9M 2016 BUSINESS REVIEW

Transcription

1 9M 2016 BUSINESS REVIEW 31 st October, 2016

2 KEY HIGHLIGHTS 3Q 2016 Revenues grew as compared to the same period last year on account of increased sales in Fertilizer businesses due to subsidy implementation, higher PVC domestic volumes along with higher availability and utilization of LNG operations 41,066 37,163 Consolidated profit after tax was PKR 3,064 Mn in 3Q 2016 vs. PKR 874 Mn in the same period last year translating into a basic EPS of 5.85 vs The variation is mainly due to an impairment loss of PKR 2,138 Mn against Rice processing plant last year. Interim dividend of PKR 8 per share was announced with 3Q 2016 results Engro Onaaj wheat pilot project concluded in August. It is currently in the process of a phased closure by the year-end Also during the quarter, A.T.S communicated to the SECP and PSX, about their withdrawal of intention to acquire Engro Polymers On Oct 5,2016, FrieslandCampina Pakistan Holding B.V. made a Mandatory Tender Offer (MTO) to acquire 49,828,746 ordinary shares of EFoods, representing 6.5% of the total issued ordinary shares of EFoods at an offer price of PKR per share. Revenue (PKR Mn) 3, PAT* (PKR Mn) Actual 3Q 2016 Actual 3Q 2015 *Profit attributable to owners of the holding company

3 KEY HIGHLIGHTS 9M 2016 Consolidated profit after tax was PKR 8,583 Mn in 9M 2016 vs. PKR 8,880 Mn in the same period last year translating into a basic EPS of vs Cumulative dividend payout along with these results is PKR 20 per share Elengy Terminal s shareholding was reduced to 80% during this 107, ,918 period upon equity disbursement by IFC EFERT divestment completed in June, ECorp s shareholding brought down to 56.45% Revenue (PKR Mn) 8,583 8,880 EFoods SPA signed with Royal FrieslandCampina (RFC) for sale up to 51% Finance Act 2016 was approved with many adverse impacts for the group including withdrawal of Income Tax exemption from Inter- Corporate Dividends under Group Relief, imposition of 25% Regulatory Duty on powdered milk and super tax PAT* (PKR Mn) Actual 9M 2016 Actual 9M 2015 *Profit attributable to owners of the holding company

4 FINANCIAL HIGHLIGHTS 9M 2016 Revenue PAT* Rs. Million 9M'16 Actual 9M'15 Actual 9M'16 Actual 9M'15 Actual Engro Corp (Standalone) 5,840 6,232 21,099 10,453 Engro Fertilizers 40,911 52,276 5,745 9,590 Engro Foods 34,311 37,263 2,595 2,601 Engro Polymer 16,610 17, (813) Engro Powergen Qadirpur 8,106 9,921 1,527 1,398 Engro Agriproducts 667 1,628 (356) (3,073)** Engro Vopak 2,336 1,891 1,511 1,198 Engro Corporation (Consolidated) 107, ,918 8,583 8,880 Notes: * Subsidiaries profit-after-tax numbers are reported as 100%. Engro Consolidated profit-after-tax numbers excludes non-controlling interest and includes the results of LNG and Power businesses. ** - Inclusive of impairment loss of Rs.2,138 Mn

5 1Q' 12 2Q' 12 3Q' 12 4Q' 12 1Q' 13 2Q' 13 3Q' 13 4Q' 13 1Q' 14 2Q' 14 3Q' 14 4Q' 14 1Q' 15 2Q' 15 3Q' 15 4Q' 15 1Q' 16 2Q' 16 3Q' 16 ECORP CONSOLIDATED LONG TERM DEBT SUMMARY PKR Mn 120, ,000 80,000 60,000 40,000 20, , Debt Level (Rs.Mn) LT Debt 93, ,325 Debt to capital 59, , Opening LT Debt (external): Additions during the period: Amortization/FX change: Repayments during the period: Ending LT Debt (external): Rs.59,583mn Rs.36,714mn (Rs. 1,051mn) (Rs. 20,656mn) Rs.74,591mn 100.0% 90.0% 80.0% 70.0% 60.0% 50.0% 40.0% 30.0% 20.0% 10.0% 0.0% 15.3% 10.9% 3.9% 6.1% 9.7% 48.8% 5.3% Subsidiary wise breakdown Powergen Thar Foods Powergen Qadirpur ECorp Elengy Polymer EFert 69.5% 30.5% Foreign/ Local breakdown

