Karachi, Engro Polymer and Chemicals Limited (EPCL) briefed analysts today on its 9MCY23 financial performance and provided insights into the company's future prospects, as stated in a report from AKD Securities Limited. EPCL announced a Profit After Tax (PAT) of PkR5.4bn for the nine months of 2023, reflecting a significant 76% YoY decline from the previous year's PAT of PkR9.3bn.
Despite net sales for this period remaining stable at PkR62bn, the substantial reduction in earnings can be mainly attributed to a decreased core-delta, adverse budgetary impacts, and broad inflationary pressures. Factors like lower international PVC prices counteracted the positive effects of increased sales volumes.
Notably, in 9MCY23, EPCL recorded sales volumes of 169k tons for PVC and 59k tons for chlor alkali. The company also marked a high point in exports during this period, totaling an inflow of US$23mn, with exported quantities being 9k tons of PVC and 4k tons of chlor alkali products. Management aims to maintain this export momentum.
EPCL experienced a rise in its PVC sales volume during the previous quarter, increasing 39% QoQ to 68k tons. Meanwhile, sales volumes of caustic soda liquid and flakes remained relatively unchanged from the quarter before.
The company remains optimistic about future sales demand, contingent on sustained economic stability, and continues to seek export opportunities to ensure efficient production. However, the management expects subdued PVC pricing owing to a surplus in supply and a slowing global economy. Ethylene prices may also see impacts from international crude oil prices, potentially pressuring the core delta.
An impending challenge for EPCL is the anticipated gas price hike, which is projected to impact gross margins, given that 80% of the company's gas usage is for in-house power generation.
In terms of projects, EPCL's High Temperature Direct Chlorination (HTDC) and Hydrogen Peroxide (HPO) ventures are set for commissioning in early 2024. After reaching optimal production levels, the HPO project is expected to add roughly PkR1.0bn to the bottom line.