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    ENGRO   PK0012101017

ENGRO CORPORATION LIMITED

(ENGRO)
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End-of-day quote The Pakistan Stock Exchange  -  2022-06-27
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04/28ENGRO : Transmission of Quarterly Report for the Quarter Ended March 31, 2022
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Engro : Transmission of Quarterly Report for the Quarter Ended March 31, 2022

04/28/2022 | 02:16am EDT

About Us

Engro's investments in food & agri, petrochemicals, telecommunication infrastructure, and energy & related infrastructure are designed to enable nutrition, prosperity, connectivity, and progress for Pakistan.

Engro Corporation Limited is one of Pakistan's largest conglomerates with the company's business portfolio spanning across sectors including chemical fertilizers, PVC resin, telecommunication infrastructure, bulk liquid chemical terminal, foods and power generation. At Engro, our ambition is to become the premier Pakistani enterprise with a global reach.

The management team at Engro is responsible for conceptualizing and articulating goals that bring our people together in pursuit of our objectives. It leads the company with a firm commitment to the values and spirit of Engro. In our journey to become a profitable, growth-oriented and sustainable company, our management structure has evolved to create a more transparent and accessible organization.

Our growth is driven by our people. Our culture is dynamic and energetic, with emphasis on our core values and loyalty of our employees. Our work environment promotes leadership, integrity, teamwork, diversity and excellence.

Our History

Today, Engro is one of Pakistan's most progressive, growth oriented organizations, managed under a holding structure that works towards better managing and oversight of subsidiaries and affiliates that are part of Engro's capital investments in Pakistan.

The company is also defined by its history, which reflects a rich legacy of innovation and growth. The seeds for the company were sown following the discovery of the Mari gas field by Esso/Mobil in 1957. Esso proposed the establishment of a urea plant, and the Esso Pakistan Fertilizer Company Limited was established in 1965 and began production in 1968. At US $43 million with an annual production capacity of 173,000 tons, this was the single largest foreign investment by a multinational corporation in

Pakistan at the time. As the nation's first fertilizer brand, the company also pioneered the education of farmers in Pakistan, helping to modernize traditional farming practices to boost farm yields, directly impacting the quality of life for farmers and the nation.

In 1978, Esso was renamed Exxon globally, and the company became Exxon Chemical Pakistan Limited. The business continued to prosper as it relentlessly pursued productivity

gains and strived to attain professional excellence.

In 1991, following a decision by Exxon to divest its fertilizer business on a global basis, the employees of Exxon Chemical Pakistan Limited decided to buy out Exxon's share. This was, and perhaps still is, the most successful employee buy-out in the corporate history of Pakistan. Renamed Engro Chemical Pakistan Limited, the company continued to go from strength to strength, reflected in its consistent financial performance, growth and diversification.

In 2009, a decision was made to demerge the fertilizer business into an independent operating company to ensure undivided focus on the business's expansion and growth. In the best interests of a multi category business, expansion strategy and growth vision, the management decided that the various businesses would be better served if the company was converted to a holding company; Engro Corporation Limited.

From its inception as Esso Pakistan Fertilizer Company Limited in 1965 to Engro Corporation Limited in 2010, Engro has come a long way and will continue working towards its vision of becoming a premier Pakistani company with a global reach.

Engro Corporation Limited

Engro Corporation Limited is a holding company, created following the conversion of Engro Chemical Pakistan Limited on January 1, 2010. Engro Corp is one of Pakistan's largest conglomerates with the company's business portfolio in four verticals, which include food & agri, petrochemicals, energy & infrastructure and connectivity.

Engro Fertilizers Limited

Engro Fertilizers Limited-a 56% owned subsidiary of Engro Corporation - is a premier fertilizer manufacturing and marketing company having a portfolio of fertilizer products with significant focus on balanced crop nutrition and increased yield. As one of the 50 largest fertilizer manufacturers of the world, we have close to 5 decades of operations as a world-class facility with a wide range of fertilizer brands, besides urea, which include some of the most trusted brand names by Pakistani farmers. These include brands like Engro Zarkhez, Zingro and Engro DAP amongst others.

