Engro Corporation Limited Fertilizer Analyst Briefing Takeaways

Key Takeaways
The management of Engro Corporation Limited held an Analyst Briefing on 20th Aug’20 to discuss the financial performance of
1HCY20 and future outlook:
 To recall the company posted a consolidated profit after tax of PKR 9,059mn (EPS: PKR 15.73), up by 33% YoY,
primarily owed to higher contribution from Thar projects and higher LPG volumes handled by Vopak. Along with this,
profitability of Rice and Terminal business surged by 1.5x and 32% YoY, respectively. However, earnings from EFERT
declined by 38% YoY amid i) 3% and 40% YoY reduction in urea and DAP offtake, respectively and ii) 3% YoY drop in
urea and DAP prices. Moreover, profitability from EPCL was down by a massive 85% YoY, due to closure of plant for
one month on account of lockdown.
 The company has setup Enfrashare business with initial investment of PKR 7.5bn. This business is successfully
managing a portfolio of 1,500 towers for Mobile Network Operator.

The company currently is conducting a feasibility study for a polypropylene business.
The company regards decision of GIDC case decision by Supreme Court as challenging for cash flows and is analyzing
available options. According to the decision, GIDC will be applicable till 30th Jul’20 and has to be paid over 24 months.
With this there will be a cash outflow of PKR 19bn for EFERT and PKR 5bn for EPCL. Pertinently, these payments are
fully accrued and there will be no impact on the profit and loss statement.
 Further the management informed that the PVC expansion timeline has been revised to 1QCY21. Upon completion it
will increase PVC production capacity by 100k tons.
 Whereas the Thar Coal Mining and Power Plant has completed one year of its operations. During 1HCY20, the power
plant received more than 2mn tons from the mine. On the other hand, 4,176 GwH has been dispatched by Engro
Powergen Thar during 1HCY20 to the national grid.
 On the power front, for EPQL which comes under power policy 2002, an MoU has been signed for reduction of RoE,
late payment surcharge and sharing of efficiency gains. This will not have a significant or material impact.
 The company told that the collection of receivables in coal power plant have been excellent. The company benefited
from Energy Sukkur issue and recovery of receivables is at 65%-70%.
 Tax holiday for the company’s Elengy business has ended and will be liable to pay tax at the rate of 29%.
 The company informed that the 2nd phase of mining project is expected to come online in 2022.
 The company’s rice business has performed well, especially during lockdown period amid COVID-19. Now the
company is examining how to grow it as a food business.

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