Engro Corporation once again showed its muscles. It said its full year 2011 profits rose by an impressive 21 percent year on year. Engros diversified business units once again helped it battle the troubles its new urea plant faced throughput the calendar year. The conglomerates revenue jumped by a significant 43 percent year on year, as nearly all the business segments showed growth, organically and otherwise. Fertiliser remains Engros core business as 27 percent of the Companys revenues were derived from fertiliser segment - primarily urea. Engros urea production and sales during the year was increased by 31 percent and 33 percent, respectively. But this is not what Engro deems it an ideal situation -as its new Enven plant is designed for producing 1.3 million tons per annum. That the plant was hardly running for a sustainable period is known to one and all as the government could not keep its word on the sovereign guarantee that ensures Engro 100mmcfd gas supply to its new plant. Engro had to take rather the wanted route of increasing domestic urea prices to mitigate the production loss, and it served the purpose well - at least in terms of profitability. Although, the Company has time and again said that is not the option they like opting for. Gross margins for the fertiliser business were seen on the higher side as the new plant is believed to have higher efficiency than its peers, plus whatever little feedstock gas it received, was on concessional rates, as per the agreement, which helped the gross margins clock 53 percent (CY10: 47 percent). Fertilisers contribution to the overall profits was 53 percent, which highlights the high margin nature of fertiliser business in Pakistan. Other arms, such as Engro PowerGen, Eximp and Engro Foods continued to bolster the top line. The power company is believed to be carrying a highly efficient generation plant, which is likely to have contributed significantly towards the bottom line growth. Eximps performance may have suffered a bit as margins on phosphates remained thin during the period. Engro Foods was the growth story of the year as the company marched on to gain market share in almost every segment from dairy to juices and ice-cream. Engro foods share in dairy segment has now clocked an impressive 44 percent as its dairy segment grew by 22 percent versus the industry growth of 9 percent. Engro Foods racked up Rs.30 billion in revenues during 2011 - nearly touching the revenues generated by the Companys core fertiliser business, which shows the stupendous rise of Efoods. Financial charges that nearly tripled during 2011 were the only dampener in an otherwise stupendous income statement. Engros high leveraged balance sheet and its ever growing appetite for diversification and expansion, kept the interest charges considerably high. Things would have been much better, had Engros new urea plant been running at optimal production capacity. On the bright side, the worst might be over at least for now as gas supply surely cannot go any worse than it was in 2011. The businesses are growing and all seems fine for Engro to showcase another year of improved financial performance.
================================================== ENGRO CORPORATION ================================================== (Rs mn) CY11 CY10 chg ================================================== Sales 114,612 79,976 43% Cost of sales 82,531 59,702 38% Gross profit 32,081 20,274 58% Gross margin 28% 25% Other income 2,057 897 129% Finance cost 14,244 5,159 176% PAT 7,811 6,441 21% EPS (Rs) 20.27 17.27 ==================================================
Source: KSE notice
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