Engro Corporation Limited (PSX: ENGRO) announced its highest-ever consolidated profit after tax of Rs. 66 billion during the calendar year that ended on 31 December 2023, up 43 percent from Rs. 46 billion in the same period last year.
After the remeasurement (accounting impact) of its thermal assets (Rs. 29.95 billion), the bottomline translated into a PAT of Rs. 36 billion during the period in review.
Along with the result, the company announced a final cash dividend of Rs. 2/- per share for the year. This is in addition to the Rs. 46/- per share dividend announced during the year, bringing the cumulative payout to Rs. 48/- per share.
The Deputy Head of Research at JS Global, Waqas Ghani, told ProPakistani, “The Company, in compliance with IAS 36, assessed the recoverable amount of thermal energy assets, resulting in a recognized accounting impact of Rs. 13.3 billion in the Consolidated Financial Statements due to lower recoverable amounts. However, no impact was recorded in the Standalone Financial Statements as the recoverable amount of thermal energy assets exceeded their carrying amount significantly. Please note that the said adjustment is only for accounting purposes and will have no cash flow impact”.
On a consolidated basis, Engro Corporation’s revenue grew by 35 percent to Rs. 482 billion in 2023, while consolidated PAT before accounting impact due to remeasurement of thermal energy assets increased to Rs. 66 billion versus Rs. 46 billion last year, recording an EPS of Rs. 63.01.
Major variance is attributable to higher urea sales, efficient plant operations, higher earnings from dollar-denominated businesses, and efficiencies derived through cost optimization.
Referring to the various disclosures made at PSX by the Company regarding the ongoing discussions with Liberty Mills Limited along with other parties acting in concert, the Company is now evaluating to execute the proposed divestment of the Company’s thermal energy assets comprising of shareholding in Engro Powergen Qadirpur Limited, Engro Powergen Thar (Pvt.) Limited and Sindh Engro Coal Mining Company Limited held via Engro Energy Limited through a sale of shares process.
SECP vide SRO 986 (I)/2019 dated September 2, 2019, has granted specific exemptions to Independent Power Producers (IPPs) from the applicability of IFRS 9, IFRS 16, and IAS 21. As a result of this, the debt component recovered from CPPA-G as part of tariff approved by NEPRA is recorded as revenue in the profit or loss statement over the life of the loan.
However, the corresponding depreciation expense related to the IPP is recorded over the term of the Power Purchase Agreement (PPA). The term of the loan being shorter than the term of the PPA results in higher Net Assets in the Consolidated Financial Statements of the Group.
Under the requirements of IAS 36, the Company has assessed the recoverable amount of the thermal energy assets for Standalone and Consolidated Financial Statements.
Due to the specific accounting treatment for IPPs, as mentioned above, the Net Assets of thermal energy assets in the Consolidated Financial Statements of the Group are higher than their recoverable amounts. Accordingly, an accounting impact of Rs. 30 billion (Owners’ Share: Rs. 13 billion) has been recognized in the Consolidated Financial Statements for the year ended December 31, 2023.
In the case of Standalone Financial Statements of the Company for the year ended December 31, 2023, no impact has been recognized as the recoverable amount of thermal energy assets is significantly higher than their carrying amount.
The Fertilizer business achieved a historic milestone of the highest-ever urea sales of 2,327 KT through record urea production, cost optimization, and long-term reliability projects executed during 2022. The business enabled import substitution to the tune of USD 0.8 billion in 2023.
Despite macroeconomic headwinds, Engro Polymer and Chemicals Limited was able to sustain an 89 percent market share by ensuring product availability and implementing various incentives to boost market confidence. The business recorded domestic sales of 199 KT, thus, enabling import substitution of USD 91 million. As a mitigant to lower domestic demand, the business focused on export opportunities and achieved the highest ever export volumes of 44 KT, including caustic soda exports of 22 KT, generating foreign exchange of USD 26 million for the period.
Engro Enfrashare (Pvt.) Limited continued to expand its national tower footprint and achieved a scale of 3,952 tower sites with a 1.21x tenancy ratio during 2023 versus 3,329 tower sites with 1.17x tenancy ratio in 2022, catering to all four major Mobile Network Operators (MNOs) of Pakistan.
In the Energy vertical, the Mining business is committed to initiating Phase III of the expansion to enhance capacity to 11.4 MTPA. Engro Powergen Thar (Pvt.) Limited achieved 82 percent availability during the year, while Qadirpur Power Plant achieved 100 percent availability by ensuring efficient plant operations and dispatched a Net Electrical Output of 870 GWH to the national grid.
Engro Elengy Terminal (Pvt) Limited handled 73 vessels during 2023, delivering 215 bcf re-gasified LNG into the SSGC network with an availability factor of 97.1 percent. The Terminal contributed 13 percent – 15 percent towards Pakistan’s total gas supply during the year. Engro Vopak Terminal’s chemical throughput was adversely influenced due to disruption in the operations of key customers, however, a notable 64 percent increase in LPG marine imports was recorded compared to last year.
FrieslandCampina Engro Pakistan Limited maintained its growth momentum, achieving a record-breaking topline of Rs. 100 billion, marking a remarkable 36 percent increase compared to last year.
Engro Eximp FZE, the Company’s international trading arm that initiated commercial activity in UAE in 2022, achieved a turnover of approximately USD 400 million including third-party contracts.