Karachi, 17 February 2012
The Board of Directors of Engro Corporation Limited has announced the achievement of the Company’s highest-ever Profit after Tax of Rs 8.06 Bn, for the year ended December 31, 2011.
Overview of 2011
The consolidated revenue stood at Rs. 114.6 billion for the year ended December 31, 2011, as compared to Rs. 79.9 billion in 2010. The company announced earnings per share (EPS) of Rs 20.50 for 2011, as compared to an EPS of Rs 17.27 in 2010. A final cash dividend of 20% (Rs 2 per share) has been approved by the Board, making a total dividend of Rs 6 per share for 2011. The Board has also recommended the issuance of 30% bonus shares (3 shares for every 10 shares held).
In 2011, the urea demand declined to 5.9 m tons (from 6.1m in 2010) due to reduced supply on account of severe gas shortage. WithEngro expansion project (Enven’s) commissioning, the business produced 1,279 thousand tons of urea and sold 1,263 thousand tons, achieving a market share of 21%. The phosphates industry declined to 1.1m tons (from 1.4m tons in 2010) with the business selling 336kt of phosphates vs 328kt in 2010, achieving a market share of 29%. The Fertilizer manufacturing and trading businesses achieved a total profit of Rs 6,251 million during 2011, a 12% growth over the year 2010. The business through its operating leverage also retired Rs. 6 billion of debt throughout the calendar year 2011 and is well on its way to deleverage its balance sheet.
In 2011, the foods business achieved volume growth of 22% in the dairy segment securing a market share of 44% as opposed to 39% in 2010. During the first half of the year, in May 2011, the foods business raised Rs. 1.2 billion by issuing 48 million shares to the institutional investors – mainly the US & UK mutual funds – and local investors. The shares were issued at a price of Rs. 25 per share. Mirroring its success in the local market, the business made its foray in the international arena with acquisition of Al-Safa – a leading halal meat brand in North America – at a total cost of US $6.3 million in April 2011.
The foods business continued to expand its infrastructure and product portfolio to meet consumer needs and achieved a profit after tax of Rs. 891 million during 2011 as compared to Rs 177 million during 2010.
The petrochemical business’s production was lower than capacity due to limited availability of VCM and some operational constraints. However, by the end of the fourth quarter the plant had overcome significant teething problems and is in better shape with VCM capacity utilization up to 99%. During the year, the company produced 122KT of PVC as compared to 114KT in 2010. The business, however, incurred an after tax loss of Rs. 706 million due to unstable VCM operations in the first three quarters, and lower international PVC-Ethylene margins in the fourth quarter.
Energy & Power
During the year 2011, the energy business recorded its highest dispatch of total net power of 1,657 GWh to the national grid as compared to 1,201 GWh in 2010. The technical, environment, social and economic feasibility for the Thar Coal project has been completed as per the target deadline. The business declared a profit after tax of Rs 1,718 million as compared to 1, 111 million in the year 2010.
Chemical Storage & Terminal
The chemical terminal’s actual throughput for the year was 1,092 k tons vs. 1,104 k tons in 2010. The decrease in annual throughput is mainly attributable to lower import of Phos Acid due to lower production of DAP as a result of gas load management by SSGCL. During the year company also handled first export parcel of VCM. Continued efforts to position for the LNG import terminal at Port Qasim resulted in short-listing of the Company for the integrated LNG project and creation of a 100 percent owned subsidiary with the name Elengy Terminal Pakistan Limited. Showing consistent growth in its main line of business, the chemical storage and handling business posted a profit after tax of Rs. 3484 million (inclusive of tax reversal of Rs 2018 million) in 2011 as opposed to Rs. 1109 million in 2010.
The automation and control engineering business registered a loss after tax of Rs 169 million in 2011 due to reverberating impact of the recession where customers remained cautious with their capital expenditures. The second issue of ‘Engro Rupiya Certificates’ was completely subscribed raising Rs 2.75 Bn during 2011.
Near Term Outlook and Challenges
For our fertilizer business, the continuation of the gas curtailment is expected to result in decreased production. The implementation of the Gas Infrastructure Development Cess Tax decreased the feed gas subsidy from Rs. 345 per bag to Rs. 260 per bag also increasing the input price of the gas from Rs. 103 per mmbtu to Rs. 313 per mmbtu – an increase of over 200 percent. This increase in input costs coupled with the continuing gas curtailment is expected to build inflationary pressures on the supply price of urea in the local market.
The foods business will continue to increase market share in its dairy and ice cream segment offering strong value added benefits to the consumers.
Given the current energy situation in the country the energy business is expected to continue achieving high dispatch rates and demonstrate strong performance.
PVC domestic demand is expected to remain stable in 2012. Demand from agriculture sector and export of pipes to Afghanistan is expected to continue to generate PVC demand. However, gas and power shortages are expected to impact demand of both PVC and Caustic Soda.