Engro Polymer & Chemicals Limited ( EPCL )

Transcription

1 Engro Polymer & Chemicals Limited ( EPCL ) First Analyst Briefing August 1 st 2008

2 Company Snapshot Sole manufacturer of PVC resin in Pakistan Company established in October,1997 initially as a Joint venture of Engro Chemical Pakistan Limited ( 50% ) Asahi Glass Company Limited (30%) Mitsubishi Corporation Limited ( 20%) 100,000 tons PVC plant commissioned at Port Qasim, Karachi in Nov,1999 Making five grades of PVC resin 58, 60, 67R, 67S, and 72.

3 Our Mission To create value for our customers by offering quality products at competitive price, on time deliveries, business development and technical support to achieve growth. We are also committed to enhance value for our stakeholders while maintaining high standards of ethics, safety & environmental responsibility

4 Our Present Operations PVC Applications Pipes VCM PVC Shoes Artificial Leather Film/Shrink wrap Compounding Rigid Sheet Garden Hose Geomembrane Drip Irrigation

5 Our Distribution Network EPCL Dealers (4) North (3) South (1) Customers Warehouses Karachi Lahore Islamabad Faisalabad Multan Quetta

6 Our Business VCM imported under contract from Qatar Vinyl Corporation (QVC), accounts for 90-95% of total variable cost Catalysts, gas and packing material are other variable costs Domestic sale in 2007 was the highest ever at 94 KT and resulted in complete sell out of plant production EPCL price generally follows international price trend and local import factor EPCL Volumes and Margins KT $/ton Domestic Exports Delta

7 Performance Highlights Operating Summary (In '000' tons) Production Domestic Sales Export Sales Financial Summary (Rs million) Net Sales Revenue 2,590 2,712 3,236 3,950 5,100 5,474 5,343 6,040 Operating Profit (78) Profit After Tax (342) (184) Dividends Shareholders Equity 1,432 1,248 1,433 1,596 1,872 1,998 2,048 5,178

8 PVC Consumption Pattern in the region 10 Kg/Person Thailand China Indonesia India Pakistan Per Capita Consumption Source: CMAI

9 EPCL HIGHLIGHTS 1H 2008

10 PVC MARKET ENVIRONMENT 1H 2008 International PVC prices sustained rising trend and reached record level in 1H 08 PVC resin Imports were negligible i.e. 370 MeT compared to 3,500 MeT in 1H 07 EPCL volumes increased by 14% compared to same period last year. The growth in demand was driven by construction, infrastructure and agriculture sectors. EPCL Market share in PVC domestic market (including scrap imports) was 77%

11 EPCL Application Wise Sales - 1H 2008 Film / Packaging 2% Shoes 7% Rigid Sheet 3% Compounding 8% Twist / Shrink wrap 2% Others 6% Garden Hose 10% Art. Leather 10% Pipe 52%

12 EPCL Key Events 1H 2008 No NEQS excursion Achieved best ever 1 st half production (49,800 MT vs 48,650 MT in 2006) Achieved best ever Quarterly Sale of 30,240 MT in Q Received ACCA-WWF Environment award for third consecutive year, invited to panel of judges. Best ever Quarterly Rs 237 M and First Half Rs 427 M Profit After Tax

13 OPERATING HIGHLIGHTS 1H H 2008 Actual 1H 2007 Actual Full Year 2007 Actual Production KT Sales Volume Domestic KT Sales Volume Export KT EPCL PVC VCM Margin $/ton Export Netback $/ton

14 EPCL PVC VCM DELTA USD PER TON Jun-07 Jul-07 Aug-07 Sep-07 Oct-07 Nov-07 Dec-07 Jan-08 Feb-08 Mar-08 Apr-08 May-08 Jun-08 MONTH

