Engro Corp’s profit shrinks 4% to Rs4.21 billion

Board recommends interim cash dividend of Rs5 per share

KARACHI: Engro Corp’s consolidated profit dropped 4% to Rs4.21 billion in the quarter ended March 31 because of a notable decline in net sales, according to a bourse filing on Wednesday.

The decline in earnings would have been much deeper had the company not achieved a 100% increase in income from non-core businesses. The conglomerate had registered a profit of Rs4.40 billion in the same quarter of previous year.

Earnings per share (EPS) fell to Rs5.42 in the Jan-Mar quarter from Rs7.05 in the corresponding quarter of previous year.

The board of directors recommended an interim cash dividend of Rs5 per share. The entitlement will be paid to the shareholders whose names appear in the register of members on June 6 this year.

Engro Corp’s stock price fell 0.72% or Rs2.62 to Rs360.97 with a volume of 827,700 shares at the Pakistan Stock Exchange (PSX).

Net sales of the group of companies declined 33% to Rs22.49 billion from Rs33.59 billion. With this, the consolidated profit would have been much lower had the income from non-core businesses (other income) not doubled to Rs2.39 billion.

Besides, support to the bottom-line came from an uptick in income from joint ventures and associates and reduction in finance cost and administrative expenses.

In post-result comments, Taurus Securities said the decline in earnings was attributable to the drop of 22% in profitability of the fertiliser business (Engro Fertilizer) on account of 7% and 38% decrease in urea and DAP volumes respectively and a 70% decline in the share of profit from Engro Foods due to a 25% fall in net sales.

The profitability of the dairy producer was further hampered by an increase in raw material prices, change in taxation structure and implementation of technical assistance fee, it said.

However, improved earnings from subsidiaries Engro Powergen (up 82%) on account of improved electricity dispatches and a turnaround in profitability of Engro Polymer due to improving PVC (chemical) margins lent support to the overall consolidated result, it added. The share of income from joint ventures and associates improved to Rs450 million from Rs308 million.

Finance cost shrank to Rs1.31 billion from Rs1.40 billion whereas administrative expenses dipped to Rs732 million from Rs922 million.

The corporation explained in its notification to PSX that Engro Foods has become an associated company with effect from December 19, 2016. Accordingly, its revenue did not include in consolidated net sales in the under review quarter (January-March 2017) unlike in the same quarter of previous year.

Similarly, profit from Engro Foods has been mentioned as share of income from associates this quarter. In the same quarter of previous year, the foods’ profit of Rs1.108 million was directly mentioned in the consolidated profit, it added.

This change has impacted the consolidated profit and left a larger impact on revenue from net sales.

Published in The Express Tribune, April 27^th, 2017.

Like Business on Facebook, follow @TribuneBiz on Twitter to stay informed and join in the conversation.