EPCL: Strong demand expands margins

August 11, 2021 (MLN): Engro Polymer and Chemical Limited (EPCL) has announced its financial results for 1HCY21 ended June 30, 2021 wherein the company has reported a whopping Rs7.27bn net profits profit, (EPS: Rs7.99), up by around 33x YoY compared to Rs222mn (EPS: Rs0.24 during 1HCY20.

In conjunction with financial results, the Board of Directors has recommended the interim cash dividend for ordinary shareholders for the second quarter ended June 30, 2021, Rs 7.00 per share i.e. 70%. In addition, it also recommended interim cash dividend for preference shareholders for the second quarter ended June 30, 2021, Rs. 0.27 per share i.e. 2.7%.

This increase in earnings can be attributed to an increase in PVC margins mainly led by disruption of supply and demand of PVC Resin.

During the period under review, net sales revenue grew by around 2.4x YoY to Rs30.50bn due to robust demand from the downstream segment due to higher production along with higher PVC prices, as per the report by Darson Securities. As a result, the gross profit margins surged to 38% from 15% as the company’s PVC production and sales took a hit due to petrochemical plant disruption amid COVID-19 lockdown during 1HCY20.

The overall expenses of the company increased: distribution and marketing expenses by 49% YoY, administrative cost by 36% YoY and other operating costs by 11% YoY during 1HCY21.

Meanwhile, the finance cost dropped by 33% YoY due to the low-interest rate regime, resulting in a healthy bottom line. However, the effective tax rate increased to 27% as compared to 1% in 1HCY20.

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