F.P. Report
KARACHI: On a consolidated basis, Engro Corporation’s revenue grew by 35% to PKR 482 billion in 2023, while consolidated PAT before accounting impact due to re-measurement of thermal energy assets increased to PKR 66 billion versus PKR 46 billion last year, recording an EPS of PKR 63.01.
Major variance is attributable to higher urea sales, efficient plant operations, higher earnings from dollar-denominated businesses and efficiencies derived through cost optimization.
However, after incorporating the accounting impact due to re-measurement of thermal energy assets, the consolidated PAT stood at PKR 36 billion with an EPS of PKR 38.60 in 2023.
Engro Corporation announced a final cash dividend of PKR 2/- per share for the year. This is in addition to the PKR 46/- per share dividend announced during the year, bringing the cumulative payout to PKR 48/- per share.
Proposed divestment of Thermal Energy assets
Referring to the various disclosures made at PSX by the Company regarding the ongoing discussions with Liberty Mills Limited along with other parties acting in concert, the Company is now evaluating to execute the proposed divestment of the Company’s thermal energy assets comprising of shareholding in Engro Powergen Qadirpur Limited, Engro Powergen Thar (Pvt.) Limited and Sindh Engro Coal Mining Company Limited held via Engro Energy Limited through a sale of shares process.
SECP vide SRO 986 (I)/2019 dated September 2, 2019, has granted specific exemptions to Independent Power Producers (IPPs) from the applicability of IFRS 9, IFRS 16 and IAS 21. As a result of this, debt component recovered from CPPA-G as part of tariff approved by NEPRA is recorded as revenue in the profit or loss statement over the life of the loan.
However, the corresponding depreciation expense related to the IPP is recorded over the term of the Power Purchase Agreement (PPA). The term of the loan being shorter than the term of the PPA results in higher Net Assets in the Consolidated Financial Statements of the Group.
In accordance with the requirements of IAS 36, the Company has carried out an assessment of the recoverable amount the thermal energy assets for the purpose of Standalone and Consolidated Financial Statements.
Due to the specific accounting treatment for IPPs, as mentioned above, the Net Assets of thermal energy assets in the Consolidated Financial Statements of the Group are higher than their recoverable amounts. Accordingly, an accounting impact of PKR 30 billion (Owners’ Share: PKR 13 billion) has been recognized in the Consolidated Financial Statements for the year ended December 31, 2023.
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 USD 0.8 billion in 2023.
Despite macro-economic headwinds, Engro Polymer and Chemicals Limited was able to sustain an 89 percent 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 USD 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 USD 26 million 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 PKR 100 billion, 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 USD 400 million including third party contracts.
