Karachi: Engro Polymer and Chemicals Ltd. (EPCL) presented a detailed analyst briefing today to review its second-quarter financial results for 2024 and discuss future strategies. The company reported a significant shift from a profit in the same period last year to a loss of PkR688 million this quarter, largely due to higher gas prices and increased financing costs.
According to AKD Securities Limited, EPCL’s challenges this quarter were compounded by macroeconomic pressures and a rise in short-term borrowing due to high inventory levels. Despite these hurdles, the company managed a 4% year-over-year increase in polyvinyl chloride (PVC) sales, totaling 51,000 tons this quarter. This increase is attributed to the company’s competitive pricing strategies, although a broader slowdown in the construction sector led to a 5% decline in PVC sales for the first half of the year.
The company noted an increase in international PVC prices to US$980 per ton during the quarter, driven by higher global freight costs. However, prices have begun to normalize with eased port congestion in July, now standing at US$810 per ton. Likewise, a temporary rise in core-delta margins was seen due to declining ethylene prices, though these margins have since adjusted back to US$300-310 per ton.
On the domestic front, the demand for PVC is expected to remain weak as the construction sector continues to struggle. For Chlor-Alkali products, the sales of liquid caustic soda dropped by 25% year-over-year to 15,000 tons, and flake sales increased to 4,000 tons from 2,000 tons in the prior year. This variance in sales performance is linked to challenges in the domestic textile sector, which has been impacted by high energy costs and inflation, although there has been some improvement in the export-oriented denim sector.
Looking forward, EPCL’s management is keen on stabilizing the business by enhancing sales efforts to reduce inventory levels, thus minimizing the need for short-term borrowing. The company is also progressing with its High-Temperature Direct Chlorination (HTDC) and Hydrogen Peroxide (HPO) projects, which are expected to be commissioned by the end of the year. These projects aim to reduce energy requirements and optimize the use of hydrogen in manufacturing processes.