Corporate results: Engro Corporation’s profit up 77%

Results better but slightly below market expectations, say Topline Securities.

KARACHI: Engro Corporation, one of the largest private sector conglomerates in the country, has posted a record net profit of Rs3.64 billion in quarter ending on March 2015, up 77% compared to Rs2.06 billion in the same quarter of previous year.

The earnings were significantly better but still slightly below market expectations, Topline Securities commented on Tuesday.

Earnings per share (EPS) improved to Rs6.9 from an EPS of Rs4.02 in the period under review.

The result also accompanied an interim cash dividend of Rs2.0 per share.

The revenue of the company posted a growth of 8% year on year to Rs41.4 billion due to 18.6% year on year increase in Engro Fertilizer sales, which were led by 6.8% year on year higher urea off-take and 24% growth in the top-line of Engro Foods.

Engro Fertilizer sold 481,000 tons of urea in the first quarter of 2015 compared to 451,000 tons in the corresponding period last year. Engro Foods’ sales increased because of higher volumetric growth in dairy segment.

The gross profit increased 22% to Rs11.4 billion in first quarter of 2015 while gross margins of the company improved by 322 basis points to 27.7%.

We attribute this improvement to lower international raw milk prices that substantially improved Engro Foods margins and flow of concessionary gas to Engro Fertilizer, the report said.

Other income surged 84% to Rs1.1 billion in the first quarter of 2015 compared to Rs617 million in the same quarter last year. We attribute this increase to interest earned by Engro Fertilizer on Gas Infrastructure Development Cess (GIDC) collected but not paid, the report added.

On a quarter-on-quarter basis, revenue of the company dropped by 23% due to seasonality, however, gross margins improved by 932 basis points to 27.7% in first quarter of 2015.

The finance cost of the company plunged by 38% quarter on quarter to Rs2.4 billion due to aggressive deleveraging of balance sheet. While, the bottom-line of the company surged 45% quarter on quarter to Rs3.6 billion mainly due to higher other income.

Published in The Express Tribune, April 29^th, 2015.

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