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Engro Corp profits drop 21.7% in 2023 due to thermal asset divestment

Engro Corp profits drop 21.7% in 2023 due to thermal asset divestment
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February 26, 2024 (MLN): Engro Corporation Limited (PSX: ENGRO) recorded a fall of 21.72% YoY in its profits in 2023, with the company's after-tax profits clocking in at Rs36.09 billion [EPS: Rs38.6], compared to a profit of Rs46.11bn [EPS: Rs42.23] in the same period last year (SPLY).

The decline was attributed to the divestment of the company's thermal energy asset portfolio.

The net assets of the thermal energy assets in the consolidated financial statements of the group were higher than their recoverable amounts. Accordingly, an accounting impact of Rs29.95bn was recognized in the consolidated financial statements for the year ended December 31, 2023.

Along with the results, the company announced a final cash dividend for the year at Rs2 per share. This is in addition to the interim cash dividends already paid at Rs46 per share.

On a consolidated basis, Engro Corporation’s revenue grew by 35% to Rs482bn in 2023, while consolidated PAT before accounting impact due to remeasurement of thermal energy assets increased to Rs66bn versus Rs46bn last year, recording an EPS of Rs63.01. 

Major variance is attributable to higher urea sales, efficient plant operations, higher earnings from dollar-denominated businesses, and efficiencies derived through cost optimization. 

In case of Standalone financial statements of the company for the year ended December 31, 2023, no impact has been recognized as the recoverable amount of thermal energy assets is significantly higher than their carrying amount.

Portfolio Performance

The Fertilizer business achieved a historic milestone of highest ever urea sales of 2,327 KT through record urea production, cost optimization, and long-term reliability projects executed during 2022.

The business enabled import substitution to the tune of $0.8bn in 2023. 

Despite macro-economic headwinds, Engro Polymer and Chemicals Limited was able to sustain an 89% market share by ensuring product availability and implementing various incentives to boost market confidence.

The business recorded domestic sales of 199 KT, thus, enabling import substitution of $91 million.

As a mitigant to lower domestic demand, business focused on export opportunities and achieved the highest ever export volumes of 44 KT, including caustic soda exports of 22 KT, generating foreign exchange of $26m for the period.

Engro Enfrashare (Pvt.) Limited continued to expand its national tower footprint and achieved a scale of 3,952 tower sites with a 1.21x tenancy ratio during 2023 versus 3,329 tower sites with 1.17x tenancy ratio in 2022, catering to all four major Mobile Network Operators (MNOs) of Pakistan.

In the Energy vertical, the Mining business is committed to initiate Phase III of the expansion to enhance capacity to 11.4 MTPA.

Engro Powergen Thar (Pvt.) Limited achieved 82% availability during the year, while Qadirpur Power Plant achieved 100% availability through ensuring efficient plant operations and dispatched a Net Electrical Output of 870 GWH to the national grid. 

Engro Elengy Terminal (Pvt) Limited handled 73 vessels during 2023, delivering 215 bcf re-gasified LNG into the SSGC network with an availability factor of 97.1%.

The Terminal contributed 13% – 15% towards Pakistan’s total gas supply during the year. Engro Vopak Terminal’s chemical throughput was adversely influenced due to disruption in the operations of key customers, however, a notable 64% increase in LPG marine imports was recorded compared to last year. 

FrieslandCampina Engro Pakistan Limited maintained its growth momentum, achieving a record-breaking topline of Rs100bn, marking a remarkable 36% increase compared to last year. 

Engro Eximp FZE, the company’s international trading arm that initiated commercial activity in UAE in 2022, achieved a turnover of approximately $400m including third party contracts.

Consolidated (un-audited) Financial Results for year ended 31 December, 2023 (Rupees in '000)
  Dec 23 Dec 22 % Change
Sales 482,488,902 356,427,526 35.37%
Cost of sales (326,853,053) (251,484,629) 29.97%
Gross Profit 155,635,849 104,942,897 48.31%
Selling and distribution expenses (11,620,761) (9,325,850) 24.61%
Administrative expenses (15,716,346) (12,100,498) 29.88%
Loss allowance on subsidy receivable from GoP (2,440,151) (522,936) 366.63%
Share of income from joint venture and associates 5,241,861 3,215,276 63.03%
Other Income 29,571,993 21,873,860 35.19%
Other expenses (9,019,690) (11,926,874) -24.38%
Finance cost (44,538,446) (27,954,920) 59.32%
Profit before taxation 77,163,998 68,200,955 13.14%
Taxation (41,069,053) (22,089,678) 85.92%
Profit for the year before remeasurement of thermal assets 66,045,256 46,111,277 43.23%
Remeasurement of thermal assets – represents accounting impact (29,950,311)
Profit for the year after remeasurement of thermal assets 36,094,945 46,111,277 21.72%
Basic earnings/ (loss) per share  38.60 42.23

Amount in thousand except for EPS

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Posted on: 2024-02-26T09:49:51+05:00