KARACHI, June 24: Early Friday morning, Engro Corporation announced the “Commercial Operations Date” (COD) of its 100 per cent subsidiary, Engro Fertilizers Limited.

The much-awaited COD was declared as Friday the 24th of the month (same day as the announcement). The fertiliser to food conglomerate stated that the plant was capable of producing 1.3 million tons of urea per annum and that it had been “satisfactorily producing on-spec urea at expected production levels (80 per cent) considering the gas curtailment currently under way.”

That was perhaps the only exciting piece of news at the stock market for the day.

On trading following the announcement, the share in Engro lost Rs1.05 on the day’s highest volume of 5.8 million shares.

Many analysts said that investors’ fears were stoked by heavy leverage and doubts over continuity of gas supply to the new plant.

Almost all major brokerage houses made a dash to convey the news to their clients, alongside their assessments.

Analysts said that it would be “remembered as the day on which the world’s largest single train urea plant in Daharki finally came to life”.

Engro’s new plant has been set up at a cost of $1.1 billion and holds total capacity to produce 1.3 million tons per annum. The plant was currently receiving gas supply of 80mmcfd against an allotted supply of 100mmcfd. At current levels, the plant is producing 3,467 tons/day of urea. “This is going to go well with Engro Corporation as the company’s wholly owned subsidiary Engro Fertilisers will now be equipped with additional supply of between 425,000 to 475,000 tons of urea,” commented one analyst.

Another said that after several delays in the COD of the new plant, the investors were getting increasingly concerned for company’s fat leverage (total debt at Rs132billion, whereas the total worth of the company stood at Rs168billion mark) and thus concern over the company’s repayment ability. Analyst said that there was market talk of Engro Corporation getting its mammoth debt restructured.

“Those fears still linger, though less intensified as plant’s COD is expected to beef up the revenue side of the company,” affirmed the analyst. But he added that the above-mentioned fears would once again be revisited if the world’s largest urea plant faces further announced or unannounced gas outages.

“Such a situation can end up putting further pressure on Engro Corporation’s balance sheet as fertiliser subsidiary is a life line to the conglomerate and contributes nearly 60 per cent to the company’s net profit,” said he.