6 FERTILIZERS

7 FERTILIZERS UREA & PHOSPHATE MARKET 3Q 2016 witnessed a turnaround in urea industry sales as off take was 55% higher vs. 3Q 2015 mainly due to subsidy announcement by the GoP towards the tailend of 2Q 2016 which led to better farmer economics on cotton and rice. That said, YTD industry sales stood lower by 12% vs. 9M 2015 on account of weak farmer economics particularly in 1H With regards to subsidy, the GoP in Budget 16 announced urea price reduction to PKR1,400/bag from previous PKR1,790/bag through a combination of price cut: PKR50/bag by manufacturers, subsidy: PKR 156/bag and GST reduction from 17% to 5% Urea Industry (MT) 9M M 2015 Opening Inventory Production Imports Sales Closing Inventory % Urea - 9M % 7% 1% 30% Domestic Urea production rose by 15% vs. 9M 2015; due to better gas availability in the Mari network and production through LNG As a result of higher production partially offset by higher demand in 3Q, industry urea inventory at the end of 9M 2016 stands at ~1,571 KT compared to 773 KT at the end of 9M 2015 Local phosphate industry sales were at 922 KT in 9M 2016 vs. 591 KT same period last year (growth of 56%) mainly due to continued subsidy on phosphates The GoP extended the subsidy on phosphates in Budget 16. Current subsidy stands at PKR 300/bag (effective: June 25, 2016), down from previous PKR500/bag 55% Engro Fauji Agri Tech DH Fatima NFML DAP - 9M % 26% 4% 38% Engro Fauji Fatima Pvt Importers * Source: Company Estimates M 2016 Business Business Results Results

8 EFERT BUSINESS HIGHLIGHTS Both plants operating since July 2013 due to gas availability 9M 2016 Urea production stood at 1,397 KT, compared to 1,472 KT in 9M 2015 due to planned turnaround Urea Operations 9M M M 2016 Urea sales stood at 1,022 KT, compared to 1,295 KT in 9M 2015, in-line with the industry trend mainly due to poor farm economics and price uncertainty till the budget announcement in June ,397 1,472 1,022 1,295 EFERT slightly lost market share as other players in the market offered higher discounts due to the current oversupply situation EFERT sold 242KT of DAP in 9M 2016 vs. 151 KT in 9M 2015 EFERT 9M 2016 PAT stood at PKR 5.7 Bn vs PKR 9.6 Bn in 9M 2015 Interim dividend of PKR 2.5 per share was announced with 3Q 2016 results (aggregating to Rs.4.5 YTD). Financial performance of the Company was impacted mainly due to depressed volumetric sales and margins due to price cuts Financial charges continue to decline mainly due to debt servicing, rate reduction and repricing/ refinancing of loans Production (KT) Sales (KT) M 2016 Business Business Results Results

