Security Analyst Briefing - YTD Dec-2010

8/7/2019 Security Analyst Briefing - YTD Dec-2010

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Full Year 2010 Business Results

Security Analyst Briefing

Financial Highlights

Revenue

Rs. MillionFull year

2010Full year

2009

Engro Fertilizers Ltd 19,018 16,231

Engro Foods Limited 21,050 14,665

Engro Polymer & ChemicalsLimited

14,618 11,632

Engro Energy/Engro Powergen 5,727 -

Engro Eximp Private Limited 17,720 10,522

Engro Vopak Terminal Limited 2,303 2,136

Avanceon Limited 1,828 1,615

Engro Corporation(Consolidated)

79,976 58,152

Profit After Tax (based on 100%)

Rs. MillionFull year

2010Full year

2009

Engro Fertilizers Ltd 3,730 2,351

Engro Foods Limited 177 (435)

Engro Polymer & ChemicalsLimited

(770) (194)

Engro Energy/Engro Powergen 1,100 -

Engro Eximp Private Limited 1,732 1,451

Engro Vopak Terminal Limited 1,109 917

Avanceon Limited (195) 24

Engro Corporation(Consolidated)*

6,790 3,807

*Engro Share


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Engros Performance

1,27713,068 20,240

34,12158,152

79,976

201020092007200620041990

134

1,719 2,107 2,834 3,8076,790

Revenues

PAT

Rs. Million


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YTD December - 2010 Business Results


Fertilizer Business


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Average selling price of domesticUrea during 2010 was Rs. 810/bag,while average landed cost ofimported Urea was Rs. 1,640/bag(C&F USD 340/ton)

By maintaining domestic Urea pricessignificantly lower than internationalprices, the industry gave benefit ofRs. 64 billion in 2010 to the Farmer

fraternity

Pakistans urea industry declined by 5% in the past year to 6.2 million in 2010 from 6.5

million tons in 2009, after facing the worst ever floods in the countrys history. However,

fourth quarter demand turned out to be better than what was expected in third quarter

UREA Market Environment

23

1764

Total Benefit to Farmer - Rs. 104 bn

GovtContribution(Differential ofFeed and Fuelgas prices, netof taxes paid)

Direct subsidy

Fertilizerproducers'contribution


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UREA Market Environment

The gas curtailment regime of the government has

seriously impacted the agricultural economy of

Pakistan by

Increasing the cost of inputs to the farmers impact of ~ Rs.

20 billion /annum on domestic urea production

Costing the national economy by importing more expensive

urea and providing subsidy for the same impact of ~ Rs. 17

billion for 2011.20

17

Impact of Gas Curtailment Rs. Billion

Cost to

Economy

Cost to

Farmers


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Phosphates Market Environment

The phosphate fertilizer demand in Pakistan declined to 1.4Mn tons from 1.8Mn

tons in 2009 due to floods and high international and domestic prices

After a depressing 2nd quarter the sales started to pick up in the third quarter and

peaked in the last quarter

Total Phosphate imports during 2010 were 679 kT vs. 995kT in 2009.

DAP price (C&F Karachi) during December was USD 633/ton (Black Sea)


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Industry Demand and Market Shares

Total Market Urea = 6.2 MT; Domestic Supply = 5.2 MT

Phosphates = 1405 Kt; Domestic Supply = 638 Kt

7%

49%

15%

5%

16%

6%

Market Share - Urea

DH FFC & FFBL Engro

AgriTech NFML Pak Arab

1%

50%

23%

1%3%

22%

Market Share - Phosphates

RG FFC & FFBL Engro

AgriTech DH Pvt Importers

* Estimated


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Business HighlightsUrea

In 2010, the company produced 972 kT of urea, which is 2% higher than the 952 kT produced in 2009

