2013 Business Review 17th February 2014 K EY H IGHLIGHTS Highest Ever Revenue Rs. 155 billion 2 Highest ever PAT Rs. 8,183 million 72% shareholder return vs. 49% KSE return PACRA rating raised by two notches to AA- EFERT Listed – oversubscribed 4 times in book building and 3.4 times in IPO Highest ever Urea Production 1,562kt (974kt in 2012) Highest ever paddy procurement 190kt (137kt in 2012) Highest ever production of VCM 170kt (146kt in 2012) and Caustic 115kt (107kt in 2012) Highest ever volume handled at Vopak 1,135kt (1,102kt in 2012) Debt Capital Ratio reduced to 62.3% (70% in 2012) Efert Debt Restructuring Complete Daharki received 4.25 DuPont safety audit rating F INANCIAL H IGHLIGHTS 2013 Rs. Million 2012 Revenue Profit After Tax Revenue Profit After Tax Engro Fertilizers 50,129 5,497 30,626 (2,935) Engro EXIMP 32,853 59 20,977 (426) Engro Polymers 24,781 707 20,606 77 Engro Foods 37,929 870 41,176* 2,375* Engro PowerGen 8,665 1,458 11,666 2,101 Engro Vopak 2,052 1,219 2,376 1,488 155,360 8,183 125,151 1,333 Business Engro Consolidated Note: - Subsidiary profit after tax numbers are reported at 100% Engro Consolidated profit after tax numbers excludes non-controlling interest * Efoods plus Foods Canada 3 F ERTILIZERS – U REA M ARKET Urea Industry (million Tons) 2013 2012 Production 4.8 4.2 Imports 1.1 1.2 Sales 5.9 5.2 Industry grew by 13% (5.9 kT in 2013 versus 5.2 kT in 2012) due to better economics on major crops and increased off take as a result of restoration of channel confidence at retail and trade level. Engro, 26% FFC, 45% NFML, 18% DH, 1% Agri Tech, RG, 6% 4% • International urea price witnessed a downward trend in 2013 – USD 400/ton in the start of the year to USD 300/ton in 3Q. Current price is Benefit to Farmer/Economy – 2013 restored to ~USD 350/ton translating into a significant gap of ~ Rs. 750/bag when compared with the locally produced urea prices • Local production increased by 17%. Consequently, the burden on national exchequer was reduced. • Imports marginally decreased to 1.1 million tons • The gas prices remained fairly stable in 2013. At start of 2014 GIDC was increased on feed gas by Rs 103/MMBTU and on fuel by Rs 50/MMBTU. The urea price was increased to Rs 1,786/bag from Rs 1,722/bag only partially transferring the gas cost increase GoP Price Benefit Imports 17 5 65 GoP Price Benefit Domestic Benefit provided by Fertilizer Producers to Economy In Billion Rupees 2013 Business Results 4 F ERTILIZERS – B USINESS H IGHLIGHTS • • • • • EFERT reported its highest annual revenue of Rs. 50.1b and highest profit after tax of Urea Operations Rs. 5.5b vs. a previous record of Rs. 4.6 b in 2011 2013 2012 EFERT Listed – the book building and public portions of the IPO were subscribed by 4x 1,562 1,570 and 3.4x respectively 974 953 Loan restructuring completed. Improved cash position allowed the Company to early pay some part of its 2014 debt obligations Daharki achieved 4.25 rating from DuPont in Process Safety Management. Highest for a fertilizer plant in the Dupont affiliated sites-worldwide Sales (kT) DuPont International Award received for “Stakeholder Engagement for Sustainability” Production (kT) Urea Business • Highest production of 1,562KT (60% higher than 2012) and sales of 1,570 KT* vs. a previous best of 1,279 KT in 2011. • Diversion of gas from Guddu to Engro enabled 2 Plant operation since end July 2013 • The Company’s share of the urea market increased to 26% in 2013 as compared to 18% in 2012 Zarkhez & Engro-NP • Zarkhez/ENP Sales increased to 95kT in 2013 from 80kT last year • Pakistan’s overall potash market remained stable at 20 KT (nutrient basis) during 2013. Engo market share in potash industry increased from 40% last year to around 50% in 2013 Manufactured Blended Fertilizer Operations 95 80 Sales 2013 2012 * Including transfers to Zarkhez 2013 Business Results 5 F ERTILIZERS – B USINESS H IGHLIGHTS ( CONTD .) Gas Update • • • • • • Approx one month gas on rotational basis was received in 1H 2013 Mari SML (~22 MMSCFD) started flowing in from April 2013 60 MMSCFD gas from Mari shallow has started to flow from end July 2013. Engro is still receiving this gas Reti Maru (~11-12 MMSCFD) started flowing in from beginning 2014. Ratification of Long Term (LT) allocation is pending with ECC. From this allocation ECC has temporarily allowed to use Reti Maru and Mari SML till LT solution is fully implemented. Capex on KPD is deferred until formal