9 EFERT OTHER HIGHLIGHTS GIDC The company is paying GIDC on current billing excluding concessionary gas For GIDC on concessionary gas, the Company obtained a stay order in 2015 and as such, no GIDC is being paid or accrued for the concessionary gas being supplied to the Enven plant. Subsequent to the quarter end in October, Sindh High Court has declared the GIDC Act, 2015 as ultravires i.e. unconstitutional and in consequence thereof, the levy of GIDC since its inception in GIDC Act 2011 has been declared as void ab initio (as the GIDC Act, 2015 intended to validate GIDC retrospectively since 2011). The Court has further declared that all amounts that have been collected to date under the GIDC are liable to be refunded/adjusted in future bills. GIDC on concessionary gas is in direct contravention with the Fertilizer Policy and our Gas supply contracts on the basis of which we invested USD 1.1 Billion to expand our fertilizer manufacturing capacity Gas Update As things stand, EFERT continues to operate both its plants pending a formal gas allocation of 26mmscfd Outlook Given better gas availability, the industry will likely remain in a long term supply overhang Continued high inventory levels within the industry, despite an uptick in sales volumes in 3Q continue to put financial burden on manufacturers M 2016 Business Business Results Results

10 FOODS

11 EFOODS BUSINESS HIGHLIGHTS The company posted a profit after tax of PKR 2,595 million for 9M 2016 as compared to PKR 2,601 million for same period last year Dairy & Beverages Volumes in Olpers and Omung have both grown year on year, but volumetric growth remained under pressure in the Tea Whitener segment due to changes in tax regime and increased competition. Appropriate steps involving targeted brand investments, educational campaigns and an optimised distribution strategy have been deployed to address the changing business environment and to maintain market leadership. Despite lower sales, the profitability was similar due to lower milk procurement prices, lower fuel and energy costs along with fixed cost savings Ice Cream & Frozen Desserts Revenue increase of 6% in 9M 16 vs. same period last year 9M M 2015 Dairy & Juices (PKR Mn) 34,252 30,950 2,458 2,487 Revenue PAT Ice Cream (PKR Mn) 3,354 3,163 Contribution margins increased to 51% in 9M 16 vs. 48% in same period last year Others Super-tax and revaluation loss of farm animals were one-off expenses booked in 1H, negatively impacting the profitability M 2016 Business Business Results Results Revenue 203 PAT 101

12 RICE

13 USD/Ton USD/Ton RICE BUSINESS HIGHLIGHTS Export Prices have stabilized around $650/MT. Export margins are low and limited deal making as local prices remained higher than export prices Local prices of white rice took a hit of around 5 7% due to Iran seasonal import ban Through implementation of better processing strategy and online palm testing, the company achieved higher recoveries vs. last year Paddy processing was lower due to management s decision to reduce open position taking on paddy An external quality audit by Bureau Veritas for quality re-certification was successfully completed and improved EEAP s rating from B to A. EEAP has the highest number of quality certifications amongst rice players in Pakistan Rice & Flour pilot concluded in August 2016 with Flour business discontinued while Onaaj Rice continued in wholesale channel The company posted a loss after tax of PKR 356 Mn for 9M 2016 as compared to loss after tax of PKR 3,073 Mn for same period last year, which included an impairment loss of Rs.2,138 Mn M 2016 Sales Volume including exports (KT) M 2015 Brown Export Prices 19.6 Jan Feb Mar Apr May Jun Jul Aug Sep SB FB (PAK) Pusa Brown (IND) 1121 & SBW Export Prices Jan Feb Mar Apr May Jun Jul Aug Sep SB FW (PAK) 1121 PB (IND) M 2016 Business Business Results Results

14 PETROCHEMICALS

15 January February March April May June July August September October November December PETROCHEMICALS BUSINESS DYNAMICS PVC Ethylene Core Delta USD/Ton PVC Market Size KT Imports 9M M 2015 Domestic Overall PVC market has increased by 20% mainly due to growth in construction sector, textile, leather, cement & steel industries etc. For 3Q 2016, PVC Ethylene core delta averaged at $ 304/MT as compared to $ 253/MT and $225/MT for 2Q 2016 and 1Q 2016 respectively PVC - Ethylene core delta improved due to higher PVC prices backed by strong demand and supply tightness in the international market M 2016 Business Business Results Results

