Engro Corporation’s profits up by more than 400%

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Engro Corporation Limited’s net profit increased by more than 400 percent during the calendar year 2016, according to a notification sent to the Pakistan Stock Exchange on Friday.

The company reported a profit of Rs61.86 billion or Rs118 per share for the year ended on 31 December, 2016, marking an increase of 444 percent compared to Rs11.37 billion or Rs21.71 per share it earned in the same period of the previous year. The company also offered a final cash dividend of Rs4 per share – contrary to the market expectations of a one-time bumper dividend of Rs25 – taking the CY16 payout to Rs24 per share.

‘’The result is in-line with market expectations,’’ said Waqas Imdad Ali in AKD Securities’ analyst report.

“[The profit] is up 4.4 times (Year on Year) primarily on account of 5.7 times (Year on Year) jump in Other Income to Rs56.4 billion. This is due to one-time gain from disposal of Engro Fertilizer’s (Rs16.01 billion) and Engro Foods’ (Rs38.55 billion) shares during the year,” the report further said.

The fertilizer company reported growth revenues in the wake of 0.2 percent increase in royalty and dividend. The royalty and dividend of the company clocked in at Rs8.3 billion during the 12 months of 2016, compared to Rs8.2 billion it earned during the same period of 2015.

As per the market experts, growth in dividend and royalty income came on the back of 32 percent YoY increase in income from Engro Vopak Terminal Limited – Engro’s storage facility for liquid chemicals. This reduced the impact of 18 percent decline in royalty income from Engro Fertilizer as a consequence of decline in fertilizer product off-take in 2016.

However, as per Insight Securities’ Zeeshan Afzal, “Excluding one-offs, the profits [of Engro Corp] would reflect a negative picture manly due to 37 percent fall in Engro Fertilizer’s profits and 25 percent fall in Engro Foods profitability amid intense competition in dairy industry along with higher sales tax and duties.”

He further added that the turnaround in profits of Engro Polymer and Chemicals Limited from loss of Rs644 million in 2015 to profit of Rs660 million has proven to be a relief for the company.  

Following the result announcement, the company’s share price depreciated by Rs17 or 4.7 percent to Rs362 compared to the previous day per share price of Rs379.34. In total 9 million shares of the Engro Corp were traded on the result day.