Engro Polymer (EPCL) Q1 earnings review

Foundation Securities Pvt Ltd has just released an update on Engro Polymer & Chemicals Limited’s (EPCL) recent quarterly results. Here are the important points from the EPCL earnings announcement:

Overview

EPCL, a key player in the chemical industry, faced challenges in the first quarter of CY24. The company reported a loss per share (LPS) of Rs0.65, marking a significant decline compared to the same period last year.

Factors Impacting Performance

PVC-Ethylene Margin Decline

EPCL’s profitability took a hit due to a 30% year-over-year decrease in PVC-Ethylene margin. This decline, with an average margin of US$303/ton during 1QCY24, compared to US$433/ton in the same period last year, contributed to the negative performance.

Rise in Administrative Expenses

Administrative expenses surged by 147% year-over-year, primarily due to high inflation experienced during the preceding year, adding pressure to EPCL’s financials.

Other Expense Reduction

While other expenses declined significantly by 97% year-over-year in 1QCY24, compared to the same period last year, this was attributed to lower foreign exchange losses and reduced expenses amid lower profitability.

Financial Costs

EPCL witnessed a 42% year-over-year increase in finance costs during the first quarter of CY24, driven by a 28% rise in borrowing and record-high interest rates.

Outlook

The outlook remains challenging for EPCL. With global economic slowdown impacting PVC prices and PVC-Ethylene International margin expected to remain range-bound, EPCL’s profitability may face further pressure.

Financial Highlights

Here are the financial highlights for Engro Polymer & Chemicals Limited (EPCL) in the first quarter of CY24:

Rs (Million)	1QCY24	1QCY23	YoY Change	QoQ Change
Net Sales	16,565	17,978	-8%	-14%
Cost of Goods Sold	15,500	14,387	8%	10%
Gross Profit	1,064	3,591	-70%	-79%
Distribution & Marketing Expenses	142	142	0%	-64%
Administrative Expenses	677	274	147%	-6%
Other Expenses	21	764	-97%	-124%
Other Income	285	438	-35%	-49%
Finance Cost	1,664	1,170	42%	605%
Profit Before Tax (PBT)	(1,156)	1,678	-169%	-126%
Tax	(371)	489	-176%	-153%
Profit After Tax (PAT)	(784)	1,189	-166%	-121%
EPS – Basic	(0.86)	1.14
EPS – Diluted	(0.65)	0.86
DPS – Ordinary	–	1.00
DPS – Preference	–	0.50
Gross Margin	6.4%	20.0%
Net Margin	-4.7%	6.6%
Effective Tax Rate	32.1%	29.1%

Disclaimer:
The information in this article is based on research by Foundation Securities Pvt Ltd. All efforts have been made to ensure the data represented in this article is as per the research report. This report should not be considered investment advice. Readers are encouraged to consult a qualified financial advisor before making any investment decisions.