Engro Polymer and Chemicals – a subsidiary of Engro Corporation – has posted net earnings of Rs123 million during the first six months of calendar year 2014 (1HCY14), down 71% year-on-year (YoY) compared with Rs425 million in the same period of previous year.
Earnings per share (EPS) declined to Rs0.19 during the six-month period compared to previous year’s Rs0.64.
The company’s earnings declined due to a significant plunge in primary margins, and higher energy tariffs, Global Research reported on Wednesday.
On a quarterly basis, the company earned a profit of Rs148 million or an EPS of Rs0.22 during the first quarter of calendar year 2014 (1QCY14). Engro then recorded a loss of Rs25 million or an EPS of Rs0.04 during the 2Q CY14.
In a recent interview with The Express Tribune, Engro Polymer and Chemicals Chief Executive Officer (CEO) Khalid Siraj Subhani said 2014 would hopefully be a better year for the company. However, he mentioned that the slow market and the high price of some raw materials are challenges that can hurt the company’s profits.
After passing through three tough years, the company finally reported a net profit of Rs50 million in 2012, followed by gains of Rs717 million in 2013.
In the recent budget, the government has levied 5% duty on the import of some raw materials the company uses, which according to the CEO, will increase the cost of production by Rs600-700 million. Moreover, the levy of Gas Infrastructure Development Cess (GIDC) is also going to dent its profits by Rs800-900 million per annum.
The main product of Engro Polymer and Chemicals is Poly-Vinyl-Chloride – commonly known as PVC. The company meets about 80% of the total PVC demand of the country, while the rest of the 20% demand is being met by the imports.
The company’s top-line declined 1% YoY to Rs11.90 billion during 1HCY14 because of lower volumetric sales. On a QoQ basis, the company’s revenue surged 22% to Rs6.53 billion during 2QCY14 because of higher volumetric sales.
Earlier during the 1QCY14, due to uncertainty regarding the Pakistan rupee and the dollar parity, dealers were delaying their PVC purchases in anticipation of lower prices.
However, once the exchange rate settled, the dealers resumed their purchases. In addition, the second quarter is generally a period during which construction activities are relatively active, leading to additional demand of PVC.
The company’s financial charges declined 54% YoY to Rs297 million during 1HCY14 because of an exchange gain of Rs191 million registered during 1QCY14 as the rupee appreciated by 6%. On a QoQ basis, financial charges ramped up 11 times to Rs273 million because of the absence of an exchange loss.
Published in The Express Tribune, August 7th, 2014.
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