Karachi, August 26, 2021 (PPI-OT): ENGRO: Corporate briefing session key takeaways
Engro Corporation Ltd. (ENGRO) announced its 1HCY21 result on August 24, 2021 wherein the company posted consolidated earnings of Rs17.05bn translating into an EPS of Rs29.60. The company also held its corporate briefing session yesterday to discuss 1HCY21 results and the future outlook of the company. We present key takeaways from the session.
EPCL and EFERT supported consolidated earnings growth
Engro Corporation Ltd. (ENGRO) announced its 1HCY21 result on August 24, 2021 wherein the company posted consolidated earnings of Rs17.05bn translating into an EPS of Rs29.60. A cash dividend of Rs7/share was also announced for 2QCY21 bringing the half year dividend to Rs19/share. The increase in profitability was primarily led by Engro Polymer Chemical Ltd (EPCL) and Engro Fertilizers Ltd (EFERT). ENGRO’s profitability increased by 87% YoY owing to higher contribution from the Chemical and Fertilizer businesses. EPCL achieved highest ever profitability due to improved PVC volumes and a higher domestic share during 1HCY21, thanks to the increased capacity that came online during the period. On the other hand Fertilizer business profitability increased by 136% due to higher Urea offtake in the period vis-à-vis SPLY and extravagant margins of the Phosphate business.
The Terminals
Engro’s Terminal businesses, Engro Elengy Terminal Pakistan and Engro Vopak Terminal Limited reported a 21% YoY decline in the contribution to bottom line. The company’s Elengy terminal handled 35 vessels of RLNG for SSGC during 1HCY21 whereas the Vopak terminal showed a 9.43% YoY increment in throughput in the 1HCY21. The increased chemical volumes during the period were offset by lower LPG imports. Company acknowledged that due to increased land movement through new routes, LPG marine imports are expected to remain subdued.
Enfrashare
Engro’s Enfrashare reached 1,963 Tenants by the end of 1HCY21 achieving a tenancy ratio of 1.08x. The company now has 1,817 operational sites, as compared to 1,265 sites in the SPLY. The management shared that Enfrashare contributed Rs600mn on the EBITDA level in the first half and it expects the EBITDA contribution for the full year at Rs1,200mn.
Engro’s Power segments
Engro Powergen Thar Ltd (EPTL) achieved a 78% load factor for the period and dispatched 2,052 GWh to the grid along with a collection rate of 91%. The mine expansion’s Phase-II is underway expected to double the existing capacity to 7.6MT/annum, the management expects it to achieve CoD by 1HCY22. Phase-III of the expansion currently has some pending approvals from the Government of Sindh but the expected CoD for the phase is 1QCY23.
Future Prospects
The company has formed Engro Connect (EConnect) as a dedicated platform for telecom and connectivity ventures. Enfrashare also comes under EConnects umbrella now. With an Equity commitment of Rs21.5bn now in Enfrashare, management expects that it’ll allow the company to house more than 5,000 towers by the end of year 2025. Management plans to target a 60:40 Debt/Equity ratio by then and to achieve a tenancy ratio of 1.33x by 2025 end. The company expects the EBITDA to magnify due to economies of scale as more tenants come in at a marginal cost and company is also going for Solarization to save up on energy costs.
Feasibility study of polypropylene project is underway with the Final Investment Decision expected in 4QCY22. The project will have an estimated investment of US$1.3-1.7bn and is expected to lead to an import substitution of around US$350mn. An amount of US$32mn have been allocated for the feasibility studies including the Front End Engineering Design and Technical studies.