On behalf of the board of directors, we are delighted to present to you our 2020 Annual Report.
This past year has been one of great uncertainty and ambiguity, leading many of us to experience the loss of what we took for granted: stability, health and most painfully, that of friends and family. The Engro community is deeply saddened by these irreparable losses, and our thoughts and prayers remain with everyone as we start to emerge from this crisis.
We would also like to humbly express our gratitude to our shareholders for your continued trust in Engro Corporation. Your confidence in us, as stewards of your capital, enabled us to focus our efforts on relief, recovery and prosperity fueled by a passion for this nation and its people. We are heartened by the resilience and agility demonstrated by management teams at Engro which led to some remarkable accomplishments under the leadership of President and Chief Executive Officer, Ghias Khan.
As the crisis unfolded in early 2020, Engro Corporation remained true to its founding values. Bearing in mind the organization’s foremost priority, our people, we recognized that we needed a response, not a reaction, now more than ever. Plans were enacted to enhance employee safety: head office-based teams shifted to a work-from-home model, while staff at various production sites moved to SOP-compliant working schedules to ensure consistent delivery of essential products and services.
We established a special Medical Helpdesk to facilitate in-home testing for our employees, and the first ever Wellness @ Work program was launched to connect employees with professional counsellors, yoga and fitness instructors, and nutritionists.
Engro was also entrusted with the responsibility of protecting front-line health workers, contributing to virus testing and diagnostics, and expanding healthcare facilities by pledging PKR 500 million to the pandemic relief efforts, nationwide.
Despite initial setbacks in performance in the first half of the year, management’s unwavering investment in its people combined with technology-enabled solutions, contributed to a tremendous reversal, shaping 2020 as one of Engro’s most rewarding years. In a world where we can expect to see an increasing number of biological, environmental and technological disruptions, Engro sincerely recognizes the value of placing people at the heart of our efforts.
These efforts are driven by our Central Idea which was established as a charter for developing individual and institutional values, strength and character so that we may contribute to solving the nation’s most pressing issues. This guiding ethos encourages the organization to focus on meaningful problems, and in doing so, is fundamentally changing the nature of decisions and decision-making; we see the Central Idea’s values and principles manifested in the design of performance management and reward systems, parenting strategy, governance frameworks and increasingly in capital allocation. Our verticals remain in key areas where investments will continue, namely petrochemicals, energy and food security and digital connectivity. The organization has embarked on a long-term journey with this charter to move towards a culture of truth, trust and the relentless pursuit of excellence in the areas where Engro is primed to have an impact.
Given the shifts in dynamics the world is witnessing, the demands of leadership are increasing. ‘Tried and trusted’ strategies are increasingly coming under question and we have the opportunity to build our organizational capabilities and culture by reinforcing a commitment to learning. This year presented some tremendous learning avenues for Engro Corporation. Since physical interactions were limited, teams adapted to manage workstreams in virtual settings. In addition, global partnerships enabled us to expand our horizons; Engro Corporation most recently had the privilege of engaging at the World Economic Forum’s Davos Agenda to learn more about pressing global developments in the sectors we operate in, especially those pertaining to environmental sustainability. A week-long learning event at the Engro Leadership Academy in KSBL with employees from all our subsidiaries enabled teams to learn and commit to transition business towards profits based on sustainability. Cross-enterprise events like these demonstrate the immense value of an open learning culture, where people are guided to act on their responsibilities in organizational initiatives and outcomes.
We are grateful to our Board of Directors for their strong stewardship of the Corporation as its term draws to a close; it has been an extraordinary term, given the role the Board played in articulating the long-term strategy of the Corporation and prioritizing people in a year of such unprecedented crisis. This focus came through in the ‘people-first’ design of Board Agendas, coupled with a record number of Board People Committee meetings. Directors were able to navigate our approach to capital deployment; despite market pressures, they maintained that capital allocation had to be guided by relevance of opportunities and long-term value creation, in the environment of conducive market conditions. As we continue to move towards more competitive markets, our focus on capability development will become even more critical. Engro strongly advocates the need for market-based reform which unleashes the productive capacity of the economy, as productivity is the best enabler of prosperity for the country. We are excited to continue playing our role with business and Government to materialize these efforts so that the nation sees improvement in investments, jobs creation and standards of living.
None of the achievements of the past year would have been possible without the consistent support of our stakeholders. We are extremely grateful to the Government, regulators, service providers, partners, customers, our people, and to you, our shareholders, for your continued trust and confidence. The past year has been a game-changer on the need for action and we are committed to building on our achievements by promoting more meaningful partnerships, engagements and investments so that we may together play a role in creating a more peaceful, prosperous and sustainable nation and world.
2020 proved to be very challenging for us, our communities and our country as the global pandemic posed a serious risk to the health and well-being of the people, while also threatening to hinder the economic progress of the country. Despite the various predicaments, foremost I am thankful to the almighty that as Engro we have managed to rise above the challenges, stronger and more united than ever. Apart from playing an integral role in producing value for the country, we have also made continued efforts to protect our people while making proactive contributions to support the wider communities.