ratification In January 2014, ECC has approved the provision of Mari gas to the Company at concessionary rate in order to discharge the Government’s contractual obligation. Implementation of this decision is expected in due course 2013 Business Results 6 F ERTILIZERS – B USINESS H IGHLIGHTS ( CONTD .) Market Share Phosphates Business Pvt. Importers 58% 16% Fauji Engro’s trading business was able to increase its market share from 22% in 2012 to 25% in 2013 with sales volume increasing from 262 KT to 401 KT. Phosphate Industry Sales KT 1597 Global DAP prices continued declining from Q4 2012; CFR Pakistan prices fluctuated in the range of $555/ton at the start of the year to $510/ton at the end of the first half, reaching $400/t by the end of the year. 1188 2013 2012 DAP Prices (CFR Karachi) 2013 Business Results 7 Dec'13 Nov'13 Oct'13 Sep'13 Aug'13 Jul'13 Jun'13 May'13 Apr'13 560 540 544 550 540 520 480 450 410 403 401 401 Mar'13 • 25% Feb'13 • Engro Local phosphates industry recorded sales of 1,597KT vs. 1,188 KT last year. The 34% increase in industry size was a result of lower dealer inventory, lower phosphate prices and healthy agronomic demand. Jan'13 • F OODS – B USINESS H IGHLIGHTS Dairy & Juices • Volumetric decline of 11% in dairy and beverages segment vs. last year was primarily due to operational challenges coupled with industry decline. • Market share declined from 51% in 2012 to 49% in 2013. • Distribution challenges addressed resulting in a volume growth of 15% in 4th quarter of 2013 vs. the 3rd quarter • Olper’s achieved its highest level of volume in Q4 since inception • Milk Collection also recorded close to highest ever volume since inception 2013 2012 Revenue (Rs. Bn) 35.2 37.4 Dairy & Juices Ice Cream • The industry declined by 16% due to ongoing load shedding. • Omore maintained its market share at 25%. • Reduced after-tax loss by approximately 22%, largely due to margin improvement and cost control Other • Launch of fresh dairy business “Mabrook”. 6 shops were opened in Karachi, with more in the pipeline. 2013 Business Results 2.8 2.6 Ice cream Profit After Tax (Rs. Bn) 3.1 1.6 (0.3) (0.4) Dairy & Juices Ice cream 8 F OODS – B USINESS H IGHLIGHTS ( CONTD .) Engro Foods Canada • Pretax loss of the Canadian subsidiary reduced from CAD$ 3.5 million last year to CAD$ 2.0 million in 2013 due to improved margins and controlled costs. • A one-time deferred taxation charge took its loss after tax to CAD$ 3.8 million as compared to CAD$ 2.4 million in 2012. • During 2013, the ownership in Engro Foods Canada was transferred from Engro Corp to Engro Foods after obtaining regulatory approvals. 2013 8.9 2012 10.8 Loss After Tax (CAD$ M) Revenue(CAD$. M) Rice • Highest ever paddy procurement of 190kT in the 2013-2014 season vs. 137kT last season. • Paddy prices increased by about 30% on back of tight stocks outlook of Indian crop. • The company exported 23.5 KT of rice during the year and sold 35 KT in the local market. • Successful launch of “Rymah” in UAE – the company’s own branded product. • Branded “Bharosa” outlets and whole sale operations launched in August. • The Company, under its “Bharosa Seed Program”, has become Pakistan’s largest private sector Basmati seed provider by distributing 550 tons of seed to farmers in 2013. • 4MW Steam turbine successfully commissioned in November 2013 Business Results (2.4) (3.8) Rice Sales Volume (KT) Paddy Procurement (KT) 190 137 58.5 39.0 2013 2012 2013 2012 9 P ETROCHEMICALS – B USINESS H IGHLIGHTS • • • • • • • • • Highest ever annual revenue and PAT The company streamlined its VCM operations achieving record production meeting its complete PVC production through in-house VCM. Highest ever production of VCM and Caustic Highest ever sales of domestic PVC, Caustic Soda and VCM exports. The Company’s performance in 2013 is an indication that it is successfully steering through challenging times. Engro Polymers’ profits were higher mainly due to – Higher sales of PVC in the domestic market – Use of in-house VCM to produce PVC – Higher PVC margins – Higher volumes and margins in Caustic The company’s domestic PVC market share grew to 81% from 79% in 2012, while the market share in domestic Caustic stood at 37% from 35% last year. 6 KT p.a. of PVC capacity was increased during the year. Another 15kt debottlenecking project being carried out. PVC-Ethylene delta was around $365 per ton at the start of 2013 and remained in the range of $305-410 per ton throughout the year. 2013 24,781 707 20,606 77 PAT (Rs. M) Revenue(Rs. M) Production (KT) 146 146 PVC 170 146 VCM 115 107 Caustic Soda Sale Volume (KT) 139 Domestic 133 100 90 PVC 2013 Business Results 2012 Caustic Soda 10 P OWER – B USINESS H IGHLIGHTS • • • Powergen Qadirpur earned a net profit of PKR 1,458m for 2013 as compared to PKR 2,101m last year. Net Electrical Output (GWh) 1765 In June, the entire overdue receivables of PKR 9 billion outstanding at the beginning of June 2013 were paid by PEPCO as part of a bailout for power sector. Accordingly the Company also settled its outstanding payable to SNGPL of PKR 5.4 billion. 