April 22, 2021 (MLN): During its board of directors’ meeting, held on Wednesday, Engro Corporation Limited (ENGRO) disclosed its consolidated financial results for the three months ended March 31, 2021, as per which the company posted net profits of  Rs14.78billion which was 2.5x higher than the profits of Rs5.94bn reported in the corresponding period last year.

This translated in the company’s earnings per share for the quarter which stood at Rs14.47/sh compared to Rs5.76/sh in 1QCY20.

In conjunction with the results, ENGRO also declared the highest ever quarterly dividend of Rs12 per share (120%) for the quarter ended in March’21 which can be associated with a surprise dividend of Rs4/sh announced by EFERT.

The remarkable increase in ENGRO’s profitability during the quarter can be attributed to improvement in Fertilizer, Power, Polymer, and Food businesses.

To highlight, ENGRO’s fertilizer segment profitability improved by around 10x YoY due to higher Urea/DAP offtake, better Urea retention prices, increased profitability from DAP trading, increased profitability of NP and NPK, and decline in finance cost.

Fertilizer segment Urea sales jumped by 244% YoY to 582K tons, due to large carryforward inventory of Urea and dealers move to build-up inventory in the DAP market. On the contrary, fertilizer complex production declined by 8.5% YoY to 523Ktons due to annual maintenance turnaround at one of its plant in Mar’21, a report by Foundation Securities highlighted.

Moreover, DAP offtake surged by 84% YoY to 62K tons in 1QCY21.

Meanwhile, EPCL had also posted record-high earnings of Rs4.1bn (EPS: 4.6), up by 21.5x YoY during 1QCY21 owing to a 64% increase in PVC margins to an average of USD 834/ton along with lower production during 1QCY20 due to gas leakage incident and COVID-19 situation

Friesland CampinaEngro Pakistan Limited (FCEPL) reported a net profit of Rs546mn (EPS: PKR 0.71) in 1QCY21 against a net loss of Rs131mn (LPS: PKR 0.17) on the back of growth in gross margins by 5ppts, settling at 20% owing to higher volumes, and fall in finance cost amid lower interest rates.

However, the profitability of Engro Powergen Qadirpur Pakistan Limited (EPQL) settled at Rs399mn (EPS: PKR 1.23) in 1QCY21 against Rs895mn (EPS: PKR 2.77) during SPLY, plummeting by 55% YoY due to the absence of debt portion in sales.

Thus, the improved performance of subsidiaries led to earnings accretion for ENGRO.

Overall, ENGRO recorded impressive revenue growth of 58% YoY to Rs70.9bn in 1QCY21, mainly due to a massive surge in fertilizer offtake and higher PVC prices during the period. This coupled with improved margins of subsidiaries, gross margins witnessed an accretion of 4ppts YoY to stand at 35% in 1QCY21 from 31% in 1QCY20.

The finance cost of the company declined by 41% to Rs3.6bn as compared with Rs6.1bn in the corresponding period last year due to lower debt and interest rates.

Among other line items, the share of income from associates jumped to Rs1.01bn, up by3.0x YoY, indicating a rebound in profitability from their Dairy business and other related businesses. The effective tax rate has increased to 31% as compared with 16% in 1QCY20 due to a one-off tax reversal booked last year.

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