I would like to take this opportunity to commend the Government for concentrated and effective measures to contain the pandemic in the country while also facilitating business continuity. It was with the support of the Government, the invaluable guidance from our Chairman, Vice Chairman and the Board of Directors and our team members that Engro was able to adapt to the changing environment and achieve some notable milestones, more resilient than ever.
With the onset of COVID-19, the company implemented stringent measures to limit the transmission of the virus by facilitating our employees to operate virtually, whereas strict protocols were adopted at our plant sites to ensure safe uninterrupted operations. Cognizant of its role in the development of the country, Engro stood with Pakistan in the battle against COVID-19 and invested heavily in the safety of the wider communities as well. I would like to take this opportunity to thank our Chairman, Mr. Hussain Dawood, who continues to inspire us with his passion for Pakistan and its people. In a time of uncertainty with regard to businesses and global market dynamics, his courageous gesture of the PKR 1 Billion Hussain Dawood Pledge to combat the pandemic was testament to his people-first vision. To date, more than PKR 300 million have been donated under this pledge with focus on disease prevention, protecting and enabling healthcare practitioners and frontline workers, enabling patient care and facilities, and bolstering livelihoods and sustenance of the most deserving in society.
On the business front, I am happy to report that Engro Corporation recorded a consolidated Profit After Tax of PKR 44.1 Billion during the year compared to 30.3 Billion in FY 2019. On standalone basis, the Company recorded a profit of PKR 16.3 Billion, EPS of PKR 28.29/sh. and announced dividends of PKR 26.0/sh. representing a 92% payout ratio.
During the year we achieved some noteworthy milestones, with our Fertilizer business registering its highest ever Urea production aided by efficient plant operations. This enabled the company in making its highest ever Urea sales and hence continuing to play a vital role in ensuring national food security. Our Polymer business showed a sharp recovery in the second half of the year and is well positioned to capitalize on the promising potential available to it, with its expansion projects expected to come online in 2021.
In our Energy businesses, maximum availability of our power plants as well as the coal mine was ensured throughout the year. During the year, the Government recommended reducing returns for IPPs which were set up under the 2002 Power Policy. In the larger national interest, we supported the recommendations and as a result EPQL is working with the relevant authorities to reduce its ROE. This year our Terminal business achieved a significant milestone by completing the transfer of over 20 million metric tons of LNG in five years, the most for any floating LNG import terminal in this time frame. In doing so, the company played an instrumental role in reducing Pakistan’s natural gas deficit, delivering more than 12% of Pakistan’s gas requirement in 2020.
To help reduce the digital divide in the country, we had launched Engro Enfrashare last year and I am happy to report that the company has made terrific progress over the year having secured projects of up to PKR 18 Billion from all mobile network operators and expanding its operational presence to 1,265 sites by year end.
During the year, the Company has rigorously explored growth opportunities in all its verticals and is looking forward to strengthening its presence in the areas of interest while making valuable contributions towards the prosperity of the country.
As companies across the world accelerated the pace of digitization amidst the pandemic, our digital transformation journey that started in 2018 with ONESAP implementation put us ahead of the curve. The project enabled us to ensure business continuity and efficiency through integration of business processes, agility and data-based decision making.
At Engro, we believe that our people are cornerstone to our success and we are driven to facilitate their development while protecting their health. During these testing times, several emotional and physical wellbeing programs were introduced to assist our colleagues in tackling the various challenges faced during these unprecedented times. Engro is further determined to create an inclusive work environment and has identified diversity as a key focus area to improve the participation of women in the workforce. We have taken various steps to adhere to our commitment by introducing family friendly policies such as day care solutions at all our working locations as well as going above and beyond the legally mandated parental leaves to support our employees. We are hopeful and confident that our efforts will enable a more inclusive and productive environment for all our employees.
I am delighted to acknowledge that the continued efforts made by our teams to achieve excellence were lauded at various national and international forums. Among the numerous achievements, Engro Corporation was recognized by the Pakistan Stock Exchange among the Top 25 Companies of the year in 2019 for a second year in a row, whereas the CFA Society of Pakistan also awarded us for our excellent investor relations. For the second consecutive year, we were rated Pakistan's Most Outstanding Company in the Industrial Sector in Asiamoney Asia's Outstanding Companies Poll.
Once again, I would like to extend my gratitude towards our Chairman, Vice Chairman and Board of Directors for enabling us to conclude another successful year. I would like to thank our various stakeholders for trusting us. To the entire Engro Family, I would like to commend and congratulate each and every one of you for an astounding level of resilience and commitment to excellence which has enabled the company in achieving significant milestones during the year. I look forward to another year of hope, faith, resilience and many more milestones.
President and Chief Executive
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