Corporate Results: Engro Corporation flips from profit to a loss

Fertiliser business cripples the local giant.

KARACHI:

Engro Corporation switched to a loss making regime in the quarter ended March 31 as flagship fertiliser business witnessed a massive slowdown. 

The country’s largest local conglomerate posted net loss of Rs649 million in January to March 2012 profits against profit of Rs2.1 billion in the same period last year, according to a notice sent to the Karachi Stock Exchange.

Major reason behind the loss is the company’s urea business that closed in the red amid sales falling 68%, said Topline Securities analyst Farhan Mahmood.

Local fertiliser manufacturers came second best to their imported counterparts during the period under review as price of imported fertiliser stood much lower due to partial payment made by the government for them in the form of subsidies. Engro Fertiliser alone contributed loss of Rs1.4 billion in the books of Engro Corporation.

The fertiliser business registered a decline in market share to 8% opposed to 20% in the same period last year.

On the flipside, better results from Engro Foods and Engro Polymer supported the bottom-line, added Mahmood.

The foods business continued on its upward growth curve to post net profit of Rs485 million, an increase of 314% on a yearly basis from the preceding period’s Rs117 million.

Turnover of the fastest growing subsidiary grew by 54% to Rs9.9 billion during the first quarter of 2012. In addition, the company’s investment in the Halal Foods business in Canada, Al Safa, also achieved sizable sales revenue of Canadian $2.5 million during the first quarter of 2012.

Company’s overall revenues still managed to grow by 5% to Rs23 billion.

The conglomerate’s financial charges increased by 166% to Rs3.86 billion due to a five-fold increase in financial charges of the fertiliser business.

With regards to the future outlook, the company forecasts gas supply to remain volatile for its new fertiliser plant while foods business is expected to drive growth in all its business segments.

Published in The Express Tribune, April 28^th, 2012.