Karachi: Engro Polymer and Chemicals Ltd. (EPCL) has unveiled its financial results for the fourth quarter of the calendar year 2024, reporting consolidated earnings of PkR2.1 billion, a 40 percent year-on-year decrease from the same period last year. Despite the decline, the results surpassed expectations, largely due to a tax reversal and better-than-anticipated gross margins.

According to a statement by AKD Securities Limited, the annual drop in earnings was primarily attributed to reduced gross margins and increased finance costs. However, the company's sequential recovery from a third-quarter loss was driven by improved gross margins.

Revenue for the period increased by 11 percent year-on-year to PkR21.3 billion, bolstered by higher PVC offtakes, which helped mitigate the impact of lower product prices. Despite an increase in energy costs that led to a contraction in gross margins to 14.1 percent from 26.9 percent in the same period last year, the margins remained above expectations.

Further, operating expenses saw a significant decline of 51 percent year-on-year, attributed to a high base in the previous year due to other adjustments. Meanwhile, the finance cost saw a substantial increase, rising 7.1 times to PkR1.8 billion, primarily due to a one-off reversal in the previous year and increased total outstanding debt.

For the full calendar year 2024, EPCL reported a bottom-line loss of PkR161 million, a stark contrast to a profit of PkR8.9 billion in the previous year. The decline was largely driven by elevated energy costs and weaker core margins.

Despite the current financial outlook, analysts have maintained a 'SELL' recommendation for EPCL, citing ongoing pressures from high energy prices and subdued core margins. The target price for the company's shares by December 2025 is set at PkR30.