Karachi, April 23rd, 2020: Pakistan’s premier conglomerate, Engro Corporation (PSX: ENGRO) announced its financial results for the quarter ended March 31st, 2020.
On March 11, 2020, the World Health Organization (WHO) declared COVID-19 a pandemic. The management has responded well during this time of crisis and has taken necessary steps to ensure long term sustainability of cash flows. 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.
The COVID-19 pandemic and resulting measures taken by governments locally and globally to contain the virus have also affected Engro businesses in various ways including supply chain issues, force majeure declaration by EPC contractors, closure of the petrochemical plant due to lockdown and potential liquidity constraints resulting from the economic slowdown.
In these challenging times, Engro remain committed to help solving pressing issues of our time, improve lives of the people of Pakistan and have a positive impact on the society we operate in. In order to fight COVID-19 and its negative impacts on Pakistan, Engro, Dawood Hercules and the Group Chairman along with his family have pledged a contribution of PKR 1 billion. This amount will be spent on disease prevention, protecting healthcare practitioners, enabling patient care and bolstering livelihood and sustenance of the most deserving in society.
On the business side, Engro’s consolidated revenue grew by 11% 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 5,941 million compared to PKR 6,565 million for the similar period last year. Profit attributable to the owners was recorded at PKR 3,317 million compared to PKR 4,010 million for the prior period.
On a standalone basis, the Company posted a PAT of PKR 780 million against PKR 3,832 million for the same period last year, translating into an EPS of PKR 1.35 per share. This decrease is primarily attributed to delays in receipts of dividends from subsidiaries as their Annual General Meetings (AGMs) have been postponed on account of the COVID-19 lockdown. This is, therefore, a temporary timing difference between quarters and not reflective of underlying performance of the Company.
The Company announced an interim cash dividend of PKR 6 per share for the first quarter. 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 in upcoming quarters.
Volumetric sales for the Fertilizer business were lower due to price disparity prevalent during the quarter, which was eliminated by the period-end. Revenue was lower by 54% as compared to same period last year. PAT for the period stood at PKR 571 million against PKR 4,007 million in the comparative period owing to lower offtake and increased finance cost due to higher policy rates and exchange loss on foreign currency borrowings. The fertilizer industry continues to face challenges in the recovery of long outstanding subsidy.
The Polymer business resumed operations on 20th April 2020 after a closure of approximately one month in compliance with the lockdown directives issued by the provincial government. Due to limited days of operations, production remained lower and resultantly, the business recorded a lower revenue of PKR 7,058 million compared to PKR 9,344 million in the same period last year and posted a PAT of PKR 193 million compared to PKR 1,094 million for the same period last year.
Mining and power plant operations at Thar continued smoothly, with over a million tons of coal being supplied by the mine and a dispatch of 1,091 GwH to the national grid during the quarter. The Qadirpur Power Plant operates on permeate gas and is currently facing gas curtailment from the Qadirpur gas field as it depletes. The Plant dispatched a Net Electrical Output of 172 GwH to the national grid with a load factor of 37% compared to 67% during similar period last year.
Receivables from power purchaser remained high and are becoming a continuous challenge for the business, and the power sector in general, and need urgent attention from the relevant authorities.
Terminals businesses remained on track. Owing to the ongoing pandemic resulting in reduced economic activity, reduced nomination from the gas customer can be a potential challenge.