Engro Polymer's turnaround

After two years of consecutive losses, 2016 has been the turnaround year for Engro Polymer & Chemicals Limited (PSX: EPCL). The firms topline grew by a modest three percent over last year, but lower costs gave a 42 percent higher gross profit. The companys net profit for the year was Rs660 million, as against a loss of nearly the same amount a year ago!

During the year, international PVC prices have seen some ups and downs but maintained a positive trajectory throughout the latter half of the year. Strong demand coupled with supply tightness was the primary driver of price increase, says the last quarterly Directors report. Ethylene prices also remained stable, improving PVC margins.

Locally, PVC demand has been strong on account of robust downstream activity and positive economic sentiment. Meanwhile, the Chlor Alkali segment has been under pressure due to competitive market dynamics, as per the 3Q Directors Report. Nevertheless, lower raw material costs in both segments have improved the companys profitability.

On the production side, the company had achieved its highest ever VCM and PVC production during the nine-month period. Moreover, lower other operating expenses and finance cost also played an important role in boosting Engro Polymers net margins for the year.