KARACHI - Pakistan’s premier conglomerate, Engro Corporation Limited (PSX: ENGRO) announced its financial results for the year ended December 31, 2022.
Overview of financial performance during 2022 Engro Corporation’s standalone revenue increased from Rs21 billion in 2021 to Rs24 billion in 2022, exhibiting healthy growth of 14 percent. Higher revenue was primarily due to higher dividends received from Engro Polymer & Chemicals Limited (EPCL), Engro Fertilizers Limited (EFERT) and Engro Energy Limited (EEL) which, in turn, were driven by strong underlying business performance. Resultantly, the company achieved an 11 percent higher PAT of Rs21 billion in 2022 against Rs19 billion in 2021, translating into an EPS of Rs36.79 per share (2021: Rs 32.14 per share).
On a consolidated basis, Engro Corporation’s revenue grew by 14 percent to Rs356 billion in 2022 from Rs312 billion in 2021. The company posted a PAT of Rs46 billion in 2022, which is 13 percent lower than Rs53 billion in 2021 on account of Super Tax charge of 4 percent on retrospective and current year earnings and one-off adjustment of Engro Powergen Thar Limited (EPTL) tariff true up adjustment. The PAT attributable to the shareholders decreased to Rs24 billion from Rs28 billion in 2022, translating to an EPS of Rs42.23 per share (2021: Rs48.50 per share).
With reference to Super Tax imposition of 4 percent on retrospective year earnings and additional discriminatory Super Tax of 6 percent on selected sectors, the group appealed before Sindh High Court (SHC) and the matter was decided in favour of the group. Whilst having the support of our legal and tax advisors, the group decided to maintain provision to the extent of 4 percent Super Tax.
Engro Corporation announced a final cash dividend of Rs1/- per share for the year. This is in addition to the Rs33/- per share dividend announced during the year, bringing the cumulative payout to Rs34/- per share.
PORTFOLIO PERFORMANCE REVIEW
Fertilizers: Domestic market witnessed adverse implications of global economic downturn and recent severe flooding in the country. Urea sales decreased to 1,936 KT compared with 2,295 KT in 2021, due to a 60-day LTR (Long Term Turnaround), which was the longest LTR in the last 50 years. This was achieved with a “ZERO” TRIR (Total Recordable Injury Rate) and no unplanned outages. Following the completion of this successful LTR, performance of the facility is expected to improve with a reduction in the energy index and capacity enhancement by 170 KT per annum.
International DAP prices decreased to $730/T on the back of slowdown in global demand and commodity cycle reversal. Due to unprecedented floods, the domestic phosphate market (DAP / NP / Zorawar) witnessed a drastic fall in demand, resulting in sales declining to 333 KT in 2022 from 366 KT in 2021.
The business enabled import substitution to the tune of $1.3 billion during the year. On an overall basis, the profitability of Engro Fertilizers Limited decreased by 24 percent to Rs16 billion in 2022 against Rs21 billion in 2021, impacted by levy of Super Tax.
Petrochemicals: International PVC supply remained disrupted due to resurgence of COVID-19 in China. Local supplies to domestic PVC downstream market continued uninterrupted due to steady production at Engro Polymer & Chemicals Limited. Business continued its upward momentum in PVC segment with the highest ever domestic sale of 231 KT against 207 KT in 2021. After catering to local PVC demand, the business also recorded export sales of 26 KT, including caustic exports of 15 KT, translating to an export value of $21 million. The business also enabled import substitution to the tune of $134 million.
EPCL recorded sales of Rs82 billion in 2022 versus Rs70 billion in 2021. PAT for the year declined to Rs12 billion from Rs15 billion in 2021, primarily due to the imposition of Super Tax and commodity cycle reversal.
Telecommunication Infrastructure: Engro Enfrashare (Pvt) Limited continued to expand its national footprint and achieved a scale of 3,329 tower sites with a 1.17x tenancy ratio during 2022 versus 2,246 tower sites with 1.1x tenancy ratio in 2021, catering to all four major Mobile Network Operators (MNOs) of Pakistan. The business captured a market share of 62 percent in Build-to-Suit (B2S) towers compared to other independent tower companies, leading to 2x revenue versus last year.
Growth potential in the business is further demonstrated by the co-location activities witnessed during the year, with total co-location tenants of 560 versus 235 in 2021, representing a 2.4x increase.
Foods and Rice: FrieslandCampina Engro Pakistan Limited witnessed robust growth momentum on the back of strong volumetric sales in both Dairy and Ice Cream segments. Business demonstrated a top line growth of 40 percent, recording sales of Rs73 billion as compared to Rs52 billion in 2021. The business recorded a PAT growth of 39 percent from Rs1.8 billion in 2021 to Rs2.5 billion in 2022 due to volumetric growth driven by distribution network expansion and surge in demand post floods.
Engro Eximp Agriproducts (Pvt) Limited continued its focus towards exports as a key contributor in foreign reserves of the country. The business generated a revenue of $31 million through international sale of 36 KT of rice against 24 KT last year. Supply to the local market decreased by 8 percent to 12 KT during 2022 versus 13KT last year.
Energy and Power: Mining operations continued smoothly during the year with supplying coal to Engro Powergen Thar Limited, Thar Energy and Lucky Electric Power Company. The mine’s Phase-II expansion was achieved during the year, which doubled capacity to 7.6 million tonnes per year, effective October 1, 2022. The Government of Sindh has also approved Phase-III capacity enhancement to 11.4 million tonnes per year. The business enabled import substitution to the tune of $320 million during the year.
EPTL dispatched 3,679 GWH to the national grid compared to 4,225 GWH last year and achieved 73 percent availability as compared to 83 percent last year. Plant availability remained low in the first quarter but, after detailed inspection and necessary rehabilitation work, both units of the plant successfully came fully back online.
Engro Powergen Qadirpur Limited dispatched a Net Electrical Output of 768 GwH to the national grid with a load factor of 41 percent. Scheduled maintenance outage was undertaken for a major overhaul, conducted every sixth year. The business posted a PAT of Rs1.5 billion in 2022 as compared to Rs1.6 billion for 2021.
Terminals: Engro Elengy Terminal (Pvt) Limited handled 74 vessels during 2022 versus 72 vessels in 2021, delivering 219 bcf re-gasified LNG into the SSGC network with an availability factor of 97.6 percent. The terminal contributed 15 percent towards Pakistan’s total gas supply during the year