Pakistan’s premier conglomerate, Engro Corporation (PSX: ENGRO) announced its financial results for the year ended December 31, 2021.
Overview of Financial Performance
During 2021, Engro Corporation’s standalone revenue increased from PKR 15.00 billion in 2020 to PKR 20.68 billion in 2021, exhibiting a substantial growth of 38%. Higher revenue was primarily due to higher dividends received from Engro Polymer & Chemicals Limited (EPCL) and Engro Fertilizers Limited (EFERT), which in turn were driven by strong underlying business performance. Resultantly, the company achieved a 14% higher PAT of PKR 18.52 billion in 2021 against PKR 16.30 billion in 2020, translating into an EPS of PKR 32.14 per share (2020: PKR 28.29 per share).
On a consolidated basis, Engro Corporation’s revenue grew by 25% to PKR 311.59 billion in 2021 from PKR 248.82 billion in 2020. The Company posted a PAT of PKR 52.61 billion in 2021, which is 19% higher than PKR 44.11 billion in 2020, translating to an EPS of PKR 48.50 per share (2020: PKR 43.57 per share).
Engro Corporation announced a final cash dividend of PKR 1/- per share for the year. This is in addition to the PKR 24/- per share dividend that has already been announced during the financial year, bringing the cumulative payout to PKR 25/- per share.
Portfolio Performance Review
Fertilizers: Domestic market witnessed strong agricultural sector performance in 2021. Resultantly, EFERT achieved a historical milestone of highest ever urea sales of 2,295 KT in 2021 against 2,057 KT in 2020. Due to the turnaround of Base and Enven plant, urea production during the year reduced from 2,264 KT in 2020 to 2,105 KT in 2021.
Phosphates sales stood at 366 KT whereby a steep rise in international prices dampened local demand. On an overall basis, EFERT achieved its highest ever PAT of PKR 21.09 billion in 2021, demonstrating a growth of 16% from 18.13 billion in 2020.
Petrochemicals: EPCL announced commercial operations of its new PVC plant and VCM debottlenecking during March and June 2021, respectively. PVC capacity increased by 100 KT to 295 KT per annum while VCM capacity increased by 50 KT to 245 KT per annum. These initiatives enabled EPCL to achieve record domestic PVC sales of 207 KT alongside highest ever PVC exports of 19 KT translating into an export value of USD 28 million. During the year, international PVC prices increased significantly due to supply disruptions, however, supplies to domestic PVC downstream market continued uninterrupted due to EPCL’s steady production.
EPCL recorded sales of PKR 70.02 billion as compared to PKR 35.33 billion in 2020. PAT increased from PKR 5.73 billion in 2020 to PKR 15.06 billion in 2021 showing an increase of 163% attributable to increased volumetric sales, efficient operations and higher international prices.
Telecommunication Infrastructure: During the year, Engro Corporation formed a dedicated platform for connectivity and telecom infrastructure initiatives by the name of Engro Connect (Pvt.) Limited (EConnect). EConnect is a wholly owned subsidiary of Engro and now holds complete ownership of Engro Enfrashare (Pvt.) Limited (Enfrashare), which is Pakistan’s largest independent telecom tower company.
Enfrashare continued to expand its national footprint and achieved a scale of 2,246 operational B2S towers with a 1.1x tenancy ratio while catering to all four Mobile Network Operators in Pakistan. Enfrashare built over 75% of the total new B2S towers that were deployed in the country during the year 2021. This increase in the portfolio led to a growth of 3x in the revenue in comparison with last year. The business has secured orders to reach a scale of 3,300+ sites by the end of 2022.
Foods & Rice: FrieslandCampina Engro Pakistan Limited (FCEPL) demonstrated a topline growth of 18%, recording sales of PKR 52.09 billion as compared to PKR 44.16 billion in 2020. The gross margin increased to 16% from 12% last year, translating into an increase in PAT from PKR 0.18 billion in 2020 to PKR 1.80 billion in 2021.
The business demonstrated an overall increase of 10x in the profitability driven by cost saving initiatives, leveraging e-commerce channels, improved reach / route to markets, increased marketing spend and market penetration to enhance brand equity.
Engro Eximp Agriproducts (EEAP) surpassed industry growth of 16% in the brown rice segment and recorded 21% growth versus last year. As a key contributor to foreign reserves, the business continued its focus towards exports, generating a revenue of USD 18.8 million through international sale of 24 KT rice against 28 KT last year. Given the supply chain constraints in the international market, the business pivoted its supply to the local market and increased domestic sales by 39% to 13 KT during 2021.
Energy & Power: Sindh Engro Coal Mining Company (SECMC) supplied 3.8 million tons of coal to Engro Powergen Thar Limited (EPTL) during the year. EPTL achieved an availability of 83% with a load factor of 80% and dispatched 4,225 GwH to the national grid during the year.
The Phase II expansion of SECMC’s mine to 7.6 million tons per annum is underway with 71% of the overburden removed from the site. Phase III expansion of the mine to 12.2 million tons per annum has also been approved during the year.
Engro Powergen Qadirpur Limited (EPQL) plant dispatched a Net Electrical Output of 851 GwH to the national grid with a load factor of 46% compared to 30% last year due to higher offtake from the Power Purchaser. EPQL’s revenue increased by 26% due to higher dispatch and load factor which was offset by the absence of long-term debt servicing component. The business posted a PAT of PKR 1.59 billion for the current period as compared to PKR 2.08 billion for 2020.
Terminals: Engro Elengy Terminal (Pvt.) Limited (EETL) successfully completed Pakistan’s first-ever Dry-Docking activity of FSRU Exquisite at Qatar dockyard with minimum outage during the switchover between the two FSRUs. During the Dry-Docking period, FSRU Sequoia enabled gas supply continuity ensuring national energy security.
The LNG terminal handled 72 vessels during 2021, in line with last year, delivering 216.2 bcf re-gasified LNG into the SSGC network with an availability factor of 96.5%. The terminal contributed 15% towards Pakistan’s total gas supply during the year.
The chemicals terminal throughput volumes normalized to 1,280 KT against 1,142 KT last year which was offset by lower LPG volumes. Overall, profitability of both the LNG and chemical storage terminals business remained stable during 2021.