15 FINANCIAL HIGHLIGHTS 1H 2008 Half year ended June 30, 2008 Half year ended June 30, 2007 Explanation Net sales 4,368,754 3,015,761 Cumulative effect of price and volume (domestic volume higher by 6,781 MT and export of 1,244 MT). Additionally the increase in price w as on average of USD178 per ton in addition to deval benefit Less: Cost of sales 3,457,100 2,587,515 Impact of higher contribution margin due to favorable VCM-PVC margin and higher volume Gross profit 911, ,246 Less: Distribution and marketing expenses 149, ,005 Less: Administrative expenses 69,639 41,822 Impact of higher transportation cost (on back of rise in oil price), salary increase and other expenses in line w ith higher inflation Variance include 18M provision created against VCM custom duty currently under litigation and 65M loss from currency flucutations. Also, Workers profit particiapation Less: Other Operating expenses 132,091 21,160 fund and Workers Welfare Fund accrual increased by 28M in the current period due to higher net income versus accual last year for the same period. Add: Other operating income 88,420 36,239 Interest income on surplus funds + equity fund invested and sale of electricity to ECPL Operating profit 649, ,498 Less: Finance costs 15,560 22,223 High product demand and favorable delta reduced our w orking capital financing requirement + repayment of few long term loans Profit before tax 633, ,275 Taxation has increased due to higher profitability Less: Provision for taxation 206,398 81,933 Profit after tax 427, ,342 Earnings per share - basic and diluted (Rupees) Due to increase in number of shares outstanding Dividend 252, ,800 Profit available for appropriation 489,802 75,369

16 EPCL PVC EXPANSION AND BACK INTEGRATION

17 Expansion and Back Integration Plan. Key Features Relocated EDC/VCM plant from FPC Baton Rouge New PVC Plant of 50 kt from CNCEC 103 kt Chlor-Alkali Plant from CNCEC Integrated utilities for the entire Complex Project Commissioning Additional PVC capacity of 50 KT expected to come online in 4Q 2008 Integrated complex is planned to be completed by the end of second quarter 2009.

18 Expansion and Back Integration Plan Textiles 1.5 MT Caustic Soda Soaps & Detergents Water Treatment Salt Others Existing EPCL Domestic 0.6 MT 0.83 MT 1.0 MT Energy Chlorine EDC VCM PVC 2,500 KWH Ethylene 0.18 MT Export 0.29 MT

19 Rationale for Expansion & Back Integration PVC EXPANSION: PVC resin Domestic Market expected to grow well, and EPCL domestic demand expected to reach capacity by end of 2007 VCM : Availability of VCM in region expected to remain tight with growing competition CHLOR ALKALI : Sole manufacturer in South with better Margins due to 100% chlorine utilization for value added PVC Proximity to port for exports 100% Captive Power (Gas based) Ion Exchange Membrane Process

20 EPCL Back Integration Margin 1,800 1,600 1,400 1,200 $/ton 1, Mar-94 Dec-94 Sep-95 Jun-96 Mar-97 Dec-97 Sep-98 Jun-99 Mar-00 Dec-00 Sep-01 Jun-02 Mar-03 Dec-03 Sep-04 Jun-05 Mar-06 Dec-06 Sep-07 Jun-08 PVC Ethylene Margin - Back Integration

21 Contribution Margin Comparison Before Expansion and Back Integration Post Expansion and Back Integration USD/Ton VCM 831 Others Catalysts and chemicals 19 Utilities 19 Packing and Bagging 15 TOTAL VARIABLE COST 884 USD/Ton Salt 11 Ethylene 637 Others Catalysts and chemicals 40 Utilities 191 Packing and Bagging 18 TOTAL VARIABLE COST 897 Post Expansion and Back Integration Post Expansion and Back Integration REVENUE USD/Ton REVENUE USD/Ton PVC 1,162 NAOH - TOTAL REVENUE 1,162 PVC 1,162 NAOH 373 TOTAL REVENUE 1,535 All numbers given in per ton of PVC Numbers based on 1H 2008 results

22 Existing shareholders Shareholding structure after offer of sale is as follows:- Shareholding No of Shares Engro Chemical Pakistan Limited 56% 292,400,000 Mitsubishi Corporation 11% 57,000,000 International Finance Corporation 15% 76,200,000 EPCL Employees Trust 3% 18,000,000 Private Placement Investors 5% 26,767,677 General Public 10% 50,000,000 Total 100% 520,367,677

23 EDC / VCM Plant in Baton Rouge USA June 2007 December 2007

24 PVC II Construction Site Cyclones

25 UTILITIES CONSTRUCTION SITE Cooling Tower Effluent Treatment Pond De-min Water Plant Pipe Rack