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ENGRO: Bottom-line sees 42% contraction amid imposition of Super tax

August 17, 2022 (MLN): Engro Corporation Limited (ENGRO), one of Pakistan’s largest conglomerates with the company’s business portfolio in four verticals, which include food & Agri, petrochemicals, energy & infrastructure and connectivity has announced its financial performance for 1HFY22 today, wherein the company reported 42% YoY decline in net profits to Rs16.8 billion.

Along with the result, the company announced an interim cash dividend of Rs11 per share which was in addition to the interim dividend of Rs12 per share i.e., 120% already paid.

As per the company’s financial statement, the decline in profitability is attributable to higher other operating expenses (up by 2x YoY) and lower profitability from the Fertilizers, Chemical and Power businesses amid the imposition of Super tax.

On the fertilizer business front, EFERT (the largest contributor to ENGRO’s earnings) reported a 48.5% YoY decline in net profits for 1HCY22 to Rs5.4 billion, against Rs10.5bn in the corresponding period a year earlier, mainly due to higher charge for super tax coupled with deferred tax liability adjustment, lower margins, hefty exchange loss on imports and a significant increase in other operating expenses.

Similarly, Engro Powergen Qadirpur Limited (EPQL) registered a net profit worth Rs405.64 million (EPS: Rs1.25), depicting a decline of 55% YoY against the net profit of Rs905mn (EPS: Rs2.79) due to super tax imposition, lower gross margins and massive exchange losses.

The bottom line of Engro Polymer & Chemicals Limited (EPCL) settled at Rs7.05 billion for the first half year ended June 30, 2022, down by merely 3% YoY when compared to Rs7.27bn recorded in the same period last calendar year, mainly on the back of imposition of super tax and fall in gross margins.

As per the note by Arif Habib Limited, the bottom-line of Elengy business to settle at Rs849mn, with an assumption of handling of around 606/mmcfd of RLNG during 2QCY22. Whereas, the contribution from Thar business (EPTL & SECMC) during 2QCY22 is projected to be Rs2,895mn.

Overall, ENGRO recorded notable revenue growth of 27% YoY to Rs177.4bn during the review period, mainly on account of higher revenues from the fertilizer, chemical and other businesses. However, the gross margins of the company declined from 34.3% to 30.5% in the said period mainly due to a 35% YoY increase in the cost of sales.

The finance cost of the company increased by 51% YoY to Rs12bn owing to higher borrowings and interest rates.

Meanwhile, the share of profit from JV clocked in at Rs1.27bn, down 32% YoY, mainly due to the subdued performance of the food business and other subsidiaries.

Among other line items, other income increased by 43% YoY to Rs9.6bn while the tax expenses jumped more than two-fold to Rs20.7bn

With this, the effective tax rate of the company came in at 55% against 23% in 1HFY21.

 

Consolidated Financial Results for the Half year ended June 30th 2022 (Rupees '000')

 

Jun-22

Jun-21

% Change

Revenue

                  177,454,754

                  139,319,217

27.37%

Cost of Sales

                (123,281,911)

                  (91,523,096)

34.70%

Gross Profit

                     54,172,843

                     47,796,121

13.34%

 Distribution and selling expenses

                     (3,425,574)

                     (3,463,622)

-1.10%

Administrative expenses

                     (4,729,283)

                     (2,826,486)

67.32%

Other income

                       9,623,415

                       6,715,858

43.29%

Other operating expenses

                     (6,430,839)

                     (3,176,306)

102.46%

Remeasurement loss on provision for GIDC

                     (1,001,520)

                     (1,177,446)

-14.94%

Loss allowance/ Reversal of loss allowance on subsidies receivable from GOP

                        (389,173)

                           164,417

 

Finance cost

                  (12,001,936)

                     (7,948,920)

50.99%

Share of income from JV and associates

                       1,272,119

                       1,877,288

-32.24%

Profit before taxation

                     37,090,052

                     37,960,904

-2.29%

Taxation

                  (20,277,549)

                     (8,849,887)

129.13%

Profit after taxation

                     16,812,503

                     29,111,017

-42.25%

Earnings per share – basic and diluted (Rupees)

                               12.87

                               29.60

-56.52%

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Posted on:2022-08-17T11:22:57+05:00

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