Engros is an interesting story; it should perhaps be a case study taught at local schools in years to come. From a fertiliser firm, it turned into a large conglomerate, from good times to bad and good again in a short span. Engros 9M CY13 financial results speak volumes of the turnaround it has undergone from last year.
At the heart of the revival was the flagship fertiliser business which rebounded stronger than ever before. The fertiliser business accounted for a third of the firms revenue, inching up from the depth of last year when fertilisers share was squeezed to a quarter. The core reason was a much improved gas supply to both the plants--which has been a rare occurrence for Engro in its recent history.
The margins understandably improved as Engro had earlier diverted gas from its old plant to the much more efficient Enven. Improved production also helped better the gross margins from 31 percent in 9M CY12 to 43 percent in 9M CY12 as the new plant receives feedstock gas at much concessionary rates of 77 cents per mmbtu.
A sizeable reduction in finance cost also aided the bottom line growth, which alone in 3Q CY13 accounted for a massive 70 percent of the Companys quarterly profits.
Engros food business has been under little pressure off late evident from its reduced share in the top line and bottom line. It was not long ago, when Engro Foods had surpassed the fertiliser business in terms of revenue generation. This further reiterates that fertiliser remains the core of Engros growth prospects in terms of profitability.
Power generation and rice businesses are believed to have contributed their bit to the bottom line growth with decent performances. Even the polymer business, which had dragged down the bottom line in the yesteryears, has turned back to profits and sizeable one at that.
Going forward, the fertiliser business will continue to depend on the availability of gas, which would determine which way the profits sway. Engro would soon be listing the fertiliser business as a separate entity, which is expected to aid the price discovery for Engro Corporation more efficiently.
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ENGRO CORPORATION=========================================================================
Rs (mn) 9MCY13 Y0Y chg 3QCY13 YoY chg
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Sales 107764 30% 40890 38%
Cost of sales 78961 23% 30154 27%
Gross profit 28803 54% 10736 84%
Gross margin 27% 26%
Admin expense 9703 15% 3281 -44%
Other income 1548 35% 538 434%
Finance cost 10422 -7% 3577 2%
PAT 6411 2584
EPS (Rs) 11.37 4.76
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Source: KSE notice
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