Engro Corporation’s revenue up by 37pc n 1H 2018

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KARACHI: Pakistan’s premier conglomerate, Engro Corporation (PSX: ENGRO) announced its financial results for the half year ended June 30, 2018. The company posted a consolidated profit-after-tax (PAT) of Rs11,055 million – up by 65 per cent, while PAT attributable to the shareholders increased to Rs6,091 million from Rs3,777 million during comparative period last year.

Engro Corporation concluded the first half of 2018 with revenue of Rs71,733 million – 37 per cent higher than Rs52,241 million for the similar period last year. The increase was primarily driven by improved fertilisers and petrochemicals performance.

On a standalone basis, the Company posted a PAT of Rs3,773 million against Rs4,105 million for the similar period last year, translating into an EPS of Rs7.20 per share (higher PAT in the previous period was due to the one-off super dividend from Engro Foods). The company announced an interim cash dividend of Rs7 per share for the quarter, bringing the cumulative dividend paid out to Rs12 per share in 1H 2018.

Fertiliser business revenues grew by 51 per cent whilst PAT for the current period increased by 74 per cent versus comparative period and stood at Rs7,149 million. Higher profitability was led by higher urea offtake, lower financial charges and one-off tax effects arising due to a phased reduction in the corporate tax rate from 30 per cent to 25 per cent. However, delayed disbursement of subsidy from the Government continues to put pressure on working capital position of the company.

1H 2018 witnessed the highest-ever PVC production during a half-year. The business recorded revenue growth of 31 per cent over a similar period last year. PAT for the half year was Rs2,784 million against Rs1,046 million for the comparative period. Primary drivers of profitability can be attributed to successful de-bottlenecking of PVC which enabled the business to enhance its profitable sales volume as well as improved domestic caustic market dynamics.

Within Engro’s energy assets, the Qadirpur plant performed as per our expectations with a Net Electrical Output of 803 GWh to the National Grid. Receivables from power purchaser remained high and are becoming a continuous challenge for the business and the power sector in general and needs urgent attention from the relevant authorities.

On June 10th, 2018, SECMC unearthed the first seam of Indigenous coal from its 3.8 metric tons per annum open-pit coal mine at a depth of 141 meters below the surface. This was the first step towards realizing the dream of power generation from indigenous Thar coal which will eventually become the cheapest source of electricity in the country.

Development on all project fronts continues at a steady pace throughout the period. The project is targeting ‘first electron flow’ from the power plant to the grid by end of 2018. Post half-year end, both units of Thar Powergen project were successfully connected to the National Grid, for the back-feed power supply required for the plant start-up.

The LNG terminal handled 36 cargoes as compared to 34 cargoes during a similar period last year. However, chemicals terminal witnessed a volumetric decrease over the corresponding period last year primarily due to lower LPG volumes.

The aforementioned growth of 65 per cent in the consolidated profit after tax of Engro Corporation has been achieved despite the recognition of a one-time taxation related provision in the terminals business.

The matter is being contested by the company but has been provided on a prudence basis.

During the period, Pakistan Credit Rating Agency Limited (PACRA) has upgraded the long-term credit rating of the Company to AA+ and maintained the short-term rating at A1+, which is a testament to the Company’s strong balance sheet and robust performance with consistent dividend payouts. It is worth mentioning that PACRA has also upgraded the long-term credit rating of Engro Fertilizers to AA and of Engro Polymer & Chemicals to AA-. Both subsidiaries’ short-term rating is maintained at A1+, which is the highest rating.