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engro-marchesEngro Corporation despite being in never-ending trouble with its new urea plant registered an impressive 9MCY11 performance with an astounding increase of 34 percent in earnings, year on year. The company registered record revenue touching Rs.800 billion with the fertiliser business at its core contributing a significant share of 28 percent. Engro has been at the heart of urea price increases of late as its new urea plant has been deprived of natural gas supply, which is the raw material for urea manufacturing. Engro produced and sold 34 and 48 percent more urea during 9MCY11, respectively, compared to the same period of last year. The urea price increase was massive during 9MCY11 as Engro, in a bid to protect its primary margin, had had no option but to increase retail prices of urea. Interestingly, Engros fertiliser business margins significantly improved during the period touching 54 percent as compared to 42 percent in the same period of previous year. Gross margins for the company during the period are almost similar to those of FFC which has been minting money over Engros production loss. A lot has to do with the efficiency of Engros new plant which is believed to be more efficient than its base plant. Moreover, the feedstock gas price for the new plant is discounted, which also helps improve its primary margin. That, the new plant hardly got any consistent feedstock supply is altogether a different story though. Engros trading arm Eximp is believed to have posted good returns on its phosphate business as the margins remained significantly high. Engro Energy is also continuing on its merry way - with high efficiency load factors and healthy profits. Engro Polymer though continues to be one black spot in an otherwise clean sheet, as its performance remains far from satisfactory. Although, Engro has so far dealt with urea gas shortage by increasing prices, but like all other things, there is a limit to raising prices and Engro appears unhappy at continuously driving up retail rates. The bottom line will face the strain of heavy financial charges which have started to be expensed - and little to no production from the new plant will make things tough for Engro. The diversified nature of the Companys portfolio is likely to keep things running but Engro would ideally want its new plant off and running - so that it gives respite to the urea prices and farmers.

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ENGRO CORPORATION
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Rs (mn)          9MCY11    9MCY10   chg    3QCY11    3QCY11    chg
==================================================================
Sales           78,824    53,569    47%   32,740    19,845     65%
Cost of sales   56,290    40,165    40%   23,247    15,723     48%
Gross profit    22,534    13,404    68%    9,493     4,121    130%
Gross margin        29%       25%             29%       21%
Other income     1,028       861    19%      429       245     75%
Finance cost     8,659     4,176   107%    4,251     1,731    146%
PAT              5,433     4,058    34%    2,118       861    146%
EPS (Rs)         14.21     11.17            5.62      2.53
==================================================================

Source: KSE notice

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