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Pakistan’s premier conglomerate, Engro Corporation (PSX: ENGRO) announced its financial results for the third quarter ended September 30, 2021. This included a consolidated Profit After Tax (PAT) of Rs. 40.50 billion which is an increase of 31 percent in comparison to the Rs. 31.07 billion last year.
Overview of Financial Performance
Engro delivered a strong operational performance in 9M 2021 as its consolidated revenue grew by 23% from PKR 182,497 million in 9M 2020 to PKR 223,581 million in 9M 2021. The Company recorded a consolidated Profit After Tax (PAT) of PKR 40,504 million up by 31% from the same period last year. Profit attributable to the owners stood at PKR 23,173 million compared to PKR 18,345 million in 9M 2020, resulting in an Earnings per Share (EPS) of PKR 40.22 compared to PKR 31.84 in 9M 2020. The growth in the bottom line is primarily attributable to increased profits posted by Fertilizers and Petrochemicals businesses.
On a standalone basis, the Company posted a PAT of PKR 16,015 million against PKR 9,283 million in 9M 2020, translating into an EPS of PKR 27.80 per share. The Company also announced an interim cash dividend of PKR 5 per share for the third quarter taking the total dividend distributed for the year to PKR 24 per share.
Financial Performance – Segmental Perspective
Fertilizers
The domestic market witnessed strong agricultural sector performance in 2021 with limited impact from COVID-19 led lockdowns. Prices of agri commodities remained firm during the quarter resulting in improved earnings for farmers and higher urea industry volumes versus the prior year.
Engro Fertilizers Limited (“EFert”) revenue during the period stood at PKR 92,742 million versus 78,138 million on the back of higher Urea sales of 1,644 KT in comparison to 1,451 KT in 9M 2020. Urea production stood at 1,560 KT versus 1,694 KT in 9M 2020 on account of planned plant turnarounds. EFert recorded Phosphate sales of 242 KT against 366 KT in 9M 2020. As a result, the PAT for EFert stood at PKR 14,921 million for 9M 2021 as compared to PKR 11,491 million in the same period last year.
Petrochemicals
International PVC prices reached an all-time high of $1850/MT by September end due to high demand along with global supply disruptions. The domestic PVC market recorded a volumetric increase of 30% in Q3 2021 against the previous quarter as buying sentiment improved.
Engro Polymers and Chemicals Limited (“EPCL”) announced commercial operations of the new PVC plant on March 01, 2021, increasing the capacity by 100 KT to 295 KT per annum and commercial operations of 50 KT new VCM DBN capacity on June 25, 2021, increasing capacity to 245 KT per annum.
In 9M 2021, EPCL recorded revenue of PKR 49,323 million as compared to PKR 22,931 million in 9M 2020. The business witnessed its highest ever profit of PKR 10,372 million versus PKR 2,103 million on account of increased volumetric sales, efficient operations, and higher international prices.
Connectivity
Engro continued to expand its footprint through Engro Enfrashare which has now become the country’s largest Independent TowerCo (with 48% market share vs 41% in 2020) in terms of operational sites, serving all Mobile Network Operators in Pakistan. As of September 30, 2021, Enfrashare held a portfolio size of 2,030 operational sites and 2,219 tenancies resulting in a tenancy ratio of 1.09x.
The telecom sector in Pakistan is registering an annual growth of 28% with the 3G / 4G subscriber base expanding beyond 100 million. This has led Engro to enhance its total equity investment in the Telecom Infrastructure vertical to PKR 21.5 billion. Engro has also formed a dedicated platform for connectivity and telecom infrastructure-related initiatives by the name of Engro Connect (Pvt.) Limited. Engro Connect is a wholly-owned subsidiary of Engro and will hold complete ownership of Engro Enfrashare (Pvt.) Limited.
Energy & Power
Sindh Engro Coal Mining Company (“SECMC”) supplied ~3 million tons of coal to Engro Powergen Thar Limited (“EPTL”) during the period. SECMC’s expansion work to enhance its output to 7.6 million tons per annum is in progress. EPTL remained fully operational and achieved 84.7% availability with a load factor of 82%, dispatching 3,253 GwH to the national grid during the period.
Engro Powergen Qadirpur Limited (“EPQL”) operates on permeate gas and is currently facing gas curtailment from the Qadirpur gas field as it continues to deplete. To make up for this shortfall, EPQL’s plant has been made available on mixed mode. The plant dispatched a net electrical output of 615 GwH to the national grid with a load factor of 44% compared to 32% during the same period last year. EPQL posted a PAT of PKR 1,463 million for the current period as compared to PKR 2,031 million for 9M 2020, which is mainly attributable to the retirement of the debt component.
Terminals
The profitability of both the LNG and chemicals terminal remained healthy during the period. The chemicals terminal throughput volumes normalized to 934 KT versus 806 KT last year as volumes were impacted in 2020 due to lockdowns because of COVID-19. The LNG terminal handled 52 cargoes against 54 cargoes during the same period last year, delivering 158 bcf re-gasified LNG into the SSGC network.
With around two years of planning and efforts amidst COVID-19 volatility, Engro Elengy Terminal Limited (“EETL”) has successfully completed Pakistan’s first-ever drydocking activity at the Qatar dockyard. During the dry-docking period, FSRU Sequoia enabled gas supply continuity ensuring national energy security. After completion of its dry docking, FSRU Exquisite has now returned to Pakistan and is online.
