Karachi, August 19th, 2020: Pakistan’s premier conglomerate, Engro Corporation (PSX: ENGRO) announced its financial results for the half year ended June 30, 2020.
Amidst a global pandemic, the world is still adjusting to the new status quo while corporates around the world are reeling from the impact on businesses and assessing the road to recovery. The Group has responded proactively during this time of crisis and has taken steps to try and minimize any impact to long term sustainability of cash flows. Our philosophy of operating in sectors that help solve pressing issues facing Pakistan implies that most of our businesses are of critical nature and continue to operate in times of lockdown. In addition, a central COVID-19 Crisis Management Committee has been constituted which actively monitors and manages the developing situation across all our businesses with regards to the pandemic.
In these challenging times, Engro remains committed to improving lives of the people of Pakistan and having a positive impact on the society we operate in. Under the PKR 1 billion pledge by Engro, Dawood Hercules and the Group Chairman along with his family, PKR 284 million has already been deployed. We believe we must remain fully transparent while attempting to make an impact and work toward saving lives. Information on how and where we apply funds from the pledge is open to the public and can be viewed at the pledge website www.hussaindawoodpledge.com.
On the business side, Engro’s consolidated revenue grew by 26% in comparison to the prior period, mainly driven by energy projects in Thar coming online during July 2019 and offset by lower turnover of Fertilizers and Petrochemicals businesses. The Company posted a consolidated profit after tax (PAT) of PKR 15,529 million compared to PKR 11,363 million for the similar period last year. Profit attributable to the owners was recorded at PKR 9,059 million compared to PKR 6,809 million for the prior period.
On a standalone basis, the Company posted a PAT of PKR 4,858 million against PKR 5,163 million for the same period last year, translating into an EPS of PKR 8.43 per share. This decrease is primarily attributed to increase in business development spend during the period.
The Company announced an interim cash dividend of PKR 8.00 per share for the second quarter. This is in addition to PKR 6.00 per share announced in the first quarter, bringing cumulative payout to PKR 14.00 per share. Like in the past, the Board has endeavored to maximize dividends on a quarterly basis, however, the future dividends for the year would be based upon prevailing situation and earnings for the year. The portfolio of Engro Corporation is resilient in these difficult times and the Company remains confident that despite challenging circumstances, it will be able to maintain a healthy performance during the year.
The recent Supreme Court verdict settling the long-standing GIDC case poses a cashflow challenge to various sectors of the industry. The Group is assessing the impact of this decision on its portfolio and is considering all available options in this regard.
Moreover, after several rounds of discussions between IPPs representing the 2002 Power Policy projects and the Committee formed under the Ministry of Energy, an MoU has been signed to alter existing contractual arrangements with a view to reduce the cost of electricity in the country. The terms of the MoU are subject to the approval of NEPRA, Federal Cabinet, IPPs’ Board of Directors, other necessary corporate approvals and execution of the final agreement between the relevant parties.
The Fertilizer business achieved its highest-ever half yearly production of Urea in its history due to continued focus on plant efficiency and engineering excellence. Revenue was lower by 20% as compared to same period last year. PAT for the period stood at PKR 4,457 million against PKR 7,184 million in the comparative period owing to Urea price reduction, increased finance cost due to higher policy rates during Q1 and exchange loss on foreign currency borrowings.
The Polymer business resumed operations on 20th April 2020 after a closure of approximately one month (after being categorized as a non-essential service during lockdown) in line with directives by the Sindh Government. Due to limited days of operations, production remained lower and resultantly, the business recorded a lower revenue of PKR 12,874 million compared to PKR 18,600 million in the same period last year and posted a PAT of PKR 223 million compared to PKR 1,544 million for the same period last year.
Mining and power plant operations at Thar continued smoothly, with over two million tons of coal being supplied by the mine and a dispatch of 2,175 GwH to the national grid during the period. The Qadirpur Power Plant operates on permeate gas and is currently facing gas curtailment due to depletion of the Qadirpur gas field. To make up for this shortfall, the plant has been made available on mixed mode.
Terminals businesses remained on track. Owing to the ongoing pandemic resulting in reduced economic activity, however, the business is facing reduction in demand from the customer and its ability to pay remains a key variable.