The gas curtailment impact was offset by a record production in the first half, as well as no planned

turnaround during the year

The company sold 971 kT of urea Vs 958 kT in 2009

Price of Engro-Urea was increased by Rs. 190/bag on December 24 to Rs. 1,020/bag , an unprecedented

hike, in response to announced gas curtailment & load management

Zarkhez

Sales for the year stood at 95 kT vs. 101 kT in 2009

Zarkhez plant produced a total of 100 kT of blended fertilizers, which includes 63 kT of Zarkhez and 37 kT

of E-NP, as compared to a total of 92 kT tons produced during 2009

Although demand for potash remained healthy throughout 2010 , the NP industry declined by 17%

compared to 2009, in line with a decline in the phosphate market

Engro Fertilizers net profit for the year 2010, was Rs. 3,730 million including one timeearnings of Rs. 574 million ( gain on sale of land & tax reversal)


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Fertilizer Expansion Project

The plant was unable to continue

operations as SNGPL commenced a

45-day gas outage on January 7,

2011, as part of a gas load

management program

The company expects to receive gas

by the end of February, commercial

production is expected soon after

the plant is stabilized

en en 1.3en en 1.3

EnVenInvestmentUSD 1.1 bn

Capacity: 1.3Million tons

EstimatedForex Saving

USD500Mn/year Total ManHours : 50

million

TrialProduction:December

29th

In 2010, the company achieved mechanical completion and started trial production of its

urea expansion project at Daharki which is the worlds largest single train ammonia-urea

plant

It is the largest private sector industrial investment in Pakistan


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Business Highlights(Contd.)

Purchased Products (Phosphates) The business sold 327 kT of phosphates in 2010, against 357 kT in 2009

Net profit for the business stood at Rs. 1,854 million vs. Rs. 1,262 million in 2009 signifying an increase of

over 47%

Higher margins due to increasing international price

Engro Phosphate imports during year were 324 kT vs. 277kT in 2009

Outlook

With the new urea expansion coming online, installed urea production capacity allows the country to

become self-sufficient in urea

Gas curtailment, against firm contracts, will affect the production negatively thus the company has

increased urea price by PKR190 per bag (23%).

With the reduced supply there is again a shortage of urea in the country and hence the company does notforesee any issues with selling its entire production

Engro Fertilizers listing is planned during 2011


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Foods Business


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Business Highlights

During 2010, foods business revenues grew by more than 43% to above Rs. 21 billion

Foods Business posted a Profit of Rs 171 million as opposed to a loss of Rs (435) million in

2009

The company achieved volume growth of 27% during 2010 increasing its volumes to 309

million liters from 243 million liters in 2009 in UHT

Tarang volumes grew by 47% to 169 million liters and maintained its leadership in tea creamers with segment

share of 62%

Olpers grew by 9% to 137 million liters achieving a market share of 39%in the all-purpose milk segment, which

was almost stagnant in 2010

Omore volumes increased by 100% to 12.2 million liters in 2010from 6.1 million liters in 2009,

and Omore market share was estimated at 17% during 2010

The companys Nara Diary Farm is currently producing 21,500 liters per day, with a total herd

size of 2,591 animals of which 1,269 are milking


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Business Highlights (Contd.)

The rice Plant started its drying operation in November 2010. Commercial production ofmilling and parboiling facilities is expected in March 2011

In the rice trading business, Engro Eximp successfully built relationships with premium

buyers in international markets, and exported 5,000 tons of rice during the year

Outlook

The foods business will continue to increase its market share in the processed milk and

ice cream segments with ice cream business increasing its geographical reach

2011 will also see the beginning of sales from its own rice processing plant

Foods is entering the Halal food business in America and Canada through its planned

acquisition of Al Safa Halal (subject to regulatory approvals). This will be foods first

international venture

Listing of Engro Foods is planned during 2011


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Petrochemicals Business


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Business Highlights

The integrated facility became fully operational after the VCM plant achieved commercialoperations in September 2010

Polymers business posted a loss of Rs. (770) million in 2010 primarily due to delay in VCM plant COD.

