Karachi, Engro Fertilizers Limited (EFERT) and Engro Polymer and Chemicals Limited (EPCL) are expected to report decreased earnings for the first quarter of 2024, as forecasted by AKD Securities Limited. The expected decline in profits is attributed to factors such as gross margin contraction due to increased gas prices and the sales of imported urea.
According to AKD Securities Limited, EFERT is predicted to announce its first-quarter results on Thursday, showing a Profit After Tax (PAT) of PKR 7.3 billion (EPS: PKR 5.46), a 31% decrease from the previous quarter. This downturn is partly due to the gross margin reduction, a consequence of the inclusion of imported urea sold at higher rates and the rise in gas prices starting February 2024. The company's topline is expected to see a 5.6% decrease quarter-over-quarter with significant drops in DAP and NP sales. Gross margins are anticipated to decrease to 25.9%, compared to 38.7% in the preceding quarter. Other income is also expected to fall by 11% quarter-over-quarter but increase substantially year-over-year due to higher short-term investments. EFERT may also announce a PKR 5.5 per share interim cash dividend with its results.
EPCL is also set to announce its results on Friday, with expected earnings of PKR 1.4 billion (diluted EPS: PKR 1.13), which is a 61.5% decrease from the previous quarter. The expected decline in EPCL's quarterly earnings is largely due to a predicted contraction in gross margins, following a high in the previous quarter from the reversal of gas provisioning. Sales are projected to increase by 7% quarter-over-quarter, with a notable uptick in PVC sales due to the low base effect from the previous quarter. Gross margins, however, may suffer, falling to 20.8% from 26.9% in the fourth quarter of 2023, impacted by lower Ethylene-PVC core delta margins and higher gas prices. Finance costs for EPCL are expected to rise year-over-year due to increased short-term borrowing, although this reflects one-time adjustments from the last quarter. No dividend payout is anticipated as the company is likely conserving cash for its ongoing expansion projects.