president's messageGhias Khan

president's message

dear shareholders,

It is my pleasure to share with you the highlights of Engro Corporation’s performance in 2017, and talk about a lot of important work that has happened in the last year ensuring a sustainable operating model.

We posted a consolidated profit after tax of PKR 16.2 billion for 2017, up from PKR 12.9 billion a year before. This was excluding the one-off gain from Engro Foods because of our strategic partnership with Royal FrieslandCampina. Revenue was PKR 128,593 million up from PKR 113,880 million the year before. This was again excluding Engro Foods’ turnover of the previous year. On a standalone basis, earnings per share were PKR 21.76 with total dividends of PKR 21 per share for the year 2017, depicting a dividend payout of 96.5%.

Early last year our strategic partnership with Friesland Campina had concluded and we were holding excess liquidity with no macro stresses on our businesses. This was a unique time in our history and a fundamental change in our reality. It was critical to adapt the structure of the corporation with clear new objectives and metrics for success to take advantage of this moment.

Engro Polymer’s year on year revenue and profitability numbers have been very impressive, and they just declared their first dividend in a decade. In the chemical value chain with the right team, high returns growth through portfolio momentum and new products is very realizable. We believe we have the right team that is why we have just announced a PKR 10B expansion for our Polymer business. Similarly Engro Fertilizer beat their commitments in a challenging year. As critically they have put a robust growth plan in place that expands their offerings to pesticides, seeds and a group of powerful enabling services for our nation’s farmers. When you are a pioneer in a field you always deal with the unexpected, but I am happy to say that with over 120 shipments received Engro Elengy has very quickly transformed into a mature business for us. We are also happy to report the turnaround in Eximp Agriproducts, our rice processing, wholesale retail and export business.

Our energy investments were first and foremost a commitment to the country. We entered the energy sector in 2008 with Qadirpur as our first project which continued to do well last year. We followed this up with investments in Thar.

We completed the picture this year with making a dedicated energy vertical. We have a clear strategy for our energy enterprises. This organizational realignment will allow us to make the most of that strategy and optimally build on our energy initiatives. We will be able to maximize the value created by the right energy and product mix that will expand to include renewables. It will help us smartly make investments to own the entire generate, store and consume cycle. While we will continue to invest in power generation, we will also be evaluating downstream opportunities in the energy sector. I am happy to communicate that in order to execute this strategy we have renamed Engro Powergen to Engro Energy Limited.

We further took steps to start aligning culture with strategy. This is going to be a core focus for the organization going forward. We have quickly and successfully realigned roles and have many right people in key positions. We have started on the road to a flatter organization and are investing in a systematic roadmap for transforming HR.

We are also in the process of launching Engro Infiniti whose mandate will be to invest in digital businesses. Digital businesses are all about how people, processes and technologies combine to power and sustain great customer experiences. Engro Digital with their focus on the Industrial Internet and Artificial Intelligence will be the first of many businesses under the Engro Infiniti umbrella. We also realized that for our business success stories to continue, we needed to significantly reduce complexity and to be able to execute with agility. Accordingly we have made great progress in instituting an enterprise stack of technologies that allows us to make better decisions faster.

Internally our ceaseless focus on health, safety and environment and corporate governance continued across the group. Externally our CSR activities continued to expand in areas of education, health and livelihood culminating in the awarding of our flagship I Am The Change awards with the highest funding in their history. Creating economic value only if it creates value for society will continue to define Engro. This means we will not decouple business results from the wellbeing of people, will continuously measure and improve our green footprint and commit to “shared value” with the communities we operate in.

Our initiatives have positioned us to seize serious growth in 2018. I would like to thank our employees for the hard work they have put in last year. The world is changing and while producing good results under predictable conditions still requires great execution, the right strategy and team delivers strong results in uncertain times. Together we will deliver against our commitments; innovate in core and adjacent areas, go global and make a difference for our customers and positively impact the lives of the people our businesses touch.

I would like to end by saying thank you, our valued shareholder, for the continuing trust and confidence you have placed in Engro Corporation.

Ghias Khan President & Cheif Executive Officer