Karachi, Engro Polymer and Chemicals Limited (EPCL) reported a significant first-quarter loss, attributed mainly to decreased margins and lower sales volumes, during their recent analyst briefing.

According to AKD Securities Limited, EPCL posted a loss of PKR 901 million in the first quarter of 2024, a stark contrast to the profit of PKR 1.2 billion in the same period last year. This loss was primarily due to reduced Ethylene-PVC core delta margins, increased gas prices, and a 14% year-over-year decline in PVC sales, which fell to 45k tons from 52k tons. The downturn in sales was linked to subdued construction activity influenced by elections, Ramadan, extended winter seasons, and heightened financing costs.

Despite the decline in PVC, EPCL saw growth in its Chlor-Alkali segment, with liquid caustic soda sales rising 17% year-over-year to 14k tons, and caustic soda flakes sales increasing to 3k tons from 2k tons. However, international PVC prices were pressured by oversupply and reduced demand from China and Europe, amidst a broader construction slowdown. Ethylene prices showed volatility, rising from US$875 per ton at the quarter's start to US$1,050 per ton, contributing to squeezed margins.

Looking ahead, EPCL management is optimistic about a rebound in PVC sales post-May, anticipating an uptick in construction activities. They also noted challenges with gas pricing and availability, with the average gas rate for the company rising due to changes in the RLNG blending ratio and increases in gas rates for captive power.

Furthermore, EPCL is progressing with its expansion projects, including the High Temperature Direct Chlorination (HTDC) and Hydrogen Peroxide (HPO) projects, slated for commissioning within the year.