Analyst Briefing: Engro Corp earnings decline due to one-offs

February 25, 2020 (MLN): Engro Corporation Limited held its analyst briefing on February 24, 2020, to discuss the financial results for the year ended December 31, 2019.

To recall, the company had declared net profits of Rs. 30.2 billion (EPS: Rs. 28.69) for the year, which is nearly 28.17% higher than the figures reported last year. It also announced a Final Cash Dividend for the year at Rs. 1 per share i.e. 10%. This is in addition to Interim Dividends already paid at Rs. 23 per share i.e. 230%.

According to the details provided by BMA Research, the management stated that its earnings were lower than the industry average owing to several one-off items. These included SAP implementation costs, FCEPL’s impairment, Engro Vopak’s tax adjustment, training and development costs, implementation of IFRS 16, as well as project feasibility costs. The management stated that all these one-off items caused the company’s non-core expenses to swell substantially.

Shedding some light on its current endeavors, the management stated that the company is trying to enhance its market visibility in the telecom sector, for which it has invested nearly Rs. 7.5 billion for 1,500 telecom towers. The company informed that it plans to have at least 10,000 such towers within the next two years to achieve its desired market share of 25%.

It also informed the onlookers that it has commenced construction on SECMC Phase 2, a project by Sindh Engro Coal Mining Company and Engro Powergen Thar. This would result in an increase in the production capacity of coal mines to 7.5mn MT.

It is pertinent to note the Engro Corporation Limited has various subsidiaries under its wing, namely Engro Chemicals and Polymers Ltd, Engro Powergen and Qadirpur Ltd, Engro Fertilizers Ltd, FrieslandCampina Engro Pakistan Ltd, and Engro Vopak Ltd.

Nearly all of the above-stated companies reported positive earnings, except for FrieslandCampna Engro Pakistan which suffered losses amounting to Rs. 1.1 million against the profits of Rs 63,783 earned last year.

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