Engro Polymer & Chemicals Limited (EPCL) released its 1QCY17 yesterday, which saw the company continue its positive trajectory witnessed in 2016. The company witnessed a decent 19 percent growth in its top line as a result of better PVC margins.
EPCL also saw a decrease in its cost of sales due to the drop in ethylene prices, the primary raw material used by the company in its production. PVC margins have picked up by more than 46 percent in 1QFY17 on a year-on-year basis and coupled with the bearish trend in ethylene prices, this has resulted in an impressive surge in EPCL’s gross and operational profitability.
Another factor in play is that the demand for PVC has picked up and the oversupply in the market is gradually eroding which means the increase in PVC prices will be further strengthened. In FY16 the domestic demand for PVC picked up by 17 percent while EPCL managed to capture 80 percent market share in the segment according to the company’s annual report.
EPCL’s bottom-line increased by more than 50 times and its EPS for 1QCY17 increased to Rs1.27 from the previous year’s Rs0.03 in the same period. There has also been a significant increase in both the gross and net margins on the back of the rising PVC price trend.
The company is also progressing with de-bottlenecking of its plants to augment its annual PVC production capacity by 10 percent which will increase production to 195,000 tonnes. It is expected to be continuing strong demand for PVC on the back of construction boom and CPEC projects in the country. Lastly, it should be noted that there is significant room for improvement in PVC resin consumption with Pakistan having one of the lowest PVC resin consumption capita at 1.03 kg well behind neighbours such as Iran and India.
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