Corporate Briefing

Lahore Stock Exchange

Engro Corporation Limited
Corporate Briefing
Lahore Stock Exchange
February 24, 2011
Corporate Briefing
Lahore Stock Exchange
Presence in Strategic Sectors
Strategic Sectors Engineering Expertise
Government relations
Ability to raise capital for
large scale projects
Knowledge of agricultural
sector
Ability to attract top
quality Human Resources
Agri based economy
One of the fast growing
developing countries
with a growing middle
class
Growing energy demand-
supply gap
Fertilizer
Food and Agri
Business
Power &
Infrastructure
Petro Chemicals
(niche player)
Project management
experience
Business sectors were chosen by combining company strengths with country fundamentals
Vision
To be the premier Pakistani enterprise with a global
reach, passionately pursuing value creation for all stake
holders
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A Diversified Conglomerate
Engro Vopak
Terminal Ltd.
50%
Engro Polymer &
Chemical Ltd
56%
100%
100%
100%
63%
Engro Powergen
Qadirpur Limited
95%
Engro Fertilizers
Ltd 100%
85%
10%
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Presence Across Pakistan
*
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Engro Corporation Limited -Insights
Engro Corporation Limited, formerly known as Engro
Chemical Pakistan Limited, was the result of a
demerger of fertilizer business into a new subsidiary
Engro Fertilizers Limited on Jan 1st 2010.
Engro Corporation is the holding company responsible
to manage talent, core values and investments across
the holding companies
It is now one of Pakistans largest conglomerates with
its portfolio consisting of multiple businesses which
include chemical fertilizers, Petrochemicals, a bulk
liquid chemical terminal, industrial automation, foods,
power generation and commodity trade.
Engro Corporation is one of Pakistan's largest
investors with USD 1.8 Billion invested in the last five
years.
Major shareholders of Engro Corporation Limited
include Dawood Group, Engro employees, annuitants
and their relatives. Other shareholders are local,
foreign institutions and general public
Key Information
* 1Q, 2011
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Businesses
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Esso Pakistan Fertilizer Co. Ltd was incorporated in 1965
Expanded from 173 kT of annual urea production to 273
kT till 1991
Exxon divested its equity in 1991 Management buyout -
Company renamed Engro Chemical Pakistan Ltd
Through expansion and debottlenecking achieved
current annual urea production capacity of 975 kT/annum
Worlds largest single train urea plant of 1.3m ton of
annual production capacity is near completion will
increase total annual production capacity to 2.3 m tons
Engro Fertilizer is a premier fertilizer manufacturing and
marketing company having a portfolio of fertilizer
products with significant focus on balanced crop nutrition
and increased yield
Engro Fertilizer Limited
7
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Massive growth in urea market share from 15% to 33% after production starts from the new
Urea plant.
High focus on health, safety and environment aligned with DuPont safety standards.
To facilitate sale of its products, Engro employs an extensive distribution network which
provides access to the wider market
Exploring offshore expansion opportunities specially in phosphates
Engro Fertilizer Limited (cont)
8
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Engro Foods Limited
Fully owned subsidiary launched in 2006 with all purpose
milk - Olpers
Aggressive growth in revenue fromPKR 3.6b in 2007 to PKR
21b in 2010
Tarang, liquid tea whitener, launched in 2007 was also a
great commercial success.
Current milk processing capacity is 1million lpd
Highest market share of 39% in UHT liquid industry in Nov
2010
Foods has also expanded into ice-cream, Omore, through
commissioning of its 17 million liters per annum facility at
Sahiwal 17% market share in 2010
Plans to expand product portfolio as well as capitalize on
potential opportunities outside Pakistan - Acquisition of a
Halal meat company in North America is in process
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Engro Polymer & Chemicals Limited
Pakistans sole manufacturer of PVC (polyvinyl chloride)
resin was set up in 1997 as a 50:50 Joint Venture with
Mitsubishi & Asahi Glass to manufacture PVC from VCM
with production capacity of 100,000 Tons per annum.
