Overview of Financial Performance

During the period, Engro Corporation (the “Company”) posted a standalone Profit-After-Tax (PAT) of PKR 5.97 billion against PKR 6.04 billion in the same period last year, translating into an EPS of PKR 11.12 versus 10.63 in 2023. This consistent profitability is primarily owing to higher dividend income from fertilizer business and efficiencies derived through cost optimization measures which has been netted off with lower interest income on account of declaring higher dividends from surplus funds last year.

On a consolidated basis, the Company’s revenue from continuing operations grew by 45% to PKR 104.30 billion during the period against PKR 72.07 billion in the same period last year. Consolidated PAT from continuing operations stood at PKR 10.38 billion (PAT attributable to shareholders: PKR 5.72 billion) compared to PKR 6.13 billion (PAT attributable to shareholders: PKR 3.46 billion) in the same period last year, recording an EPS of PKR 10.66 compared to PKR 6.08 in 2023. Major variance is attributable to higher fertilizer sales, improved margins, efficient plant operations, higher earnings from dollar-denominated businesses, and efficiencies derived through cost optimization.

PAT including discontinued operations stood at PKR 10.38 billion (PAT attributable to shareholders: PKR 5.72 billion) compared to PKR 8.80 billion (PAT attributable to shareholders: PKR 4.65 billion) in the same period last year, recording an EPS of PKR 10.66 compared to PKR 8.18 in 2023.

The Company announced an interim cash dividend of PKR 11.00/- per share for the for the first quarter ended March 31, 2024.

Divestment of Thermal Assets

As notified to the Pakistan Stock Exchange (PSX) on April 04, 2024, the Company has entered into an agreement via Engro Energy Limited with Liberty Power Holding (Pvt.) Limited and other parties acting in concert for the sale of its entire shareholding in Engro Powergen Qadirpur Limited, Engro Powergen Thar (Private) Limited, and Sindh Engro Coal Mining Company Limited at the cumulative transaction value of PKR 34.75 billion. Completion of the Transaction is subject to conditions as agreed in the definitive agreements, including receipt of corporate / regulatory approvals and lender consents.

Portfolio Performance Review

Fertilizers

The Fertilizer business reported a PAT of PKR 10.78 billion versus PKR 4.40 billion in the same period last year, mainly due to higher Zabardast Urea and phosphate sales, improved margins, efficient plant operations and efficiencies derived through cost optimization.

Urea sales during the period stood at 548 KT vs 551 KT, translating to a market share of 30% for the period. Phosphate sales stood at 83 KT vs 45 KT during the same period in 2023. The local fertilizer industry ensured availability of locally produced urea to farmers at a significant discount of ~32% over international prices and contributed import substitution to the tune of USD 670 million in this quarter, wherein Engro Fertilizers’ contribution stood at USD 200 million.

Petrochemicals

The Polymer business incurred a loss after tax of PKR 0.90 billion against PAT of PKR 1.18 billion in the same period last year, mainly attributable to significant decline in commodity prices, increase in gas price and lower domestic PVC sales. The business recorded domestic sales of 44 KT, translating to a market share of 79% versus 46 KT in the same period last year.

Telecommunication Infrastructure

Tower deployment slowed down during the period due to consolidation of the MNOs from four to three. Enfrashare continued to expand its footprint and achieved a scale of 3,977 tower sites with a 1.22x tenancy ratio, capturing 53% market share. Additionally, 103 new colocation tenants were added during the period, where Enfrashare captured 56% of the market share.

The bottom line of the business was impacted due to higher interest rates given its capital structure. The business is rigorously pursuing various options to mitigate this risk in the future, including hedging mechanisms and reassessment of its capital structure.

Energy

Coal Mine: Mining operations continued smoothly, supplying coal to Engro Powergen Thar, Thar Energy and ThalNova Power.

Thar Power Plant: During the period, the plant dispatched a Net Electrical Output of 618 GWH to the national grid against 514 GWH in the same period last year.

Qadirpur Power Plant: During the period, the plant dispatched a Net Electrical Output of 216 GWH to the national grid against 262 GWH in the same period last year.

Foods & Rice

The results of FrieslandCampina Engro Pakistan Ltd will form part of our Directors Report as it is a listed entity, and its results will be announced in due course.

There has been minimal activity in the rice business as the management is evaluating the future direction of Engro Eximp Agriproducts.

Terminals

The LNG terminal handled 18 cargoes, in line with the same period last year, delivering 55 bcf re-gasified LNG into the SSGC network, accounting for ~15% of the total gas supply of the Country. The chemical terminal handled 317 KT against 134 KT during the same period last year. The increase is mainly due to higher chemical volumes during the period driven by last years’ slowdown in economic activity and higher LPG marine imports owing to proactive commercial efforts.

International Trading

Eximp FZE is a UAE based international trading arm of the Company initiated commercial activity in 2022 with a vision to consolidate the Group’s trading activities under one roof. During the period, business achieved a turnover of USD 84 million against USD 54 million in the same period last year.