KARACHI, July 26: Engro Pakistan Limited is expected to announce profit after tax (PAT) in the range of Rs673 to Rs785 million (the first figure representing estimates by Elixir Securities and the second by First Capital Equities). The poll of about half a dozen analysts shows quite wide ranging estimates, that work out to earnings per share between Rs4.40 to Rs5.13. Interim dividend was expected to materialize at Rs2 to Rs3 per share. Engro is to announce its financial results for the first half ended on June 30, 2005 in a board meeting scheduled on Wednesday at 9:30 am.
Analysts at Jahangir Siddiqui Capital markets are looking at PAT between Rs688 to Rs 719 and those at Arif Habib Securities Rs 719.87 million. Analysts at JS said that PAT was expected to show a growth of around 43-49 per cent, compared for the half term. High growth in profitability by Engro was stated to emerge on the back of high urea sales and higher prices during the period.
Elixir Securities said they expected a 39 per cent increase in PAT year-on-year and an interim payout of Rs2.5 per share. Robust demand for urea and a tight supply situation was stated to have pushed urea prices upwards, driving earnings for Engro and other urea manufacturers. “April-May 05 has been a reasonably good quarter for urea manufacturers, with urea off-take (industry) at 1,203KT (+9% YoY) and average prices are up 3-4% YoY”, says Elixir.
Arif Habib Securities thought that earnings could grow by 49 per cent. The company said that improvement in bottom-line was mainly expected to come from higher volumetric sales and improvement in gross margin. “It should be noted that during the 2Q04, the gross margin of the ECPL was badly affected due to plant outage and gas inefficiencies. Resultantly, the gross margin of the company dropped to 16.39 per cent”, said the analysts.
Engro has planned to setup its milk processing facility in Sukkur which is expected to be completed by March 2006. According to the company sources, all the major equipment was on order and civil construction was expected to commence soon. The company would initially invest Rs1 billion while it requires additional Rs1 billion at a later stage, which is expected to be raised through TFC’s. The company believes that project would offer attractive returns however during the initial few years of operations; the project may suffer losses due to substantial upfront investments required to build the milk collection and processing infrastructure and the brand. This is similar to the profit history of company’s other joint ventures and investments where the subsidiaries of ECPL have now started benefiting the company through their surprising dividend, said the analysts.