Engro Polymer & Chemicals Limited

Engro Polymer & Chemicals Limited-a 56% owned subsidiary of Engro - is the only fully integrated chlor-vinyl chemical complex in Pakistan and produces poly-vinyl chloride (PVC), caustic soda, sodium hypochlorite, hydrochloric acid and other chlorine by-products. The business was setup as a state-of-the-art plant in 1997, as a 50:50 joint venture, with Mitsubishi and Asahi Glass with Asahi subsequently divesting its shareholding in 2006.

owned subsidiary of ETPL, set up a state of the art LNG terminal, at Port Qasim. The terminal - which is also one of the most cost efficient terminals in the region - has the capacity for regasification of up to 600 mmcfd.

Engro Vopak Terminal Limited

Engro Vopak is a joint venture with Royal Vopak of the

Engro Energy Limited

Engro Energy Limited is a wholly owned subsidiary of Engro Corporation and it owns and operates Engro Powergen Qadirpur Limited, a 224 megawatt power plant and the group's first initiative in the power sector of Pakistan. Engro

Powergen Qadirpur Limited was listed on the Karachi Stock Exchange in October 2014 where 25% of the shares were offered to the public. As of now, Engro Powergen Qadirpur

Netherlands - the world's largest bulk liquid chemical handling company. The business is engaged in handling, storage and regasification of liquid & gaseous chemicals, Liquefied Petroleum Gas (LPG), petrochemicals and bio-fuels. Engro Vopak's terminal is Pakistan's first cryogenic facility that handles 70% of all liquid chemical imports into Pakistan including Paraxylene (PX), Acetic Acid (AA), Vinyl Chloride Monomer (VCM), Ethylene Dichloride (EDC), Mono Ethylene Glycol (MEG), Ethylene along with Phosphoric Acid (PA) imports, which are pumped directly to customer's facilities.

Limited is 69% owned by Engro Energy Limited.

FrieslandCampina Engro Pakistan

Engro Energy Limited is also involved in the Thar Coal project. The project operates a coal mine under Sindh Engro Coal Mining Company (SECMC) and operations of two 330MW mine mouth power plants under Engro Powergen

FrieslandCampina Engro Pakistan Limited is an 40% owned associated company engaged in the manufacturing, processing and marketing of dairy products and frozen desserts. The business owns two milk processing plants in

Thar Limited (EPTL) in the first phase. SECMC is a joint venture company formed in 2009 between the Government of Sindh (GoS) and Engro Energy Limited & Affiliates.

Sukkur and Sahiwal and operates a dairy farm in Nara, Sindh.

SECMC's shareholders include Government of Sindh, Engro Energy Limited, Thal Limited, Habib Bank Ltd, CMEC Thar Mining Investment Limited, Huolinhe Open Pit Coal Investment Company Limited and Hub Power Company Limited (HUBCO). The Sindh Coal Authority has awarded a 95.5 square kilometer area of the coalfield, known as Block

In its continued efforts to 'elevate consumer delight worldwide', the business has established several brands that have already become household names in Pakistan such as Olper's (UHT milk, low-fat milk and cream), Omoré (frozen desserts), Tarang (tea whitener) and Dairy Omung (UHT dairy liquid and dessert cream).

Engro Enfrashare (Private) Limited

II, to SECMC for exploration and development of coal deposits. Within this block, there is an estimated amount of exploitable lignite coal reserves of 1.57 billion tons. In 2010, SECMC completed the Bankable Feasibility Study (BFS) for Thar Block II Coal Mining Project by engaging internationally renowned Consultants such as RWE-Germany, Sinocoal-China, SRK-UK and HBP Pakistan, meeting all national/international standards. The first phase of the

Engro Enfrashare is a wholly owned subsidiary of Engro Infiniti, with a purpose to make connectivity more accessible and affordable for everyone. By aiding increased efficiency for network users, and already partnered with all of the country's major

Project has started. Thar Coal Project achieved its Commercial Operations Date (COD) in July 2019 and since been providing low cost electricity to the national grid.