16 PETROCHEMICALS BUSINESS HIGHLIGHTS Company has maintained its operational ability at optimum level and remained comfortable on the production front leading to cost optimization PVC domestic sales remained strong due to strong downstream demand and firm economic sentiments Company achieved its highest ever PVC sales and production in 9M M 2016 Revenues (PKR Mn) 16,610 17,064 9M 2015 PAT/(LAT) (PKR Mn) 32 (813) During the quarter, the Company posted a 12% volumetric Production (KT) growth on YoY basis and secured a market share of 80%* in the domestic PVC market Domestic caustic sales performed in line with the same period last year as the market remained competitive PVC VCM Caustic Soda Variance as compared to 9M 2015 was witnessed on account of: Higher domestic sales of PVC 127 Sales Volume** (KT) 113 Cost optimization and operational efficiency Lower financial charges * (Internal Estimate) PVC **Domestic Sales Caustic Soda M 2016 Business Business Results Results

17 POWER

18 EPQL BUSINESS HIGHLIGHTS The decline in Net Electrical Output and Load Factor was primarily on account 9M M 2015 of power purchaser s (NTDC) auto transformer fire incident which occurred on January 21, 2016 and forced the plant to remain on standby mode until the completion of transformer repair. Normal operations resumed from April 29, 2016 onwards Net Electrical Output (GWh) 845 1,023 The Plant was entitled to full Capacity Purchase Payments (CPP) throughout the period EPQL achieved PAT of PKR 1,527 Mn for 9M 2016 vs. PKR 1,399 Mn in 9M 2015 Load Factor 73.9% 60.2% PAT was higher mainly due to PKR 42 Mn impact of higher periodic weighing factor (PWF) and PKR 99 Mn one-off insurance claim during the first half The Company had been assigned a higher PWF in 1H 2016 (average PWF 1H 2016: 1.2 vs average PWF 1H 2015: 1.0). This arrangement generated a favorable timing difference of 330m in 1H which has been reversed in 3Q to the extent of PKR 288 Mn which is reflected in the Company s gross profits. The remaining Billable Availability Factor 100.2% 99.6% amount will reverse in 4Q 2016 which carries a lower PWF of 0.8. It is pertinent to note that as per the PPA, the average PWF for the complete year has to be at M 2016 Business Business Results Results

19 CHEMICAL STORAGE & HANDLING LNG

20 CHEMICALS STORAGE & HANDLING / LNG Engro Vopak Terminal The company recorded an increase in top and bottom line mainly due to positive tariff impact of higher LPG import handled and LNG services provided by the company as compared to same period last year EVTL won the Global Service Excellence Award 2015 emerging as the best amongst 67 terminals in 25 countries of the Vopak world Cash dividend paid was PKR 1,440 Mn in 9M 16 compared to PKR 1,215 Mn for similar period last year 9M M 2015 Revenue (PKR Mn) 2,336 1,891 PAT (PKR Mn) 1,511 1,198 LNG Business Update The company achieved Financial close on 10 th March, 2016 During the first half, the company entered into the 2nd year of contract whereby it is supposed to supply 400mmscfd to SSGC The Company lost its case against Custom Duty on FSRU and paid Rs 1.3 billion SSGC nomination was successfully met each day of the quarter. The terminal handled 32 cargoes and the total regasification during the 9M was 94.5 Bcf M 2016 Business Business Results Results

21 THAR COAL PROJECT

22 Thar Update The projects envisage a 6.5 million tons per annum mine under Sindh Engro Coal Mining Company (SECMC) in the first phase and the development of 2 x 330 MW mine mouth power plants under Engro Powergen Thar Financial close of both Thar mining and power project was achieved on 4th April Chinese Contractors for both the mining and power projects fully mobilized At the mine site, round-the-clock Over Burden (OB) removal is in progress ~8 out of 112 million completed at September end (slightly ahead of schedule) Work fronts being created during lean construction period to shorten project timeline: Chinese Accommodation Facilities, Detailed Topography and Geotechnical survey, Phase I of Temporary Site Facilities (TSF), and Piling for Unit 1 has been completed Construction of Stack Foundation, TSF Phase II, Turbine Hall Building, 7km long Access Road, & Boundary Wall and Piling for Unit 2 is in Progress can M 2016 Business Business Results Results