In 2007, Asahi divested its share; Engro Asahi becomes
Engro Polymer & Chemicals Ltd
Recently completed expansion and back integration of
PVC along with a caustic facility at a project cost of USD
265 m
Sole player in PVC and 30%+ market share in Caustic
Soda
Current shareholding - Engro (56%), IFC (15%), Mitsubishi
(11%) and General Public (18%)
Current Annual Production Capacities
(K Tons)
PVC 150
VCM 150
EDC 127
CAUSTIC 106
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Engro Powergen
In 2006, Engro diversified into Energy sector
In 2008, Engro Powergen Ltd was incorporated to undertake
power distribution business. Later, became the holding company
of Engro Powergen Qadirpur Limited
Engro Powergen Qadirpur Limited, Engros first Independent
Power Plant, has set up 217 MW power plant utilizing low btu &
high sulphur permeate gas (a by-product of gas purification
process) which was previously being flared
Lowest Cost IPP among comparable power projects
completed in shortest timeline
Complies with World Bank Emission Standards
Cheapest tariffs among gas fired IPPs and is very high on
power dispatch merit order
9 months of operations have demonstrated better than name plate
capacity and efficiency
Sindh Engro Coal Mining Company, in association with Govt. of
Sindh is working on Thar Mining & Thar Power Energy Project
Project Location
Qadirpur, Sindh
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Engro Vopak Terminal Limited
Modern liquid chemical & LPG terminal set up in 1996 as
a 50:50 JV with Royal Vopak of the Netherlands - the
worlds Largest Bulk Liquid Chemical Handling Company
Vopak offers storage and handling solutions for liquid
and gaseous chemicals, petrochemicals, bio-fuels,
vegetable oils and Liquefied Natural Gas
Engro Vopak handles 70% of liquid chemical imports into
Pakistan
Pakistans first cryogenic storage facility established in
2009
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Business Results
2010
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Engros Performance
1,277
13,068
20,240
34,121
58,152
79,976
2010
2009 2007 2006 2004 1990
134
1,719
2,107
2,834
3,807
6,790
*
Revenues
PAT
Rs. Million
Total
Assets
* Assets as of Dec 31,1989
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Business Wise Financial Highlights - 2010
Revenue
Rs. Million
Full year
2010
Full year
2009
Engro Fertilizers Ltd 19,018 16,231
Engro Foods Limited 21,050 14,665
Engro Polymer & Chemicals
Limited
14,618 11,632
Engro Energy/Engro Powergen 5,727 -
Engro Eximp Private Limited 17,720 10,522
Engro Vopak Terminal Limited 2,303 2,136
Avanceon Limited 1,828 1,615
Engro Corporation
(Consolidated)
79,976 58,152
Profit After Tax
(based on 100%)
Rs. Million
Full year
2010
Full year
2009
Engro Fertilizers Ltd 3,730 2,351
Engro Foods Limited 177 (435)
Engro Polymer & Chemicals
Limited
(770) (194)
Engro Energy/Engro Powergen 1,100 -
Engro Eximp Private Limited 1,732 1,451
Engro Vopak Terminal Limited 1,109 917
Avanceon Limited (195) 24
Engro Corporation
(Consolidated)*
6,790 3,807
*Engro Share
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Fertilizer Business
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23
17 64
Total Benefit to Farmer - Rs. 104 bn
Govt
Contribution
(Differential of
Feed and Fuel
gas prices, net
of taxes paid)
Direct subsidy
Fertilizer
producers'
contribution
Pakistans urea industry declined by 5% in the past year to 6.2 million in 2010 from 6.5 million tons in 2009,
after facing the worst ever floods in the countrys history.
Average selling price of domestic Urea during 2010 was Rs. 810/bag, while average landed cost of imported
Urea was Rs. 1,640/bag (C&F USD 340/ton) - By maintaining domestic Urea prices significantly lower than
international prices, the industry gave benefit of Rs. 64 billion in 2010 to the Farmer fraternity
UREA & Phosphates Market Environment
The phosphate fertilizer demand in Pakistan
declined to 1.4Mn tons from 1.8Mn tons in 2009
due to floods and high international and domestic
prices
Total Phosphate imports during 2010 were 679 kT
vs. 995kT in 2009.
DAP price (C&F Karachi) during December was
USD 633/ton (Black Sea)
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Industry Demand and Market Shares
Total Market Urea = 6.2 MT; Domestic Supply = 5.2 MT
Phosphates = 1405 Kt; Domestic Supply = 638 Kt
7%
49%
15%
5%
16%
6%
Market Share - Urea
DH FFC & FFBL Engro
AgriTech NFML Pak Arab
1%
50%
23%
1%
3%
22%
Market Share - Phosphates
RG FFC & FFBL Engro
AgriTech DH Pvt Importers
* Estimated
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2010 Business Highlights
Urea
In 2010, the company produced 972 kT of urea, which is 2% higher than the 952 kT produced in 2009
The gas curtailment impact was offset by a record production in the first half, as well as no planned
turnaround during the year
The company sold 971 kT of urea Vs 958 kT in 2009
Price of Engro-Urea was increased by Rs. 190/bag on December 24 to Rs. 1,020/bag , an unprecedented
hike, in response to announced gas curtailment & load management
Zarkhez
Sales for the year stood at 95 kT vs. 101 kT in 2009
Zarkhez plant produced a total of 100 kT of blended fertilizers, which includes 63 kT of Zarkhez and 37 kT
of E-NP, as compared to a total of 92 kT tons produced during 2009
Although demand for potash remained healthy throughout 2010 , the NP industry declined by 17%
compared to 2009, in line with a decline in the phosphate market
Engro Fertilizers net profit for the year 2010, was Rs. 3,730 million including one time
earnings of Rs. 574 million ( gain on sale of land & tax reversal)
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Fertilizer Expansion Project
The plant was unable to continue
operations as SNGPL commenced a 45-
day gas outage on January 7, 2011, as part
of a gas load management program
The company expects to receive gas by
the end of February, commercial
production is expected soon after the
plant is stabilized
en en 1.3 en en 1.3
EnVen
Investment USD
1.1 bn
Capacity: 1.3
Million tons
Estimated Forex
Saving USD
500Mn/year
Total Man Hours
: 50 million
Trial Production:
December 29
th
In 2010, the company achieved mechanical completion
and started trial production of its urea expansion
project at Daharki which is the worlds largest single
train ammonia-urea plant
It is the largest private sector industrial investment in
Pakistan
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2010 Business Highlights(Contd.)
