Engro Corporation’s revenue increased to Rs24 billion

KARACHI: Pakistan’s premier conglomerate, Engro Corporation Limited’s standalone revenue increased to Rs24 billion in 2022 from Rs21 billion in 2021, exhibiting a healthy growth of 14 per cent, a statement issued by the company said on Thursday.

Higher revenue was primarily due to higher dividends received from the Engro Polymer and Chemicals Limited (EPCL), Engro Fertilisers Limited (EFERT) and Engro Energy Limited (EEL), which, in turn, were driven by strong underlying business performance.

Resultantly, the company achieved an 11 per cent higher profit-after-tax of Rs21 billion in 2022 against Rs19 billion in 2021, translating into the earnings per share (EPS) of Rs36.79/share (2021: Rs32.14/share).

On a consolidated basis, the Engro Corporation’s revenue grew 14 per cent to Rs356 billion in 2022 as against Rs312 billion in 2021.

The company posted a profit-after-tax of Rs46 billion in 2022, which is 13 per cent lower than Rs53 billion in 2021 on account of super tax charge of 4 per cent on retrospective and current year earnings and one-off adjustment of the Engro Powergen Thar Limited (EPTL) tariff adjustment.

The profit-after-tax attributable to the shareholders decreased to Rs24 billion from Rs28 billion in 2022, translating into an EPS of Rs42.23/share (2021: Rs48.50/share).

With reference to the super tax imposition of 4 per cent on retrospective year earnings and additional discriminatory super tax of 6 per cent on selected sectors, the group appealed before the Sindh High Court (SHC) and the matter was decided in favour of the group. While having the support of our legal and tax advisers, the group decided to maintain the provision to the extent of 4 per cent super tax.

The Engro Corporation announced a final cash dividend of Re1/share for the year. This is in addition to the Rs33/share dividend announced during the year, bringing the cumulative payout to Rs34/share.

Portfolio Performance Review

Fertilisers: The domestic market witnessed adverse implications of the global economic downturn and recent severe flooding in the country. The urea sales decreased to 1,936,000 tonnes, compared with 2,295,000 tonnes in 2021 due to a 60-day LTR (Long-Term Turnaround), which was the longest LTR in the last 50 years. This was achieved with a ‘zero’ TRIR (Total Recordable Injury Rate) and no unplanned outages.

Following the completion of this successful LTR, the performance of the facility is expected to improve with a reduction in the energy index and capacity enhancement by 170,000 tonnes/annum.

The international DAP prices decreased to $730/tonne on the back of a slowdown in the global demand and the commodity cycle reversal. Due to the unprecedented floods, the domestic phosphate market (DAP/NP/Zorawar) witnessed a drastic fall in the demand, resulting in the sales declining to 333,000 tonnes in 2022 from 366,000 tonnes in 2021.

The business enabled import substitution of $1.3 billion during the year. On an overall basis, the profitability of Engro Fertilisers Limited decreased 24 per cent to Rs16 billion in 2022 against Rs21 billion in 2021, impacted by the levy of the super tax.

Petrochemicals: The international PVC supply remained disrupted due to the resurgence of the Covid-19 in China. The local supplies to domestic PVC downstream market continued uninterrupted due to steady production at the Engro Polymer and Chemicals Limited.

The business continued its upward momentum in PVC segment with the highest ever domestic sale of 231,000 tonnes against 207,000 tonnes in 2021. After catering to the local PVC demand, the business also recorded export sales of 26,000 tonnes, including caustic exports of 15,000 tonnes, translating to an export value of $21 million. The business also enabled import substitution of $134 million.

EPCL recorded the sales of Rs82 billion in 2022 versus Rs70 billion in 2021. The profit-after-tax for the year declined to Rs12 billion from Rs15 billion in 2021, primarily due to the imposition of the super tax and commodity cycle reversal.

Telecommunication Infrastructure: The Engro Enfrashare (Pvt) Limited continued to expand its national footprint and achieved a scale of 3,329 tower sites with a 1.17x tenancy ratio during 2022 versus 2,246 tower sites with 1.1x tenancy ratio in 2021, catering to all the four major mobile network operators (MNOs) of Pakistan.

The business captured a market share of 62 per cent in Build-to-Suit (B2S) towers, compared with other independent tower companies, leading to 2x revenue versus the last year.

The growth potential in the business is further demonstrated by the co-location activities witnessed during the year, with the total co-location tenants of 560 versus 235 in 2021, representing a 2.4x increase.

Foods & Rice: The FrieslandCampina Engro Pakistan Limited witnessed a robust growth momentum on the back of strong volumetric sales in both dairy and ice cream segments.

The business demonstrated a top-line growth of 40 per cent, recording the sales of Rs73 billion, compared with Rs52 billion in 2021. The business recorded a profit-after-tax growth of 39 per cent from Rs1.8 billion in 2021 to Rs2.5 billion in 2022 due to the volumetric growth driven by the distribution network expansion and a surge in the demand after the floods.

The Engro Eximp Agriproducts (Pvt) Limited continued its focus towards exports as a key contributor in foreign reserves of the country.

The business generated a revenue of $31 million through the international sale of 36,000 tonnes of rice against 24,000 tonnes last year. The supply to the local market decreased 8 per cent to 12,000 tonnes during 2022 versus 13,000 tonnes last year.

Energy & Power: The mining operations continued smoothly during the year with supplying coal to Engro Powergen Thar Limited, Thar Energy and Lucky Electric Power Company.

The mine’s Phase II expansion was achieved during the year, which doubled the capacity to 7.6 million tonnes/annum, effective from October 1, 2022. The government of Sindh has also approved the Phase III capacity enhancement to 11.4 million tonnes/annum. The business enabled import substitution of $320 million during the year.

EPTL dispatched 3,679GWh to the national grid, compared with 4,225GWh last year and achieved 73 per cent availability, compared with 83 per cent last year. The plant availability remained low in the first quarter but, after detailed inspection and necessary rehabilitation work, both units of the plant successfully came fully back online.

The Engro Powergen Qadirpur Limited dispatched a net electrical output of 768GWh to the national grid with a load factor of 41 per cent. The scheduled maintenance outage was undertaken for a major overhaul, conducted every sixth year.

The business posted a profit-after-tax of Rs1.5 billion in 2022, compared with Rs1.6 billion for 2021.

Terminals: The Engro Elengy Terminal (Pvt) Limited handled 74 vessels during 2022 versus 72 vessels in 2021, delivering 219bcf re-gasified LNG into the SSGC network with an availability factor of 97.6 per cent.

The terminal contributed 15 per cent towards Pakistan’s total gas supply during the year.

The Engro Vopak Terminal Limited recorded the highest-ever volumetric increase in chemicals handling to 1,331,000 tonnes in 2022 against 1,280,000 tonnes last year, attributable to higher imports of phosphoric acid and paraxylene, which was offset by the lower LPG marine imports of 32 per cent over the last year, primarily driven by gray channel imports.

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