Security Analyst Briefing - Engro Foods · Urea industry off take is estimated at 2.7 mn tons Vs. 3 mn tons in 1H2010 ... Engro FFC Pvt Importers ... Security Analyst Briefing

Security Analyst Briefing YTD June - 2011


F INANCIAL HIGHLIGHTS

Revenue

Rs. Million YTD June

2011

YTD June

2010

Engro Fertilizers 12,146 9,415

Engro Foods 13,652 9,529

Engro Polymer 8,031 6854

Engro Powergen 3,781 2,007

Engro Eximp 7,631 5,161

Engro Vopak 1,014 1,072

Avanceon 705 757

Engro Corporation

(Consolidated*) 46,084 33,724

PAT

Rs. Million YTD June

2011

YTD June

2010

Engro Fertilizers 2,175 2,012

Engro Foods 217 (180)

Engro Polymer (195) (449)

Engro Powergen 745 379

Engro Eximp 314 973

Engro Vopak 478 518

Avanceon (65) (94)

Engro Corporation

(Consolidated*) 3,381 3,397

* Engro Share


FERTILIZER BUSINESS

Security Analyst Briefing 1st Quarter - 2011


UREA MARKET ENVIRONMENT

Urea industry off take is estimated at 2.7 mn tons Vs. 3 mn tons in 1H2010 - 10% decline

o Lower production: 2.35 mn tons Vs. 2.53 mn tons in 1H2010 – 7% decline on account of unprecedentedgas curtailment.

o Lower imports: 240kT Vs. 600kT in 1H2010

International urea prices increased from US$ 417/ton at the beginning of the year to close at US$ 545/tonat the end of June resulting in the landed price of imported urea of approximately Rs. 2,950 per bag asagainst the domestic price of Rs. 1,235 per bag

By keeping domestic prices substantially lower than international prices, the fertilizer industry providedbenefit of approximately Rs. 39 billion to farmers in the 1H-2011 which is ~40% higher Vs. same period lastyear

5

8

39

Direct Subsidy on imports

Govt Contribution (Differential of Feed gas and Fuel gas, net of taxes paid)

Fertilizers Producers Contribution

Total Benefit to Farmer - Rs. 52bn

39

28

1H2011 1H2010

Fertilizer Industry Contribution to Farmers -Rs.bn


PHOSPHATES MARKET DEMAND

Phosphates demand in Pakistan declined to 317kT from 333 kT in 1H 2010

o Decline is due to higher international prices i.e. USD 655/ton in 1H2011 Vs. USD505/ton in 1H2010

Total Phosphate imports during 1H2011 were 149kT vs. 258kT in 1H2010


MARKET SHARES

30%

63%

7%

Phosphates Market share

Engro FFC Pvt Importers

Total Market

Sales Domestic Supply

Urea 2.7 MT 2.35 MT

Phosphates 317 kT 304 kT

52%

12%

21%

4%

9%2%

Urea Market Share

FFC and FFBL NFML EngroDH Pak Arab Agri Tech


BUSINESS H IGHLIGHTSUrea

Revenue from urea sales was Rs. 9.5 bn Vs. Rs. 8 bn last year – an increase of 20%. Increase inrevenue is attributable to:

o Higher urea prices due to pricing of higher gas curtailment levels & greater Enven outages

o Higher sales volumes - 575kT Vs. 491kT in 1H2010 (17% increase) due to production from the new plant, which was 139 kT; consequently Engro’s urea market share improved to 21% in 1H2011 from 16% in 1H2010

Due to gas curtailment urea production at base plant was 453kT Vs. 504kT achieved in 1H2010 – adecrease of 10%

PAT from urea business was Rs. 1.8 bn Vs. Rs. 1.5bn in 1H2010

Zarkhez

Revenue from Zarkhez was Rs. 3 bn Vs. Rs. 1.6 bn in 1H2010

Sales were 61 kT Vs. 45 kT during the same period last year - Increase is attributable to higher deltain absolute prices vs. phosphates and lower availability of potash & phosphates

PAT was Rs. 314 mn Vs. Rs. 187 mn earned in 1H2010


BUSINESS H IGHLIGHTS – CONT.

Engro Fertilizers results include interest capitalization upto April 30, 2011 for the newexpansion plant, beyond that it has been expensed out – after tax impact Rs. 844 million

Under the IAS, capitalization of borrowing cost should cease when all the activities necessary toprepare the asset for its intended use or sale are substantially complete.

No substantial activities relating to the Ammonia and Urea units were carried out after April 30,2011. Beyond that activities were primarily related to the Carbon Dioxide Recovery Unit andHydrogen Recovery Unit which got completed on June 09 and June 23 respectively.

Purchased Products (Phosphates)

Revenue from purchased products was Rs. 7 bn as compared to Rs. 5 bn in 1H2010 - dueto higher prices

Engro imported 122kT of Phosphates during 1H2011 Vs. 194 kT in 1H 2010

Phosphates sales were 106 kT in 1H2011 (30% market share) Vs. 103 kT in 1H2010

PAT was Rs. 562mn as compared to Rs. 1,034mn in 1H2010 - windfall trading gains in 1H-2010


BUSINESS H IGHLIGHTS – CONT.Outlook

Continuation of gas curtailment is expected to result in a requirement of around 1.15 MT ofUrea imports for remaining Kharif and upcoming Rabi season

Growing realization that Urea shortage might have significant adverse impact onagriculture output of the country – efforts are being made to increase gas supply to Ureaplants


FOODS BUSINESS



BUSINESS H IGHLIGHTS

Foods business revenue was Rs. 13.6bn Vs. Rs. 9.5bn in 1H2010 - an increase of 43%, led by the dairy andthe juice segment

