Engro Corporation after announcing earnings of its two giant subsidiaries – fertilisers and foods –finally declared results of all its other segments on Thursday. The cumulative result of the local conglomerate did catch the market by surprise as net profit increase of 21% was much higher than analyst expectation.
Overall net profit stood at Rs7.81 billion, with almost 70% generated from the fertilisers and foods segment.
The board of directors in their meeting held on Thursday also announced 30% bonus shares and a final cash dividend of Rs2 per share, taking the full-year 2011 payout to Rs6 per share, according to a notice sent to the Karachi Stock Exchange.
The company’s stock price rose to its upper limit of 5% to close at Rs127.85 during trade at the Karachi Stock Exchange on Thursday.
The company’s financial and other expenses on a consolidated basis increased by 176% to Rs14.2 billion which diluted the impact of overall growth in revenues which improved by massive 43% to Rs115 billion, said Topline Securities analyst Farhan Mahmood.
Fertiliser business leads
Engro Fertilisers reported its earnings earlier this month with net profit increasing 23% to Rs4.59 billion in 2011 despite the manufacturers’ despite the manufacturers’ new plant facing multiple shutdowns during the year.
The manufacturer produced 1.28 million tons of urea and sold 1.26 million tons, achieving a market share of 21%.
The continuation of the gas curtailment is expected to result in decreased production, the company said in a press statement. The implementation of the Gas Infrastructure Development Cess Tax decreased the feed gas subsidy from Rs345 per bag to Rs260 per bag also increasing the input price of the gas from Rs103 per mmbtu to Rs. 313 per mmbtu – an increase of over 200 percent. This increase in input costs coupled with the continuing gas curtailment is expected to build inflationary pressures on the supply price of urea in the local market, adds the statement.
Engro Foods earnings grew by five times to Rs891 million in 2011 against Rs176 million in 2010 driven mainly by the dairy segment.
In 2011, the foods business achieved volume growth of 22% in the dairy segment securing a market share of 44% opposed to 39% in 2010. During the first half of the year, the foods business raised Rs1.2 billion by issuing 48 million shares to institutional investors at Rs25 per share.
The foods business will increase its market share in dairy and ice cream segment offering strong value added benefits to the consumers, the company believes.
Energy and Power
The energy business increased its generation up a notch as it dispatched total net power of 1,657GWh to the national grid compared with 1,201GWh in 2010. The business declared a net profit increase of 52% to stand at Rs1.7 billion in 2011 against the preceding year’s 1.1 billion.
Given the current energy situation in the country the energy business is expected to continue achieving high dispatch rates and demonstrate strong performance.
Chemical Storage & Terminal
Engro Vopak, the chemical terminal of the corporation, actual output stood in the same range of 1.09 million tons in 2011, however, net profit jumped to Rs3.48 billion due to a tax reversal of Rs2.02 billion against Rs1.11 billion in 2010.
The decrease in annual throughput is mainly attributable to lower import of phosphoric acid due to lower production of fertilizer di-ammonia phosphate as a result of gas load management by Sui Southern Gas Company Limited.
During the year, Engro Polymer and Chemicals produced 122,000 tons of PVC against 114,000 tons in 2010 but still posted a net loss of Rs706 million, to mark its third consecutive annual loss.
Published in The Express Tribune, February 17th, 2012.