Karachi, Thursday April 20, 2023: Engro Corporation (PSX: ENGRO) announced its financial results for the quarter ended March 31, 2023.

Overview of Financial Performance

Engro Corporation’s standalone revenue for the first quarter was PKR 6.4 bn – down by 21%, primarily due to lower dividends received from Engro Polymer & Chemicals Limited (EPCL) due to reversal of commodity cycle and increase in gas prices. Correspondingly, the Company posted a 12% decline in PAT of PKR 6 bn in Q1 2023 against PKR 6.9 bn in Q1 2022.

On a consolidated basis, Engro Corporation’s revenue grew by 10% to PKR 97.3 bn in Q1 2023 from PKR 88.3 bn in Q1 2022. The Company posted a PAT of PKR 8.8 bn in Q1 2023, which is 41% lower than PKR 14.9 bn in Q1 2022. The PAT attributable to the shareholders is PKR 5 bn, translating into an EPS of PKR 8.18 per share (Q1 2022: PKR 13.84 per share). Major variance was attributable to the macroeconomic headwinds resulting in commodity cycle reversal, lower DAP demand and increasing cost pressures.

Dividend Declaration

During the first quarter Board meeting, the directors conducted a comprehensive analysis of the investment opportunities available, prevailing economic situation including but not limited to the prohibitive cost of capital and challenges on import of plant, machinery and raw materials, and the capital structure of the Company. After extensive deliberation, the Board concluded that keeping in view the current circumstances, the most optimum utilization of cash was to pay dividends to shareholders, as a result the Board decided to declare a PKR 40.0 per share dividend.

It is worth noting that this decision will not have a significant impact on long-term investment program of the Company which will continue to be funded by retaining future dividends and/or capital reallocation. Within its long-term investment program, Engro will continue to strive for global competitiveness within the businesses it operates and continue to explore opportunities for increasing exports and international footprint.

Portfolio Performance Review

Fertilizers: Urea sales stood at 551 KT versus 549 KT, translating to a market share of 34% for the period. Phosphate sales stood at 65 KT vs 79 KT during the same period in 2022. EFERT contributed ~USD 139 mn in import substitution for Pakistan and sold urea at a discount of ~37% over international prices.

Profitability of the business was impacted by higher gas prices and lower margins on phosphates. EFERT posted a PAT of PKR 4.4 bn in Q1 2023 vs PKR 5.5 bn in Q1 2022.

Petrochemicals: The business recorded domestic sales of 46 KT, translating to a market share of 87% versus domestic sales of 62 KT and a market share of 96% in the same period last year. The decline comes amid significant challenges posed by a volatile macroeconomic situation in the country. The business also exported 5 KT of PVC and 3 KT of caustic, generating foreign exchange of USD 6 million for the quarter. EPCL reported a PAT of Rs. 1 bn in Q1 2023 against PKR 5 bn in Q1 2022, mainly attributable to commodity cycle reversal.

Telecommunication Infrastructure: Expansion continued for the telecommunication infrastructure vertical with Engro Enfrashare growing its national tower footprint to 3,488 sites by the end of Q1, servicing all of Pakistan’s mobile network providers. This drove revenue growth of Engro Enfrashare by 81% in Q1 2023 in comparison to the same period last year.

The growth potential in the business is further demonstrated by the colocation opportunities witnessed during the quarter, as reflected by the 90% increase in colocation tenants versus last year. The business also captured a market share of 52% in Built to-Suit (B2S) towers rollout during the period.

Foods & Rice: FrieslandCampina Engro Pakistan demonstrated a topline growth of 62%, reporting a revenue of PKR 23 bn against PKR 14 bn in the same period last year, due to volumetric growth driven by the expansion of its distribution network. The business recorded a PAT growth of 49% to PKR 1 bn in Q1 2023 versus PKR 0.7 bn for the comparative period. The Company took multiple business initiatives across its portfolio including cost optimization and strategic price increases resulting in high profitability.

Engro Eximp Agriproducts recorded 1.3 KT basmati rice exports during the quarter versus 12.7 KT SPLY due to reduced procurement during the previous paddy season on account of floods in the country. During the quarter, the rice business generated revenue of USD 1.6 mn through exports versus USD 10.2 mn in Q1 2022.

Energy & Power: Mining operations continued smoothly, supplying coal to Engro Powergen Thar, Thar Energy and ThalNova Power. To meet the potential increase in demand for energy, the management has committed to initiate Phase III of the expansion to enhance capacity to 11.4 million tons per year, approval for which has been sought from the Government of Sindh.

Engro Powergen Thar Limited dispatched 514 GWH to the national grid, compared to 610 GWH in the same period last year. Plant availability remained low primarily due to a major planned maintenance and inspection activity which typically occurs once every five years and is necessary to ensure the plant safety, reliability, and efficiency.

During the period, EPQL Plant dispatched a Net Electrical Output of 262 GWH to the national grid with a load factor of 56% compared to 27% in the same period last year. The business posted a PAT of PKR 0.4 bn for the current period as compared to PKR 0.2 bn in the same period last year due to higher capacity payments on the back of higher period weighing factor.

Terminals: Engro Elengy Terminal enabled ~15% of the total gas supply to Pakistan. It handled 19 cargoes, delivering 55 bcf re-gasified LNG into the SSGC network. Engro Vopak Terminal handled 134 KT against 381 KT during the same period last year. The decrease is mainly attributable to chemical volumes due to slowdown in economic activity pertaining to LC opening issues.