Analyst Briefing: ENGRO talks about GIDC verdict, investment in telecom sector

August 21, 2020 (MLN): Engro Corporation held its analyst briefing today to deliberate upon the latest financial performance and the key drivers behind it, as well as the future outlook of the company.

To recall, the company had reported 36% growth in its net profits for the six months ended on June 30, 2020, to Rs. 15.52 billion, as compared to the Rs. 11.36 billion earned in the corresponding period of last year.

The earnings per share of the company grew by 33%, from Rs 11.82 per share to Rs 15.73 per share, mainly due to incremental earnings from Thar operations.

According to Fortune Securities, the management of the company attributed the increase in earnings to a higher contribution of Thar projects, which completed its first year of operations, as well as higher LPG volumes. The latter has been credited for being the most profitable segment of the organization, as it was able to negate the adverse impact emanating from the declining profitability of Fertilizer and Chemical segments.

The management further spoke about how it invested Rs. 7.5 billion in Enfrashare, i.e. an initiative by Engro Corp to mark its footing in the telecommunication sector. It also spoke about the possibility of a cash investment of up to Rs. 60 billion to further expand its presence in the sector as well as search for synergies in other subsidiaries.

With regard to ongoing endeavors, the management also spoke about how it was working on a feasibility study for its proposed polypropylene facility to further strengthen its presence in the petrochemical segment.

Addressing the elephant in the room, the company shed some light on the recent GIDC spectacle and ensured that its subsidiaries, EFERT and EPCL, which owe Rs. 19 billion and Rs. 5 billion respectively, have adequate financial backing and resources to retire off the debt in the allotted time period.

The company informed that it had managed to maintain its gearing ratio at 45:55 despite, despite making several long-term borrowings for its coal project as well as expected Engro Polymer expansion projects.

It also discussed the success of coal mining and power plant business, as both SECMC and Engro Powergen Thar Limited completed the first full year of undisrupted operations. The management informed that the second phase of the coal mining project is expected to start in CY22.

Talking about some of the challenges being faced by the company, the management stated that circular debt continues to remain a problem. Nonetheless, around 65% of the total billing amount has been successfully recovered by the company.  

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