Mobile Network Operaters (MNOs), Engro Enfrashare aims to help facilitate financial and social inclusion. While its expertise and investment in connectivity infrastructure allow mobile operators to reduce the cost of access to consumers, it aims to engage with all stakeholders in the telecom ecosystem in order to realize a larger goal of digitizing Pakistan.

Engro Eximp Agri Products (Private) Limited

Elengy Terminal Pakistan Limited

Elengy Terminal Pakistan Limited (ETPL) is a 56% owned subsidiary of Engro Corporation. The company won the contract to handle liquefied natural gas (LNG) and thereafter acquired FSRU vessel on lease from a US-based company - Excelerate Energy. Engro Elengy Terminal Limited, a wholly

Engro Eximp Agriproducts is a wholly owned subsidiary of the holding company and it manages the procurement, processing and marketing of rice. The company owns and operates a state-of-the-art paddy processing plant near Muridke and has an installed capacity of 144KT.

03

The Directors of Engro Corporation Limited are pleased to submit their report along with the condensed interim financial statements of the Company for the first quarter ended March 31, 2022.

directors' report

In Q1 2022, the global economy sustained its journey of demand recovery, coupled with supply chain challenges that resulted in continuation of commodity cycle upturn. This recovery was offset by the turbulence in the geo-political environment due to the Russia - Ukraine conflict which is resulting in further increase in inflation and commodity prices reaching all time high levels around the world. Resultantly, major economies in the world are pivoting towards monetary tightening to combat the inflationary trends.

Furthermore, international political and economic dynamics continued to impact Pakistan's domestic economy. Higher commodity prices driven by global geopolitical challenges and fiscal / monetary stimuli are translating into inflationary pressures for the domestic economy which may suppress local demand going forward.

Despite these challenging times, Engro's diversified portfolio is well positioned to sustain against these adverse externalities. The portfolio's diversification also shields business performance from foreign exchange volatility.

Business Review

On a standalone basis, the Company posted a PAT of PKR 6,877 million against PKR 3,586 million for the comparative period, translating into an EPS of PKR 11.94 per share. The 92% increase in profitability is primarily on account of higher dividends from subsidiaries mainly from the Fertilizer and Petrochemical businesses.

On a consolidated basis, the Company's revenue grew by 24.6%, to PKR 88,333 million in the first quarter compared to PKR 70,866 million in Q1 2021. The consolidated Profit-After-Tax (PAT) for the quarter was PKR 14,897 million, while PAT attributable to the shareholders is PKR 7,972 million against PKR 8,337 million in the comparative period, resulting in an Earnings per Share (EPS) of PKR 13.84 compared to PKR 14.47 in same period last year.

A brief review of our business segments is as follows:

Fertilizers

Fertilizer business showed strong performance and recorded a revenue of PKR 36,813 million compared to PKR 29,443 million in Q1 2021, whereas profit after tax stood at PKR 5,511 million versus PKR 5,741 million same period last year.

On the domestic front, farm economics continued to improve driven by better farm outputs and improved support pricing, following the momentum built over last year. Urea sales during the period stood at 549 KT vs 601 KT for the comparative period. Incremental sales in 2021 can be attributed to higher opening inventory. Phosphate sales stood at 79 KT vs 74 KT

during the same period in 2021.

International Urea prices increased to USD 1,005/T (landed equivalent PKR 11,741/bag) by the end of Q1 2022 amidst volatility in global geopolitical environment. However, the local fertilizer industry ensured that farmers continue to benefit from lower domestic urea prices with a discount of 84% over international prices. DAP international and local prices continued the upward trajectory and have witnessed an increase of 12% during the quarter with offers being quoted as high as USD 1,025/T by the end of Q1 2022.

Presence of domestic urea manufacturing industry enabled import substitution to the tune of USD 1.2 billion in Q1 2022, wherein Engro Fertilizers' contribution stood at USD 0.4 billion, equating to 35%.