However, since stable operation of the VCM plant has been achieved the business has started

improving its profitability

The company produced 114,000 tons of PVC as compared to 116,000 tons in 2009. PVC domestic

sales volume declined to 97,000 tons in 2010 from 119,000 tons in 2009

93,000 tons of Caustic soda was produced as compared to 39,000 tons in 2009. Caustic soda sales

remained strong during the year and Company sold 80,000 tons as against 27,000 tons in 2009

Outlook:

PVC domestic demand is expected to be stable to strong in 2011 on account of reconstruction

activities in flood affected areas, demand from agricultural sector and pipe exports to Afghanistan.Power load shedding and gas supply curtailment will continue to adversely affect demand

Caustic Soda demand is expected to remain strong and the Company is expected to sell capacity


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Energy & Power Business


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Business Highlights

The plant dispatched a total net power of 1,201 GWh to the national grid during the year

(Plant Capacity of 217.3 MW)

Total turnover for the company was Rs. 5,727 million

The company posted a profit of Rs. 1,100 million during 2010

- Exchange loss of Rs. 294 million on embedded derivates was capitalized in consultation with the auditors

During the first nine months of operations, the plant demonstrated billable availability factor

of 95%

Outlook

Based on current demand supply situation the Qadirpur power plant is expected to achieve

very high dispatch rates

Engro Powergen Qadirpur listing is planned during 2011


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Business Highlights (Contd.)

In 2010, the Sindh Engro Coal Mining Company Limited (SECMC) completed the detailedfeasibility study (DFS) as per the target deadline, confirming the technical, social and

environmental viability of the Thar Coal Mining Project (Block II)

Estimated Exploitable Coal Reserves of 1.57 Billion ton sufficient to produce 5,000 MW for

50 years

Fiscal Incentives Package ( including guaranteed 20% IRR for Coal Mining & Power Projects )

was approved by ECC on Oct 15, 2010

However economic viability cannot be ascertained without approval of Coal PricingMechanism and Infrastructure Projects by Government of Sindh / Government of Pakistan


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Engro Vopak Terminal Ltd.


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Business Highlights

The Company completed 13 years of safe operations without lost work

injury in November 2010

The companys achieved its highest ever throughput for a year of 1,104 kT

vs. 1,063 kT in 2009, including LPG import of 31 kT vs. 40 kT in 2009

Engro Vopak also achieved a first in the history of LPG imports in the

country by handling the largest ship (5,000 tons) to dock in Pakistan


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Avanceon


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Business Highlights

Total revenues of Rs 1,828 million during 2010 vs. Rs 1,614 in 2009

Avanceon Limited posted a consolidated loss of Rs (217) million vs. a profit of Rs 35

million during the same period last year. However US operations posted a profit of

Rs. 72 million.

Sales in Pakistan and UAE declined due to macroeconomic slowdown

Outsourced hours increased from 3,230 hrs (3.6%) in 2009 to 6,443 hrs (9.4%) in

2010


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Engro Rupiya


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Highlights

Achieved the target of Rs. 4 billion withindividuals subscribing to almost 80% of the

issue

Engro Rupiya Certificate has been a successful

alternate for the company to raise funds for its

borrowing requirements from a previously

untapped investor base

Engro intends to develop Engro Rupiya as a long

term source of funding for which it plans to offer

subsequent TFC offerings with the 2nd issue in

2Q, 2011

Corporates,22%

Individuals,

78%

Subscription Breakup

Rs. 3,125 million,2,460 Investors

Rs. 875 million,81 Institutions


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Corporate Social Responsibility Engro contributed over Rs.136 million under its social investments commitment in 2010, as

compared to Rs. 58 million in 2009

Engro was also heavily involved in the relief and rehabilitation efforts following the floods

during the summer of 2010(total budget Rs. 61.75m)

Engro Corporation hosted the first Engro Excellence Awards in January, 2011. The recipients

were selected based on lifetime accomplishment and excellence in their respective fields and

received a cash prize of PKR 5 Million each at an exclusive award ceremony

Recipients of Engro Excellence Award 2011

Sir Syed award for Humanitarianism Abdul Sattar Edhi and Edhi Foundation

Ghalib award for Literature Mushtaq Ahmed Yusufi

Dr Abdus Salam award for AppliedSciences

Dr Ataur Rahman


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Q & A

Thank You

Documents

Security Analyst Briefing - YTD Dec-2010