014 alone. We have also placed huge emphasis on employing PWDS in organizational roles and our numbers in this area have also doubled over the past 3 years registering an increase of 10% in 2014.
Everything that I set out to do 3 years ago and more has been achieved during this period. I am confident that with restored capacityand capability, improved balance sheet and the right people in place Engro can be a major change agent in Pakistan and beyond.
In the years ahead you will see the elements of our strategy coming into focus, a company that is growing EPS, returning cash to shareholders and executing well across all our businesses.
On behalf of the Executive Committee, I would like to thank our board members, shareholders, employees, investors, bankers, customers, suppliers, CSR partners and the other stakeholders who have demonstrated faith & trust in our leadership throughout the year.
Ali Ansari,
President & CEO