Petrochemicals

The Polymer business recorded a revenue of PKR 23,126 million translating into a Profit After Tax of PKR 4,714 million as compared to revenue of PKR 15,671 million and Profit After Tax of PKR 4,143 million

  • in same period last year. Increase in revenue emanates from increase

  • in PVC prices which averaged at USD 1,339/T due to supply disruptions

  • in North-East Asia. However, higher PVC prices could not be translated into profitability as core delta reduced during the quarter due to increased ethylene cost which averaged at USD 1,176/T, translating into core-delta of USD 751/T. Despite supply tightness of PVC in international market, domestic PVC downstream market continued uninterrupted due to Engro Polymer's steady production.

The business recorded domestic sale of 62 KT, translating to a market share of 96% versus 53 KT and market share of 93% in the same period last year. Resultantly, the Polymer business enabled import substitution of USD 37 million.

The company continued its awareness and partnership with construction sector stakeholders through its "thinkPVC" outlet, demonstrating the versatility and superior physical properties of PVC downstream products with the aim to change the landscape of construction sector of Pakistan.

Telecommunication Infrastructure

Enfrashare continued to expand its national footprint and achieved a scale of 2,557 tower sites by end of Q1 with a 1.13x tenancy ratio, catering to all four Mobile Network Operators (MNOs) in Pakistan. The company deployed 50% of the new sites during the quarter by independent tower companies which led to an increase of 85% in revenue in comparison to Q1 2021.

The growth potential in the business is further demonstrated by the colocation opportunities witnessed during the quarter, with total colocation tenants of 325 in March 2022 versus 225 in Dec 2021, representing an increase of 38%. The business is well positioned to capture the growth expected in the sector, driven by increase in data usage, localization of smart phone assembly and other policy level interventions made by the Government of Pakistan.

Foods & Rice

Terminal Operations

FrieslandCampina Engro Pakistan demonstrated a topline growth of 21%, reporting a revenue of PKR 13,971 million against PKR 11,577 million in the same period last year. The business registered a Profit After Tax of PKR 664 million versus PKR 547 million for the comparative period.

The LNG terminal handled 19 cargoes, in line with Q1 2021, delivering 54 bcf re-gasified LNG in to the SSGC network. The chemicals terminal had an actual throughput of 381 KT against 281 KT during the same period last year. The increase was primarily observed in chemical volumes offset by lower LPG handling.

Higher market penetration by the business was driven by leveraging e-commerce channels, whereby the business entered strategic partnerships with notable fin-techs to digitize the sales and distribution management at a national level. The business also improved reach and route to markets, increased marketing spends to enhance brand equity and increased market penetration.

Distribution to Shareholders

The Board endeavors to maximize total shareholder returns and is pleased to propose an interim cash dividend of PKR 12 per share for the year ending December 31, 2022.

The business continued to expand its consumer awareness and dairy development programs which have been further supported by restoration of zero-rated taxation on the dairy segment in 2021.

Near-Term Outlook

In 2022, we will continue to develop our verticals while making meaningful contributions to the country and our stakeholders at large.

Engro Eximp Agriproducts continues its excellence in rice export business getting both local and international recognition for its efforts. The business surpassed industry growth of 2% in the brown rice segment and recorded 65% growth versus same period last year.

Fertilizer

During the quarter, rice business generated revenue of USD 10.2 million through export of 13 KT rice versus 9 KT in comparative period. The Profit After Tax for Q1 2022 stood at PKR 85 million vs PKR 31 million in Q1 2021. Given the supply chain constraints in the international market, the business pivoted its supply to the local market and increased domestic volumes by 40% to 4 KT during the period against 3 KT in same period last year.

The agricultural sector in Pakistan is expected to maintain its growth trajectory owing to continued government support, improved farmer economics and availability of urea at significantly discounted prices compared to global levels. Steady production by Engro Fertilizers will continue to meet the fertilizer needs of the domestic market.

With surplus urea installed capacity in the country, the industry can generate incremental foreign reserves through urea exports subject to Government's approval and required policy interventions.

Energy

Petrochemicals

Coal Mine: Mining operations continued smoothly, and the mine supplied one million tons of coal to Engro Powergen Thar during the quarter. Phase II expansion of the mine to 7.6 million tons per annum is expected to be completed in during Q4 of 2022. Phase III expansion of the mine to 12.2 million tons per annum that was approved in 2021 will achieve its financial close during 2022 as well.

