Engro Corp’s profit surges 74% to Rs4.21b

Result below expectations even as net sales rise

KARACHI: Engro Corporation’s consolidated profit soared 74% to Rs4.21 billion for the second quarter ended June 30 mainly due to robust sales and significant cut in tax paid on the profit.

Profit stood at Rs2.42 billion in the same quarter last year.

Accordingly, earnings per share surged to Rs3.62 in the quarter compared to Rs1.67 in the corresponding quarter of previous year. The board of directors recommended an interim cash dividend of Rs7 per share, which will be paid to the shareholders whose names will appear in the register of members on September 18, 2018. It has already paid a dividend of Rs5 per share during the calendar year in progress.



Engro Corp’s share price dropped 2.43%, or Rs8.38, to close at Rs336.01 with 1.53 million shares changing hands.

Sales (net revenue) increased 29% to Rs38.20 billion compared to Rs29.66 billion.

Besides, the effective tax rate applied on the profit before tax reduced 32.22 percentage points to 31.71% (Rs1.95 billion) of the profit compared to 63.93% (Rs4.29 billion) in the corresponding quarter of last year.

“Earnings were well below street expectations of Rs7.4-7.7 per share due to one-time expense recognition of nearly Rs2 billion, partly recognised under (loss)/income from joint ventures head while remaining was booked under other operating expenses, as per our channel checks,” Topline Securities’ Analyst Shankar Talreja said in a note to clients.

Net sales surged due to increase in revenue from Engro Fertilizers (up 31%) on year-on-year basis and Engro Polymer and Chemicals (EPCL) (up 35%), he said.

Fertiliser business recorded growth in its sales revenue due to increase in urea and DAP prices by 10% and 20% on year-on-year basis, respectively. The polymer business showed robust growth in revenues due to increase in its PVC (chemical) volumes, he said.

Selling and distribution expense went down by 13% to Rs1.72 billion due to lower handling cost of its fertiliser division. Similarly, admin cost fell to Rs896 million from Rs914 million in the corresponding quarter of previous year.

Joint ventures (JVs) and associates posted loss of Rs918 million against profit of Rs230 million in the corresponding period of last year.

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“Negative surprise in JVs [Engro Vopak’s loss] was due to recognition of tax expenses on prudent basis against change in company’s tax status in 2010, that was challenged by the company in the court [case is still pending].

“However, the company has recognised its due portion of expense under two heads [of] share of [loss]/profit from associates and JV and other operating expenses…we cannot rule out the possible reversion of this amount going forward if decision comes in favour of the company,” he said. 

Published in The Express Tribune, August 17^th, 2018.

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