Corporate results: Engro’s earnings stand well below expectations

Profit drops 20% to Rs2.7 billion in first half of 2014.

Our Correspondent August 20, 2014


Engro Corporation – one of the largest conglomerates of the country – reported net profit of Rs2.7 billion in the first half of calendar year 2014, down 20% compared to Rs3.3 billion in the previous year.

Earnings per share (EPS) fell to Rs5.23 compared to Rs6.53 in the previous year.

Commenting on the figures, BMA Capital, in a research report, said the result was disappointing and came in well below the consensus estimate of Rs9.06 per share.

The earnings announcement was accompanied by the declaration of cash dividend at Rs2 per share.

Engro reported a 16% year-on-year growth in net sales, thanks to the conglomerate’s subsidiary Engro Fertilizers, which was able to run its both plants compared to just one in the same period of previous year.

Revenues rose from Rs66.874 billion in the first half of 2013 to Rs77.541 billion in the first six months of the current year. The increase in revenues was driven by higher fertiliser sales at Engro Fertilizers and Engro Eximp.

Gross profit dipped 7% to Rs16.8 billion despite strong earnings posted by Engro Fertilizers and other listed entities of the conglomerate. Its unlisted businesses may have contributed to the decline in gross profit, the report added.

“The strong performance of Engro’s fertiliser and commodity trading businesses was kept in check by a challenging business environment in its rice, polymer and food businesses,” said Engro Corp in a press release.

Profit before tax stood higher by 11% at Rs5.351 billion compared to Rs4.822 billion in 1H13, but higher tax provisions by the businesses brought down the net profit.

In the second quarter (April-June) of 2014, Engro Corporation notched up a 10% growth in revenue compared to the previous quarter because of higher urea sales.

Finance cost fell 21% quarter-on-quarter to Rs3.1 billion on the back of low-cost debt re-profiling by Engro Fertilizers coupled with early debt repayments. Moreover, the company reported an effective tax rate of 59% during the quarter.

The impact of a sequential decline in gross profit trickled down to the bottom-line, which dived 57% quarter-on-quarter to Rs682 million with EPS at Rs1.32.

Published in The Express Tribune, August 21st, 2014.

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Timorlane | 9 years ago | Reply

Engro Foods is an example of pedant cliche corporate thinking far too evident in its advertising for example copying Coke ad to make the Omore launch ad, disappointing mindset

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