23 Thar Project Update EDS Project Status Temporary Service Facility Current Site Overburden Dump M 2016 Business Business Results Results

24 Equity Breakdown SECMC Phase 1 USD Mn % Break up of Project Cost Total Debt % Equity % Total Project Cost % Break up of Total Debt FCY Debt % LCY Debt % Total Debt % EPTL USD Mn % Break up of Project Cost Total Debt % Equity % Total Project Cost 1, % Break up of Total Debt FCY Debt % LCY Debt % Total Debt % SECMC Equity (USD Mn) Equity Amount Percentage Holding* GoS % Engro Powergen % Thal % HBL % Hubco % CMEC % Total Ordinary Shares % CPIM Preference Share** Total Equity EPTL Equity (USD Mn) Equity Amount Percentage Holding* EPL % CMEC % HBL % Liberty % Total Ordinary Shares % CMEC Preference Shares** Total Equity * Percentage holding based on total equity over the course of the project and calculated based on number of shares ** Tenor of the preference shares is equal to the life of the respective projects M 2016 Business Business Results Results

25 Important Disclaimer THIS PRESENTATION IS NOT AN OFFER OR SOLICITATION OF AN OFFER TO BUY OR SELL ANY SECURITIES OR ANY INVESTMENT. This presentation has been prepared by Engro Corporation Limited ( Engro ) solely for information purposes. No representation or warranty express or implied is made thereto, and no reliance should be placed on, the fairness, accuracy, sufficiency, completeness or correctness of the information or any opinion contained herein or any opinion rendered thereto. The information contained in this presentation should be considered in the context of the circumstances prevailing at the time and will not be updated to reflect any developments that may occur after the date of the presentation. Neither Engro nor any of its respective subsidiaries, affiliates, officials, advisors, associates, employees or any person working for, under or on behalf, shall have any responsibility and/or liability of any nature whatsoever (in contract or otherwise) for any loss whatsoever arising from any use of this presentation or its contents or otherwise arising in connection with this presentation. This presentation does not constitute or form part of a prospectus, offering circular or offering memorandum or an offer, solicitation, invitation or recommendation to purchase or subscribe for any securities and no part of it shall form the basis of, or be relied upon in connection with, or act as any inducement to enter into any arrangement, agreement, contract, commitment or investment decision in relation to any securities. This presentation shall not at all be intended to provide any disclosure upon which an investment decision could be made. No money, securities or other consideration is being solicited, and, if sent in response to this presentation or the information contained herein, will not be accepted. The presentation may contain statements that reflect Engro s own beliefs and expectations about the future. These forward-looking statements are based on a number of assumptions about the future, which are beyond Engro s control. Such forward-looking statements represent, in each case, only one of many possible scenarios and should not be viewed as the most likely or standard scenario. Such forward looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those contemplated by the relevant forward-looking statements. Engro does not undertake any obligation to update any forward-looking statements to reflect events that occur or circumstances that arise after the date of this presentation and it does not make any representation, warranty (whether express or implied) or prediction that the results anticipated by such forward-looking statements will be achieved. In addition, past performance should not be taken as an indication or guarantee of future results. Certain data in this presentation was obtained from various external data sources that Engro believes to its knowledge, information and belief to be reliable, but Engro has not verified such data with independent sources and there can be no assurance, representation or warranty as to the accuracy, sufficiency, correctness or completeness of the included data. Accordingly, Engro makes no assurance, representation or warranty as to the accuracy, sufficiency, correctness or completeness of that data, and such data involves risks and uncertainties and is subject to change based on various factors. By attending this presentation, you are agreeing to be bound by the foregoing limitations Business Results