Pakistan’s premier conglomerate, Engro Corporation announced its financial results for the year ended 31 December 2021.
Overview of Financial Performance
The company recorded a consolidated Profit After Tax (PAT) of Rs. 52.61 billion, showing an increase of 19 percent as compared to Rs. 44.11 billion in 2020.
On a consolidated basis, Engro Corporation’s revenue grew by 25 percent to Rs. 311.59 billion in 2021 from Rs. 248.82 billion in 2020, translating to an EPS of Rs. 48.50 per share (2020: Rs. 43.57 per share).
The company on a standalone basis achieved a 14 percent higher profit after tax (PAT) of Rs. 18.52 billion in 2021 against Rs. 16.30 billion in 2020, translating into an earning per share (EPS) of Rs. 32.14 per share (2020: Rs. 28.29 per share).
In 2021, Engro Corporation’s standalone revenue increased from Rs. 15.00 billion in 2020 to Rs. 20.68 billion in 2021, exhibiting a substantial growth of 38 percent. Higher revenue was primarily due to higher dividends received from Engro Polymer & Chemicals Limited (EPCL) and Engro Fertilizers Limited (EFERT), which in turn, were driven by strong underlying business performance.
Engro Corporation announced a final cash dividend of Rs. 1 per share for the year. This is in addition to the Rs. 24 per share dividend that has already been announced during the financial year, bringing the cumulative payout to Rs. 25 per share.
Portfolio Performance Review
Fertilizers
The domestic market witnessed strong agricultural sector performance in 2021. Resultantly, EFERT achieved a historical milestone of the highest ever urea sales of 2,295 KT in 2021 against 2,057 KT in 2020. Due to the turnaround of the Base and Enven plant, urea production during the year reduced from 2,264 KT in 2020 to 2,105 KT in 2021.
Phosphates sales stood at 366 KT, whereby a steep rise in international prices dampened local demand. On an overall basis, EFERT achieved its highest ever PAT of Rs. 21.09 billion in 2021, demonstrating a growth of 16 percent from Rs. 18.13 billion in 2020.
Petrochemicals
EPCL announced commercial operations of its new PVC plant and VCM debottlenecking during March and June 2021, respectively. PVC capacity increased by 100 KT to 295 KT per annum, while VCM capacity increased by 50 KT to 245 KT per annum.
These initiatives enabled EPCL to achieve record domestic PVC sales of 207 KT alongside the highest ever PVC exports of 19 KT, translating into an export value of $28 million. During the year, international PVC prices increased significantly due to supply disruptions. However, supplies to the domestic PVC downstream market continued uninterrupted due to EPCL’s steady production.
EPCL recorded sales of Rs. 70.02 billion as compared to Rs. 35.33 billion in 2020. PAT increased from Rs. 5.73 billion in 2020 to Rs. 15.06 billion in 2021, showing an increase of 163 percent attributable to increased volumetric sales, efficient operations, and higher international prices.
Telecommunication Infrastructure
During the year, Engro Corporation formed a dedicated platform for connectivity and telecom infrastructure initiatives by the name of Engro Connect (Pvt.) Limited (EConnect).
EConnect is a wholly-owned subsidiary of Engro and now holds complete ownership of Engro Enfrashare (Pvt.) Limited (Enfrashare), which is Pakistan’s largest independent telecom tower company.
Enfrashare continued to expand its national footprint and achieved a scale of 2,246 operational B2S towers with a 1.1x tenancy ratio while catering to all four Mobile Network Operators in Pakistan. Enfrashare built over 75 percent of the total new B2S towers that were deployed in the country during the year 2021. This increase in the portfolio led to a growth of 3x in revenue in comparison with last year. The business has secured orders to reach a scale of 3,300+ sites by the end of 2022.
Foods & Rice
FrieslandCampina Engro Pakistan Limited (FCEPL) demonstrated a topline growth of 18 percent, recording sales of Rs. 52.09 billion as compared to Rs. 44.16 billion in 2020. The gross margin increased to 16 percent from 12 percent last year, translating into an increase in PAT from Rs. 0.18 billion in 2020 to Rs. 1.80 billion in 2021.
The business demonstrated an overall increase of 10x in profitability driven by cost-saving initiatives, leveraging e-commerce channels, improved reach/route to markets, increased marketing spend, and market penetration to enhance brand equity.
Engro Eximp Agriproducts (EEAP) surpassed industry growth of 16 percent in the brown rice segment and recorded 21 percent growth versus last year. As a key contributor to foreign reserves, the business continued its focus on exports, generating a revenue of $18.8 million through the international sale of 24 KT rice against 28 KT last year. Given the supply chain constraints in the international market, the business pivoted its supply to the local market and increased domestic sales by 39 percent to 13 KT during 2021.
Energy & Power
Sindh Engro Coal Mining Company (SECMC) supplied 3.8 million tons of coal to Engro Powergen Thar Limited (EPTL) during the year. EPTL achieved availability of 83 percent with a load factor of 80 percent and dispatched 4,225 GWh to the national grid during the year.
The Phase II expansion of SECMC’s mine to 7.6 million tons per annum is underway, with 71 percent of the overburden removed from the site. Phase III expansion of the mine to 12.2 million tons per annum has also been approved during the year.
Engro Powergen Qadirpur Limited (EPQL) plant dispatched a Net Electrical Output of 851 GWh to the national grid with a load factor of 46 percent compared to 30 percent last year due to higher offtake from the Power Purchaser. EPQL’s revenue increased by 26 percent due to the higher dispatch and load factor, which was offset by the absence of a long-term debt servicing component. The business posted a PAT of Rs. 1.59 billion for the current period compared to Rs. 2.08 billion for 2020.
Terminals
Engro Elengy Terminal (Pvt.) Limited (EETL) successfully completed Pakistan’s first-ever Dry-Docking activity of FSRU Exquisite at Qatar dockyard with minimum outage during the switchover between the two FSRUs. During the Dry-Docking period, FSRU Sequoia enabled gas supply continuity, ensuring national energy security.
The LNG terminal handled 72 vessels during 2021, in line with last year, delivering 216.2 bcf re-gasified LNG into the SSGC network with an availability factor of 96.5 percent. The terminal contributed 15 percent towards Pakistan’s total gas supply during the year.
The chemicals terminal throughput volumes normalized to 1,280 KT against 1,142 KT last year, which was offset by lower LPG volumes. Overall, the profitability of both the LNG and chemical storage terminals business remained stable during 2021.
