Engro’s chemical subsidiary announces loss of Rs1.1b

Earnings fall due to lower PVC and caustic soda margins

KARACHI:

Engro Polymer and Chemicals – the only producer of Poly-Vinyl-Chloride (PVC) in the country – on Tuesday announced a loss of Rs1.1 billion for the year ended December 2014 compared to a profit of Rs707 million in calendar year 2013.

Loss per share (LPS) was Rs1.67 compared to earnings per share (EPS) of Rs1.07 in the previous year.

The decline in earnings can be attributed to significantly lower realised PVC and caustic soda margins during the period, Global Research reported.

On a quarterly basis, profitability levels collapsed and the company posted a loss of Rs1.08 billion or LPS of Rs1.62 in the fourth quarter of calendar year 2014 compared to a loss of Rs157 million or LPS of Rs0.24 in the corresponding quarter of previous year.



The loss largely emanates from lower realised PVC prices. The company’s revenues declined by 4% year-on-year to Rs23.82 billion in 2014 because of a fall in domestic PVC sales and caustic soda prices.

Revenues, however, surged by 27% quarter-on-quarter (QoQ) to Rs6.67 billion due to higher PVC sales as demand during the third quarter of 2014 was subdued due to Ramazan and Eid holidays.

Gross margins of the company fell by 13 percentage points year-on-year to 8% because of lower realised PVC and caustic soda margins.

The margins turned red because of a significant decline in international PVC prices (-10% QoQ to $933 per ton). The situation worsened because of leftover PVC and Vinyl Chloride (VCM) inventory produced from ethylene procured prior to the oil price crash, the report added.

Engro Polymer and Chemicals is a subsidiary of Engro Corporation. The company’s history goes back to 1994 when it was established as a joint venture with two Japanese companies.

Later, perturbed about the low margins, the company decided to change its business model by producing PVC raw material within Pakistan and invested $350 million.

With 170,000 tons of installed capacity, the company meets 80% of the total PVC demand of the country, while the rest is met from imports.

Published in The Express Tribune, February 4^th, 2015.

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