EPCL: Engro Polymer & Chemicals Limited
First Quarter Mar 2024
EPCL reported a loss of Rs. 1.16 billion before tax for the first quarter ending in March 2024. However, the loss after tax was mitigated by some tax reversals.
The primary reason for the significant decline in profitability is the drastic reduction in gross margin, plummeting from 20% in the first quarter of last year to just 6% this year. Additionally, sales declined by 8% compared to the same quarter last year.
Furthermore, financial charges also saw an increase of over 40% compared to the first quarter of last year.
Unfortunately, the management has not provided any details or reasons for the decline in sales and profitability alongside the announcement of financial results. This lack of transparency is a significant concern regarding listed corporates behavior at PSX, as disclosures often conceal more than they reveal.
EPCL has a commendable and consistent dividend payout history. Its paid-up capital has remained unchanged since 2018.
An interesting note from the Director's Report (FY 2023) states, "In 2024, the PVC outlook hinges on the delicate balance between cost pressures and market demand dynamics. While oversupply and weak demand may suggest price declines, narrow producer margins limit further price cuts. Near-term market firmness is anticipated due to rising production costs, fueled by an upward trend in ethylene prices. Ethylene prices are expected to rise to USD 1,000 by year-end, translating to higher production costs. Geopolitical tensions in the Red Sea could further tighten supply, offering additional support for price increases. The second half holds potential for margin improvement as demand strengthens."
EPCL's stock closed at a market price of Rs. 44.42 (-4.62%). Over the past year, the stock has experienced a marginal decline of around 3%, compared to a market rise of over 73%.
EPCL is closely held, with a free float of 25%. It has approximately a half-percent exposure in the KSE100 Index and close to 1% in the KMI30.
Background: Engro Polymer and Chemicals Limited, a subsidiary of Engro Corporation Limited (itself a subsidiary of Dawood Hercules Corporation Limited), was incorporated in Pakistan in 1997. The company's principal activity involves manufacturing, marketing, and selling Poly Vinyl Chloride (PVC), Vinyl Chloride Monomer (VCM), Caustic soda, and other related chemicals. Additionally, Engro Polymer supplies surplus power generated from its power plants to Engro Fertilizers Limited.
EPCL Announcement Mar 2024
EPCL Corporate Briefing Note
