Pakistan’s premier conglomerate, Engro Corporation (PSX: ENGRO) announced its financial results for the first half of the year ended June 30, 2022.
Engro Corporation’s standalone revenue increased from Rs8.6 billion in the first half of 2021 to Rs16.6 billion in 1H 2022, exhibiting a substantial growth of 92 per cent.
Higher revenue was primarily due to higher dividends received from Engro Polymer and Chemicals Limited (EPCL) and Engro Fertilizers Limited (EFERT) which, in turn, were driven by strong underlying business performance.
Resultantly, the company achieved a 29 per cent higher profit after tax (PAT) of Rs12.5 billion in the first half of 2022 against Rs9.7 billion in the first half of 2021, translating into an earning per share (EPS) of Rs21.66 per share which was Rs16.81 per share in the same period in 2021.
On a consolidated basis, Engro Corporation’s revenue grew by 27 per cent to Rs177.5 billion in the first half of 2022 from Rs139.3 billion in the first half of 2021. The company posted a profit after tax (PAT) of Rs16.8 billion in 1H 2022, which is 42 per cent lower than Rs29.1 billion in 1H 2021.
The PAT attributable to the shareholders is Rs7.4 billion, translating into Rs12.87 earnings per share (1H 2021: Rs29.60 per share). Despite organic revenue growth, the imposition of super tax on current and prior year earnings weighed on the conglomerate’s consolidated profitability.
Engro Corporation announced an interim cash dividend of Rs11 per share for the year. This is in addition to the Rs12 per share dividend that has already been announced during the year, bringing the cumulative payout to Rs23 per share.
Portfolio Performance Review
Fertilizers: The domestic urea market exhibited growth of 12 per cent in 1H 2022. Engro Fertilizers Limited sales remained steady during the year touching 1098000 tons versus 1167000 tons during the same period last year.
By enabling indigenous production of urea, Engro Fertilizers contributed $0.8 billion in import substitution for Pakistan and sold urea at a discount of 78 per cent over international prices.
The profitability of the business was impacted by super tax imposition to the tune of Rs5.2 billion. Engro Fertilizer posted a profit after tax of Rs5.4 billion in 1H 2022 as compared to Rs10.5 billion in 1H 2021.
Petrochemicals: The petrochemical business continued its upward momentum and EPCL sales increased to 120000 tons in 1H 2022 against 96000 tons in 1H 2021. Timely expansion and operational reliability supported Pakistan in avoiding a $72 million incremental outflow in the form of import substitution.
EPCL recorded sales of PKR 45.4 billion in 1H 2022 compared to PKR 30.5 billion in 1H 2021. The 49 per cent increase is attributable to higher international pricing and capacity enhancement on the PVC front. EPCL reported a PAT of Rs7.1 billion in 1H 2022 against Rs7.3 billion in 1H 2021, despite the super tax impact of Rs2 billion.
Telecommunication Infrastructure: Expansion continued for the telecommunication infrastructure vertical at Engro, with Engro Enfrashare growing its national tower print to 2,937 sites by the end of 1H, servicing all of Pakistan’s mobile network providers. This drove revenue growth of Engro Enfrashare by 86 per cent in 1H 2022 in comparison to the same period last year.
Engro Enfrashare is well-positioned to enable the colocation model while enhancing services to all its customers, as reflected in the 179 per cent hike in colocation tenants versus last year. Engro Enfrashare is on track to capture future sectoral growth with its high value-add proposition complemented by economies of scale.
Foods & Rice: Engro Eximp Agriproducts continued its excellence in the rice export business, recording 62 per cent growth in volumes versus the same period last year (33400 tons versus 20700 tons).
During the half year, the rice business generated a revenue of $21 million through exports versus $12 million in 1H 2021, represented by the export of 25600 tons in 1H 2022 versus 14100 tons in the comparative period. The business continued expanding its footprint in the local market and increased domestic volumes by 20 per cent to 7800 tons against 6500 tons in the same period last year.
The results of FrieslandCampina Engro Pakistan Ltd are yet to be announced.
Energy & Power: Mining operations continued smoothly and the Mine supplied 1.4 mn tons of coal to Engro Powergen Thar during the period. Phase II expansion of the Mine to 7.6 mn tons per annum is on track and expected to be completed during Q4 of 2022.
Engro Powergen Thar Limited achieved a collection of 88 per cent from inception to date, bringing it at par with other coal IPPs. During the first half, the Plant achieved 58 per cent availability, dispatching 1,503 GwH to the national grid.
Plant availability remained low due to outages following an incident on the coal conveyor belt. After detailed inspection and necessary rehabilitation work, both units of the plant successfully came online and have been demonstrating a 100 per cent operational rate.
Due to a shutdown for a scheduled major inspection, the EPQL Plant dispatched a Net Electrical Output of 331 GwH to the national grid against 394 GwH in the same period last year. The business posted a profit after tax of Rs406 million for the current period as compared to Rs905 million for 1H 2022, primarily on account of lower Period Weighting Factor (PWF) applicable during the period and lower finance income; the impact of PWF will be offset in the next six months.
Terminals: Engro Elengy Terminal enabled ~13% of the total gas supply to Pakistan. It handled 37 cargoes, delivering 110bcf of re-gasified LNG into the SSGC network.
Engro Vopak Terminal had an actual throughput of 720000 tons against 638000 tons during the same period last year. The increase was primarily observed in chemical volumes offset by lower LPG handling