January 26, 2010
Engro Corporation Limited (formerly Engro Chemical Pakistan Limited) has announced reviewed accounts for the Year Ended December 31, 2009.
PAKISTAN FERTILIZERS MARKET
Industry urea off-takes grew 17% during the year to 6.4 million tons. Increase was mainly due to (a) record wheat support prices (Rs950/mound) for Rabi 08/09 and 09/10 resulting in highest ever returns for the farmers (b) increase in acreages under BT Cotton requiring more urea and (c)rising cotton prices encouraging increased fertilizer use.
Domestic urea production during 2009 on a national basis, was 5.05 million tons vs. 4.98 million in 2008, but it was well short of market demand. The Government of Pakistan filled the gap in demand through urea imports. A total of approximately 1.6 million tons were imported during the year, which was distributed through National Fertilizer Marketing Limited (NFML).
Imported urea cost was around Rs. 1,325/bag (average for the year) as compared to local urea price of Rs 700/bag. The fertilizer industry continued to sell urea at substantially lower prices than international prices resulting in a net benefit of Rs 62 billion to the farming community. Of this total benefit, Government of Pakistan contributed Rs 20 billion and the fertilizer industry contributed the remaining Rs 42 billion.
Industry wide phosphate sales more than doubled to a record volume of 1.8 million tons in 2009 from 0.8 million tons in 2008. Growth is attributable to the reduction in international and domestic phosphate prices and better crop economics as outlined above.
ENGRO FERTILIZERS LIMITED 2009*
In 2009, we produced 952,000 tons of urea, which is 4% lower than 995,000 tons produced in 2008 due to the planned maintenances shutdown in the second quarter. We sold 933,000 tons of urea and consumed 20,000 tons in our Zarkhez operations. Our full year market share was 15% versus 19% in 2008 primarily on account of the following factors: (a) our production remaining constant having reached maximum capacity and (b) while there was growth in urea demand, the distribution of imported urea was handled directly by National Fertilizer Marketing Limited (NFML).
We sold 357,000 tons of phosphates in 2009, against 128,000 tons in 2008, achieving market share of 21% versus 16% in 2008. The growth was accomplished as a result of focus on anticipating demand and market trends.
As a result of relatively higher international potash prices in 2009, the potash nutrient industry registered a 33% decline during the year. Being the largest player in the potash market our Zarkhez sales dropped to 55,000 tons, a 20% decline from 69,000 tons in 2008. However, our market share of potash increased from 51% in 2008 to 65% in 2009.
In line with the growth in the phosphate industry, our Nitrophos (E-NP) sales more than doubled to 45,000 tons during 2009 versus 20,000 tons in 2008.
The Company delivered a Profit After Tax of Rs. 3.96 billion in 2009 versus Rs. 4.24 billion in 2008. The decline is primarily due to lower income from affiliates.
Sales for the year amounted to Rs. 30.2 billion against Rs. 23.3 billion last year. Though urea sales volumes remained relatively constant, there was a significant increase in phosphate sales due to reasons highlighted above.
With the close of 2009, our urea expansion project completed its 33rd month of execution. Total project cost outlook remains at US$ 1.05 billion with commercial production to commence by third quarter 2010.
OUTLOOK AND CHALLENGES
Urea supply is expected to increase as a result of our own expansion project and Fatima Fertilizers coming online in 2010. This should lead to a significant reduction in urea imports in 2010. Phosphates demand is expected to remain stable.
*With effect from January 1, 2010, Engro Fertilizers Limited has been demerged from and became a fully owned subsidiary of Engro Corporation Limited (formerly known as Engro Chemical Pakistan Limited).
ENGRO SUBSIDIARIES AND AFFILIATES
Engro Vopak Limited: The Company achieved a landmark in terminal industry of Pakistan following the successful commissioning of Pakistan’s first cryogenic import facility for ethylene in early 2009.
Engro Polymers and Chemicals Limited: The Company’s new PVC plant came into commercial production from January 1, 2009, enhancing the capacity to 150,000 tons. EDC and caustic soda plants were also commissioned during 2009, while VCM plant is expected to come online by first quarter 2010.
Avanceon Limited: The Company’s International Execution capabilities were utilized by UAE and US businesses to execute engineering projects by using the pool of engineers based in Pakistan. The Company returned to profitability during the year.
Engro Foods Limited: The Company continued its aggressive growth plans and enjoyed phenomenonal growth in UHT volumes during 2009 with the dairy segment recording a profit for the year. The year also saw the successful launch of the ice cream brand “Omore”.
Engro Energy Limited: The Company’s Qadirpur power plant is on track with trial production currently underway and commercial operations are expected to commence by February 2010.
Sindh Coal Mining Company Limited: The Company was established as a result of joint venture agreement with the Government of Sindh, for the development, construction, and operation of an open coal mining facility in Block II of Thar coal field. The Company is currently conducting a detailed feasibility study and an environmental impact assessment for the project.