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Engro expects capital gain from thermal divestment

Engro's subsidiary seals stakes sale deals for EPQL
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February 26, 2024 (MLN): Engro Corporation (PSX: ENGRO) expects to book a capital gain from selling its stakes in energy thermal assets on a standalone basis, the management of the company said in a corporate briefing session on Monday.

The gain will only be realized if the transaction materializes, the management said.

The company's divestment comes as a strategic move aimed at rebalancing its investment portfolio by reducing dependence on government projects, the management highlighted.

To note, Engro's thermal energy assets comprise of shareholding in Engro Powergen Qadirpur Limited, Engro Powergen Thar (Private) Limited and Sindh Engro Coal Mining Company Limited.

The company earlier today unveiled its financial performance for the year 2023, wherein an accounting impact of Rs29.95bn was recognized in the consolidated financial statements owing to this divestment.

However, the company during the briefing session clarified that this loss does not have a cash flow impact. 

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 was 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.

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.

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Posted on: 2024-02-26T21:50:31+05:00