ENGRO in CY22

Engro Corporation Limited’s (PSX: ENGRO) consolidated earnings in CY22 have been hit by higher inflation. ENGRO’s revenue growth stood at 14 percent year-on-year during the year, while the conglomerate announced a 13 percent year-on-year decline in earnings for 2022 with a noticeable squeeze in profit margins.

Its fertilizer business – Engro Fertilizer (PSX: EFERT) posted an earnings decline of 24 percent in 2022, which was led by a decline in urea and DAP off take and higher finance cost in 2022. However, the last quarter of 2022 (4QCY22) witnessed a 4 percent year-on-year growth in the bottomline.

In the power sector, Engro Powergen Qadirpur Pakistan Limited ( PSX: EPQL) posted a decline of 8 percent year-on-year in profits due to lower dispatches amid falling demand, and higher costs.

The chemical business (Engro Polymer & Chemicals Limited – EPCL) also posted a 22 percent year-on-year decrease in the bottomline in 2022 due to lower PVC margins and high gas prices.

The food and beverage business - Frieslandcampina Engro Pakistan Limited (FCEPL) was also impacted by high inflation and higher costs in 2022, while it was able to post a positive earnings in the last quarter of CY22 versus a loss in 4QCY21 on the back higher sales volumes and improved gross margins.

Overall, ENGRO’s bottomline benefitted from a decline in other losses such as remeasurment loss on provision for GIDC, and loss allowance on subsidy receivable from GoP; whereas higher finance cost (up by 66 percent YoY) restricted growth.

ENGRO’s management in its analyst briefing yesterday highlighted that its chemical business is likely to weather away the higher interest rates - despite being leveraged - due to the dollar pricing of its products as well as higher economies of scale achieved through higher capacities. On the fertilizer front it believes that the Mari gas compression project, which is underway will provide gas sustainability to the company for the next decade. Also higher prices for MARI gas are likely after the government’s recently announced the gas price hike in the country.