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Engro Chemicals profit declines by 22.62 percent

Staff Report

KARACHI: Engro Chemicals Pakistan posted Rs 2.599 billion net profit in the nine months ended September 30, 2009 as compared with net profit of Rs 3.359 billion for the same period of last year.

The decrease in earnings is mainly attributed to lower margins on Zarkhez, lower dividend income partially offset by higher phosphate sales, company announced on Wednesday after its board meeting approved the un-audited financial results for the period under review.

The market demand for urea, during the nine months ended September 30, 2009 was 4.7 million tonnes, an increase of 18 percent over the same period last year (4.0 million tonnes). The increase is attributable to two major reasons, which are, better farm economics for wheat, which led to increased sowing and sowing of BT cotton which requires greater application of urea over conventional cotton varieties.

Domestic production at 3.74 million tonnes was almost the same as compared to 3.73 million tonnes during the same period last year.

International urea prices declined during the period. Current landed price of imported urea is approximately Rs 1,323 per bag as against the domestic price of Rs 730 per bag. By keeping domestic prices substantially lower than international prices, the fertilizer industry provided benefit of approximately Rs 31 billion to farmers.

Industry wide sale of Phosphatic fertilizers increased to 1.13 million tonnes as compared to 0.30 million tonnes for the same period last year. Industry demand remained high primarily due to the decrease in phosphate prices.

Urea sales were 673,000 tonnes, down by 15 percent for the same period last year due to higher inventories carried forward during first quarter of 2008 and lower production during the current period. ECPL plant produced 689,000 tonnes during the nine months ended September 30, 2009 against 740,000 tonnes during the same period last year as a result of a planned turnaround during the second quarter of 2009.

This combined with Government’s decision to distribute imported urea through National Fertilizer Marketing Limited, resulted in decline of ECPL market share to 14 percent vs 20 percent last year. The urea expansion project at Daharki site, at 30th month of execution, is progressing satisfactorily.

The sale of Company manufactured blended fertilizers (Zarkhez and Engro NP) was 72,500 tonnes vs 71,000 tonnes during same period last year. Reduction in sugar cane acreage and reduced availability of financing with sugar cane growers alongwith higher potash prices, caused a decrease in Zarkhez sales which reduced to 37,800 tonnes as compared to 54,000 tonnes during the same period last year. The Company however sold 34,700 tonnes of its Engro NP fertilizer vs 17,000 tonnes in the comparative period. The Company’s sale of imported phosphatic fertilizers, DAP and Zorawar, was 240,000 tonnes vs 54,000 tonnes for the same period last year as a result of higher market demand due to reduction in international market prices.

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