With the availability of 295 KT capacity post-expansion, the business is well positioned to strongly pursue the agenda of import substitution whilst capitalizing on the growing PVC market in Pakistan. Engro Polymer & Chemicals is confident to continue strong operational performance and market development activities for the upward trajectory in per capita PVC consumption of Pakistan.

Thar Power Plant: Engro Powergen Thar Limited achieved a collection of 86% inception to date bringing it at par with other coal IPPs. The plant achieved 48% availability with a load factor of 47%, dispatching 610 GwH to the national grid during the period. Plant availability remained low due to a forced outage following an incident on the coal conveyor belt. Investigations are ongoing and the two units are expected to come online during Q2 2022.

Telecommunication Infrastructure

The business outlook for Enfrashare remains strong owing to continued growth in mobile data usage and start of local production of mobile handsets, driving MNOs to enhance availability and quality through aggressive Built-to-Suit roll outs.

Qadirpur Power Plant: During the period, the plant dispatched a Net

Electrical Output of 124 GwH to the national grid with a load factor of 27% compared to 37% in same period last year due to lower offtake from the Power Purchaser. The business posted a PAT of PKR 151 million for the current period as compared to PKR 399 million for Q1 2021 due to a scheduled plant shutdown on account of major inspection.

Enfrashare would strive to maintain its market leadership as an independent TowerCo business through organic and inorganic growth opportunities and is driven to become a 5,000+tower with a strong tenancy potential of over 1.3x by the year 2025.

Engro Corp. | First Quarter Report 2022

05

Foods

Terminal Operations

The business continues to leverage FrieslandCampina's global expertise to introduce new products and innovations as a key driver of future business growth. The business has also ventured into the dairy cheese segment and has started pilots in Karachi and Lahore. Keeping focus on consumer awareness to drive conversion and penetration in dairy segment, the business also plans to optimize their supply chain and raw material costs to improve profitability.

The LNG terminal is positively playing its role in partially alleviating the energy shortage faced by the country. Furthermore, market dynamics in the chemicals sector have been stable and Engro Vopak continues to retain its status as the market leader. However, LPG marine imports remained under pressure due to imports through land route at Taftan and the entry point at border "post-250".

Acknowledgment

Energy

The energy business remains committed to the development of a bilateral electricity market by working closely with the regulators and industry stakeholders to revamp the power sector. The business will also continue to work extensively to gain a foothold in the renewables market. Engro Energy signed an MoU with the Government of Sindh to develop the first hybrid 400 MW Renewable Energy Park and has recently signed term sheets with potential customers for the sale of energy.

The Directors would like to express their deep appreciation to our shareholders who have consistently demonstrated their confidence in the Company. We would also like to place on record our sincere appreciation for the commitment, dedication and innovative thinking put in by each member of the Engro family and are confident that they will continue to do so in the future.

With the aim of providing indigenous affordable energy for the country, we will continue to expand our coal mine which is expected to increase capacity to 7.6 million tons per annum by 2022 and 12.2 million tons per annum by the year 2023.

Hussain Dawood Chairman

Ghias Khan

President and Chief Executive

This is an excerpt of the original content. To continue reading it, access the original document here.

Disclaimer

Engro Corporation Ltd. published this content on 28 April 2022 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 28 April 2022 06:14:37 UTC.


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Financials
Sales 2021 255 B 1 236 M 1 236 M
Net income 2021 - - -
Net Debt 2021 - - -
P/E ratio 2021 4,91x
Yield 2021 11,6%
Capitalization 147 B 713 M 713 M
Capi. / Sales 2021 0,58x
Capi. / Sales 2022 0,54x
Nbr of Employees 2 766
Free-Float 91,2%
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Number of Analysts 10
Last Close Price 257,38 PKR
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Spread / Average Target 38,8%
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Ghias Uddin Khan President, Chief Executive Officer & Director
Mazhar Abbas Hasnani Chief Financial Officer
Muhammad Hussain Dawood Chairman
Eram Hasan Chief Information & Transformation Officer
Henna Inam Independent Director
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