Engro Corporation Reports Decline in CY23 Earnings Amid Economic Challenges, Optimistic on Future Outlook

Karachi, Engro Corporation Limited (ENGRO), a leading conglomerate in Pakistan, held its analyst briefing earlier today to discuss the financial outcomes for the calendar year 2023 (CY23) and share its future business outlook. The company reported a 17% year-on-year decline in its unconsolidated earnings, posting PkR17.6 billion compared to PkR21.2 billion in CY22. This decrease was attributed mainly to the imposition of an additional super tax on dividends and a drop in interest income, as higher dividends declared in the first quarter reduced cash and equivalents.

According to AKD Securities Limited, despite the decline in standalone earnings, Engro's subsidiaries showed varied performance. EFERT, Engro's fertilizers segment, achieved record-high production and sales of urea, leading to a 64% growth in profitability. The company anticipates stable urea demand and an increase in phosphate demand in CY24, driven by improved farm economics. However, EPCL, Engro's polymers and chemicals division, experienced a 24% decline in profitability due to reduced domestic PVC demand amidst the economic slowdown. Nonetheless, an uptick in PVC demand is expected in CY24.

Engro Elengy and Vopak saw a 28% reduction in chemical handling due to operational challenges and import restrictions, while Engro Enfrashare expanded its tower footprint significantly, adding 623 towers and reaching a total of 3,952 towers by the end of CY23. The expansion reflects ENGRO's commitment to investing in infrastructure, with around PkR21 billion injected into Enfrashare.

Further highlights include a 71% increase in EPQL's profitability due to efficient operations and higher interest income, and SECMC's declaration of its first-ever dividend of PkR11 billion following the successful completion of Phase 1 PSD in CY23. Meanwhile, FCEPL's revenue surged to PkR100 billion, marking a 36% increase year-on-year, although profit declined by 39% mainly due to higher interest costs.

Engro's management also discussed its strategic shift away from government-related businesses, with a focus on divesting thermal assets. This move aligns with the company's strategy to optimize its portfolio and improve profitability. Additionally, an accounting adjustment in the annual consolidated earnings was noted, related to the adjustments of non-amortized loan amounts for Independent Power Producers (IPPs), indicating a nuanced financial strategy to enhance shareholder value.

As Engro navigates through economic challenges, its diversified operations and strategic focus on high-growth sectors suggest a resilient outlook for CY24. The corporation's ability to adapt and its ongoing investments in infrastructure and sustainable practices underscore its commitment to long-term growth and profitability.