KARACHI:
The country’s largest conglomerate Engro Corporation reported a loss of Rs135 million in January to June 2012 following its largest subsidiary finding it hard to operate due to gas shortage.
The new plant of Engro Fertilizers, the largest profit making subsidiary in 2011, operated for only 33 days due to gas shortage in the first six months of 2012. This, together with rising financial charges, pushed the company into losses for the second consecutive quarter.
The manufacturer’s most recent balance sheet shows short-term borrowings in excess of Rs5.6 billion compared with negligible Rs4 million at the end of 2011, which explains finance costs exceeding street expectations and pushing the company into loss despite urea sales gaining three times on a quarterly basis.
The local giant will continue to face financial challenges until a permanent gas supply solution to Engro’s new fertiliser plant is found, said BMA Capital analyst Farid Aliani.
Finance costs of the conglomerate rose by hefty 95% to Rs8.6 billon, mainly on account of fertilizer subsidiary’s new urea plant. Fertilizer business contributed 66% to the financial charges but only 24% to revenue.
The massive finance cost was the only reason which has pushed the company into loss, said Summit Capital analyst Muhammad Sarfraz Abbasi.
Foods: The silver lining
Engro Foods appears to be the silver lining for the conglomerate. The foods business continued its rapid growth trajectory registering a net profit increase of 368% to Rs1.02 billion in the period under review against Rs216 million during the same period last year. In addition, the Company’s investment in the Halal Foods business in Canada, Al Safa, also achieved sizable sales revenue of Canadian $5.7 million during the first half of 2012.
The petrochemicals business switched to a net profit of Rs59 million for the six months ended June 30, 2012, compared with a loss of Rs195 million in the corresponding period last year mainly attributable to increased volumes and higher caustic prices.
During the first half, Engro Qadirpur Powergen posted net profit of Rs1.07 billion due to higher gas efficiency and initiatives taken to ensure plant reliability and availability to the national grid. However, the substantial rise in the receivables due to circular debt is a major cause of concern for the business, the company said in a press statement. The subsidiary plant dispatched a total of 870.2 GWh to the national grid and demonstrated a billable availability of 100.8%.
The chemical storage and handling business – Engro Vopak Terminal Limited (EVTL) – had smooth operations in the first half and posted a net profit of Rs673 million against last year’s Rs478 million during the same period last year.
Published in The Express Tribune, August 17th, 2012.
COMMENTS (9)
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Bhuttos regime historically are anti investment and anti industry and this report is no surprise for any one in Pakistan.
Thanks god PPP will soon be wiped out of people's hearts and mind.this is balance sheet of PPP regime not engro corporation.
The company should have seen it coming and planed accordingly, after all they have been operating and making a profit in Pakistan for a long time and are aware of the issues that arise over here. If this performance cntinues and no solution is found then I guess ENGRO is just a paper tiger.
A few greased palms and 'hey presto' the gas supply will be resumed!
Fools should have known better then to invest in Pakistan and trying to be honest should have known how things work here, Pay Pay Pay PPP
ENVEN is the name of plant which ENGRO should strategically shift to Oman or Qatar with their key decision makers already worked out means and resources to shift it.
After the Kamran attack there will be more attacks on defence and government installations, a UN observer mission to safeguard pakistan's nuclear assets will be deputed in next 6 months, and thereafter the mission will be linked with NATO forces to be deputed in Pakistan.
Next 6 months to 1 year we will see NATO forces in Pakistan with Saudi support so no one in muslim world will be able to oppose.
ENGRO and many other entities will suffer further in that environment.
@i like it: At some level this is the usual path all investments (local and foreign) have to struggle with if they make the mistake of investing in Pakistan. It is absolutely absurd the way business is done in this country. Engro being such a large and visible investor is going to raise a hue and cry as they should.....but they should also open up the history books especially form the 80s and 90s and see that almost all industrial investments, large or small, have been a mistake for the investor...
Food for thought never invest in Pakistan only divest. Pakistan se zinda bhaag.
Sorry state of affairs in the country. The company everybody was so proud of is in doldrums. Wish it can survive and benefit its share holders.
it is one of the biggest tragedies in our corporate history that a company that is internationally recognized as champion of the pakistani private sector stands to destroyed due to the government continuously dishonoring its commitment. this is the single largest private sector investment in pakistan's history... and it now stands as a symbol of why not to invest here...