1334 The plant successfully completed a turnaround in 2013 which was the most extensive and complex since COD. The exercise was completed before planned time. 2013 2012 Load Factor (%) • The main reason for the lower profitability was the complete plant outage on 12th Oct due to a fault in gas turbine generator rotor. The plant was successfully brought online after 76 days, and has been operating normally since December 27. • Intensive follow-up for recovery of overdue receivables with PEPCO resulted in a total receipt of Rs. 2.2 b during plant outage of 76 days • Overdue receivables as of Dec 31 stand at Rs.1.2b including delayed interest charges of Rs. 0.7 b • • 93.8 71.7 2013 2012 Billable Availability Factor (%) 83.1 100.4 2013 2012 In August, Engro Powergen Qadirpur gave a bumper dividend due to clearance of circular debt bringing total YTD dividend paid to Rs. 2.7b Engro Powergen made its first overseas investment in a 72MW CPP. 2013 Business Results 11 C HEMICALS S TORAGE & H ANDLING Revenue (Rs. Mn) PAT (Rs. Mn) 2,376 2013 2012 2,052 1,219 1,488 • EVTL completed 16 Years of safe operation on November 25, 2013 without LTI (lost time injury). • EVTL handled the highest ever volume in its history of 1,135 KT. • Contract with FFBL for handling Phosphoric Acid signed for 15 years • Lower tariffs on paraxylene and acetic acid due to re-negotiation of Lotte contract led to lower revenue and profitability vs. last year 2013 Business Results 12 SECMC Update • Revision of the JV agreement for equity share adjustment from 60:40 to 49:51 completed during Jan 2014 • A wholly owned subsidiary, Thar Power Company (THARCO) was incorporated with the objective of developing a power plant based on Thar coal. • Thar coal project was inaugurated on January 31, 2014, with PM Nawaz Sharif and former President Asif Ali Zardari • Mining: Firm technical & commercial bids received from four EPC Chinese contractors and being evaluated • Power: Power Plant Bankable Feasibility Study (BFS) was finalized by RWE, with discussions on Financial Analysis and Risk Management underway. EPC bids have been received from seven world renowned Chinese firms and are under evaluation. • The land acquisition process is in progress for initial 5,500 acres of land for which no resettlement is required. • Other infrastructure requirements including water, transportation and power transmission lines are also being pursued actively with relevant public sector agencies. 2013 Business Results 13 LNG Update • Elengy Terminal Pakistan Limited, a subsidiary of Engro Corporation Limited won the GOP’s tender for Fast Track LNG in November 2013 • Engro will setup a regasification facility and handle LNG on tolling basis for 15 years • Volume 200MMSCFD in year 1 and 400MMSCFD from Year 2 onwards. • Facility will be connected with SSGC’s existing network via a pipeline. • This fast track project is expected to complete 11 months from the signing of the LSA. 2013 Business Results 14 Engro Rupiya • Engro Rupiya 1 matured on January 31, 2014 - Principal outstanding re-paid to all investors along with final profit payment • The Company plans to launch Engro Islamic Rupiya to provide the customers with an opportunity to reinvest with Engro, subject to regulatory approvals 2013 Business Results 15 Building Investor Confidence Rs. 47bn shareholder wealth NIL Rs. 81bn shareholder wealth 8,183 Rs. 73bn shareholder wealth 5,497 Rs. 6.7bn shareholder wealth Rs. 75bn shareholder wealth Rs. 8.9bn shareholder wealth Rs. 80bn shareholder wealth 2,375 870 707 1,333 77 Engro Polymer 2012 vs. 2013 Engro Fertilizers 2012 vs. 2013 Engro Foods 2012 vs. 2013 Engro Corp 2012 vs. 2013 (2,395) PAT (Rs. Million) 2013 Business Results 16 Questions & Answers 2013 Business Results 17
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