Even though Engro reported an improvement of a significant 50 percent in its profits for the nine months ending September 2010, this did not interest investors in the market - the results failed to augment the companys share price. And there are reasons for that too - the companys earnings on a quarter-on-quarter basis moved in the wrong direction despite strong support from the non-core businesses.
The fertilizers business did pretty well, contributing a healthy 70 percent to the bottom line, despite urea sales being hurt in the third quarter due to the unprecedented floods. Superior performance in the pre-flood days mitigated the 38 percent year-on-year drop in the third quarter sales due to the floods, as the total offtake dipped by just 4 percent in the nine months.
Revenues remained on the higher side on the back of a 10 percent increase in urea prices, which were increased after gas curtailment in urea plants across the board. Interestingly though, Engros production during the period actually surged by 4 percent as no plant turnaround took place, creating a win-win situation and aiding the gross margins.
Another fertilizer related business, Engro Eximp, the trading arm of the company, yet again contributed heavily towards the bottom line. Despite a slowdown in imported fertilizer sales, the subsidiary managed to post profits nearing Rs1 billion during the period, owing to higher phosphate prices and huge inventory gains.
Engro Energy provided the power boost to the earnings, as its 89 percent plant availability during the period helped it achieve a Rs377 million net profit. Going forward, an almost similar amount would be reimbursed to the company by Wapda, on the account of the companys losses on the foreign currency loan. Hence, one can expect a bigger contribution from Engro Energy in the coming quarters.
Engro foods has finally turned green, though only a marginal one, after quarters and quarters of loss making - its profits netted around Rs35 million. The star performer was the dairy segment, achieving sales growth of 42 percent and profits of nearly half a billion rupees. The spoilsport turned out to be the infant Omore, which reported losses of nearly Rs300 million. The Food segment seems headed for brighter results in future, especially since the dairy segment has started milking profits.
The PVC business, however, continues to remain a cause of concern for Engro. With losses reaching Rs762 million during the period, the sector eroded the stellar performance achieved by the other segments. The chief reason for this dismal performance was the VCM plant which remained non-operational for most of the period.
With a highly varied portfolio, it is not an easy task to give one verdict on Engro Corporation. The fertilizer business may remain under pressure in the upcoming Rabi season as urea demand is likely to be lacklustre. Engro Eximp maybe a big worry going forward as a slowdown in phosphate demand would halt imports, which would be a big blow to the bottom line as Eximp has been a significant contributor.
The companys financial charges are on a high and are expected to stay on the higher side when interest payments on the new fertilizer plant start. The commencement of the 1.3 million-ton urea plant is eagerly awaited - any delay would not be good for the investors sentiments.
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ENGRO P&L
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Rs (mn) 9MCY10 9MCY09 chg 3QC10 2QCY10 chg
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Sales 53,569 40,561 32% 19,845 16,865 18%
Cost of sales 40,165 31,431 28% 15,723 12,264 28%
Gross profit 13,404 9,129 47% 4,121 4,601 -10%
Gross margin 25% 23% 11% 21% 27% -24%
Other income 861 395 118% 245 481 -49%
Finance cost 4,176 2,018 107% 1,731 1,541 12%
PAT 4,058 2,705 50% 861 1,392 -38%
EPS (Rs) 13.41 8.93 3.04 4.60
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Source: KSE notice
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FFCP&L
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Rs (mn) 9MCY10 9MCY09 chg 3QC10 2QCY10 chg
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Sales 28,505 25,734 11% 8,559 10,448 -18%
Cost of sales 15,788 14,207 11% 4,675 5,658 -17%
Gross profit 12,718 11,526 10% 3,884 4,789 -19%
Gross margin 45% 45% 0% 45% 46% -1%
Other income 2,240 2,076 8% 716 263 172%
Finance cost 838 826 1% 344 230 49%
PAT 7,021 6,639 6% 1,920 2,372 -19%
EPS (Rs) 10.35 9.78 2.83 3.50
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Source: KSE notice
United Bank Limited(UBL)
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PL (Rs mn) 9MCY10 9MCY09 chg 3Q10 3Q09 chg
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Mark-up earned 43,251 46,163 -6.3% 14,771 14,535 2%
Mark-up expenses (18,170) (22,259) -18.4% (6,204) (6,315) -2%
Net Mark-up Income 25,081 23,904 4.9% 8,566 8,219 4%
Provisioning (6,250) (9,395) -33.5% (2,156) (2,691) -20%
Net Mark-up income
after provisions 18,831 14,509 29.8% 6,410 5,528 16%
Non Mark-up income 7,294 8,251 -11.6% 2,565 2,042 26%
Operating revenues 32,375 32,155 0.7% 11,132 10,261 8%
Non Mark-up expenses (13,200) (12,808) 3.1% (4,616) (4,387) 5%
Profit after taxation 8,060 6,367 26.6% 2,860 2,080 37%
EPS 6.58 5.20 2.34 1.70
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Source: KSE notice
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