Foods posted a profit of Rs. 216 mn as opposed to a loss of Rs. (180) mn in the corresponding period lastyear – mainly driven by dairy business profitability i.e. Rs. 491 mn Vs. Rs. 165 mn in 1H2010

UHT volume grew by 20% over the corresponding period last year, driven by Tarang

Foods retained market leadership in UHT segment (41% Vs. 39% in 1H2010)

Juices segment volumes increased substantially – 11 klpd Vs. 2 klpd in 1H2010

Ice-cream business reported revenues of Rs. 1.4bn Vs. Rs. 0.8 bn in 1H2010, an increase of 69% - Omorévolumes increased by 51% (53 klpd Vs. 35 klpd in 1H2010)

Omoré market share increased to 24% in 1H2011 from 17% in 1H2010

Launches

Dairy Omung was introduced with 250ml and 1000ml SKUs - branded as an economical clean milk forthe masses

Olper’s extended its variants line to include Badam Zafran and Rose flavors launched in 250ml SKU inJune.


BUSINESS H IGHLIGHTS – CONT. Launch of two new flavors under the Omoré Premium Dairy Ice Cream multiserve range - Tiramisu and

Strawberry Cheesecake

Additions of two new flavors in Olfrute during the 1H2011 - Apricot and Green Cocktail which were new toPakistani market

Engro Foods Canada

Engro Foods North American operation posted a revenue of USD 1.0 mn during 2 months post acquisition

Private Placement and Listing

Engro Foods Raised Rs. 1.2 billion by issuing 48 million shares, at a price of Rs. 25/share to institutionalinvestors; mainly US & UK mutual funds and local investors

Engro Corporation Limited offered 27 million shares from its holding in the company to the general publicat a price of Rs. 25 per shares (inclusive of a premium of Rs. 15 per share); Public offering was 94%subscribed with the balance taken up by the under writers.

Outlook

Continue to expect growth in all our business segments and are confident of financial performance as per expectations.


RICE BUSINESS


R ICE

The rice trading business, managed by Engro Eximp, exported 6.5 kT of rice during 1H 2011 vs. 1kT in 1H2010.

Rice processing facility achieved commercial production of milling line 1 for brown rice duringthe period; Milling for white rice and parboiling is expected to achieve commercial productionduring the 3rd quarter

Rice business posted a loss of Rs. (248)m during the period – inline with the business strategy


PETROCHEMICALS BUSINESS



BUSINESS H IGHLIGHTS Revenue was Rs. 8 bn Vs. Rs. 7 bn in 1H2010 - an increase of 17%, due to increased volumes and higher

product prices as compared to the same period last year.

VCM production was 35 kT Vs. 14 kT in 1H2010

Company incurred a loss after tax of Rs. (195) mn in 1H 2011 Vs. loss after tax of Rs. (449) mn in the sameperiod last year – loss is primarily due to lower than required VCM production

Outlook

PVC prices are expected to remain high with strong domestic demand from the agricultural andconstruction sector as well as exports to Afghanistan.

VCM operations have been improved over the last year, VCM plant has not been able to achieve stableoperations for extended period at design throughput rates. Extensive efforts are being made to ensuresmooth operations

4246

38

44

Sales Production

1H2011 1H2010

Caustic Soda - kT55

52

4650

Sales Production

1H2011 1H2010PVC- kT


ENERGY AND POWER BUSINESS




Total turnover for the company was Rs. 3.8bn Vs. Rs. 2bn in 1H2010

Qadirpur plant availability remained at 99.7% (940 GWh) of its installed capacity(217MW) adjusted for outage days; dispatched 791 GWh to the national grid during 1H2011 -dispatch factor of 84%

Safe and successful completion of plants first planned outage during the period; alsosuccessfully demonstrated Annual Capacity Test to WAPDA after completing first yearof commercial operations.

Achieved Project Completion (Physical and Financial ) with the Lenders – paid firstinterim cash dividend for 1H, 2011 i.e. 0.86/share

Engro Powergen posted a profit of Rs. 745 mn Vs. Rs. 379 mn in 1H 2010.

Outlook

Company continues to focus on plant performance improvement and modification,and foresees stable operations.

Continue progress on Thar coal project


CHEMICAL STORAGE & TERMINAL BUSINESS




Engro Vopak posted a total revenue of Rs. 1,014 mn Vs. Rs. 1,072 mn in 1H2010 - lowerrevenues on account of lower volumes i.e. 503 MT Vs. 537 MT in 1H2010

Vopak posted a profit of Rs 478mn vs. Rs. 518mn in 1H2010

The Competition Commission of Pakistan decided on EVTL’s exclusivity clause in theImplementation Agreement with PQA and Lotte PPTA complaint on abuse of dominantposition.

CCP concluded that EVTL had not abused its dominant position with Lotte PPTAand did not impose any penalty in this regard.

CCP has imposed penalty of Rs. 10m on EVTL for not taking exemption for itsexclusive rights under Implementation Agreement (IA). The company has filed anappeal in the Sind High Court against CCP decision on exclusivity


AUTOMATION BUSINESS




Avanceon posted revenues of Rs. 705 mn Vs. Rs. 757 mn in 1H2010 – due toweak order generation in UAE

decline in order generation is mainly attributable to tough macro-economicenvironment;

Loss posted by the business was Rs. (65)mn Vs. Rs. (94)mn in 1H2010

International Execution hours were 5,247 Vs. 5,583 in 1H2010 - a fall of 6% dueto lower order generation


Q & A

Thank You

Documents

Security Analyst Briefing - Engro Foods · Urea industry off take is estimated at 2.7 mn tons Vs. 3 mn tons in 1H2010 ... Engro FFC Pvt Importers ... Security Analyst Briefing