Karachi: Engro Polymer and Chemicals Limited (EPCL) has reported a significant loss for the first half of the calendar year 2025, influenced by declining margins, increasing gas prices, and operational expenses. The company detailed these challenges during an analyst briefing, along with insights into revenue changes and future expectations.
EPCL recorded a loss of PkR3.2 billion, a stark increase compared to a loss of PkR1.6 million in the same period last year. This was attributed to reduced Ethylene-PVC core delta margins and higher maintenance costs related to plant operations. Revenue, however, increased by 9% year-over-year, driven by higher sales volumes of PVC and caustic soda, as well as new sales of hydrogen peroxide.
The company sold 115,000 tons of PVC in the first half of 2025, marking a 21% increase from the prior year, supported by market recovery. Despite this, international PVC prices have been pressured by global oversupply and weak construction demand, especially in China and the U.S.
Ethylene prices, which remained firm in the first quarter, softened to US$850 per ton by June 2025, compressing PVC margins to an average of US$275 per ton. Caustic soda prices remained stable, although margins were squeezed by rising energy costs.
EPCL's entry into the hydrogen peroxide market yielded 3,000 tons sold since February 2025, capturing a 15% share of the local market. Management anticipates an improvement in PVC sales with the recovery of construction activities, aided by falling interest rates. However, PVC prices are expected to stay within US$700-800 per ton for the remainder of 2025.
The company faces challenges with securing gas at competitive rates and is exploring alternative energy sources, including third-party gas and coal-fired plants. The captive gas tariff increased to PkR4,291 per mmbtu, with a recent levy adjustment to PkR238 per mmbtu.
AKD Securities Limited has revised its earnings estimates for EPCL downward to PkR-5.6 per share for 2025 and PkR0.90 per share for 2026, citing persistent low margins and adjustments in gas pricing. Consequently, the target price was revised to PkR23 per share for June 2026, maintaining a 'Sell' recommendation.