Purchased Products (Phosphates)
The business sold 327 kT of phosphates in 2010, against 357 kT in 2009
Net profit for the business stood at Rs. 1,854 million vs. Rs. 1,262 million in 2009 signifying an increase of
over 47%
Higher margins due to increasing international price
Engro Phosphate imports during year were 324 kT vs. 277kT in 2009
Outlook
With the new urea expansion coming online, installed urea production capacity allows the country to
become self-sufficient in urea
Gas curtailment, against firm contracts, will affect the production negatively thus the company has
increased urea price by PKR190 per bag (23%).
With the reduced supply there is again a shortage of urea in the country and hence the company does not
foresee any issues with selling its entire production
Engro Fertilizers listing is planned during 2011
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Foods Business
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2010 Business Highlights
During 2010, foods business revenues grew by more than
43% to above Rs. 21 billion
Foods Business posted a Profit of Rs 177 million as
opposed to a loss of Rs (435) million in 2009
The company achieved volume growth of 27% during 2010
increasing its volumes to 309 million liters from 243
million liters in 2009 in UHT
Tarang volumes grew by 47% to 169 million liters and
maintained its leadership in tea creamers with segment
share of 62%
Olpers grew by 9% to 137 million liters achieving a market share of 39%in the all-purpose milk segment, which was
almost stagnant in 2010
Omore volumes increased by 100% to 12.2 million liters in 2010from 6.1 million liters in 2009, and Omore market
share was estimated at 17% during 2010
The companys Nara Diary Farm is currently producing 21,500 liters per day, with a total herd size of 2,591
animals of which 1,269 are milking
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2010 Business Highlights (Contd.)
The rice Plant started its drying operation in November 2010. Commercial production of
milling and parboiling facilities is expected in March 2011
In the rice trading business, Engro Eximp successfully built relationships with premium
buyers in international markets, and exported 5,000 tons of rice during the year
Outlook
The foods business will continue to increase its market share in the processed milk and
ice cream segments with ice cream business increasing its geographical reach
2011 will also see the beginning of sales from its own rice processing plant
Foods is entering the Halal food business in America and Canada through its planned
acquisition of Al Safa Halal (subject to regulatory approvals). This will be foods first
international venture
Listing of Engro Foods is planned during 2011
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Petrochemicals Business
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2010 Business Highlights
The integrated facility became fully operational after the VCM plant achieved commercial
operations in September 2010
Polymers business posted a loss of Rs. (770) million in 2010 primarily due to delay in VCM plant COD.
However, since stable operation of the VCM plant has been achieved the business has started
improving its profitability
The company produced 114,000 tons of PVC as compared to 116,000 tons in 2009. PVC domestic
sales volume declined to 97,000 tons in 2010 from 119,000 tons in 2009
93,000 tons of Caustic soda was produced as compared to 39,000 tons in 2009. Caustic soda sales
remained strong during the year and Company sold 80,000 tons as against 27,000 tons in 2009
Outlook:
PVC domestic demand is expected to be stable to strong in 2011 on account of reconstruction
activities in flood affected areas, demand from agricultural sector and pipe exports to Afghanistan.
Power load shedding and gas supply curtailment will continue to adversely affect demand
Caustic Soda demand is expected to remain strong and the Company is expected to sell capacity
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Energy & Power Business
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2010 Business Highlights
The plant dispatched a total net power of 1,201 GWh to the national grid during the year
(Plant Capacity of 217.3 MW)
Total turnover for the company was Rs. 5,727 million
The company posted a profit of Rs. 1,100 million during 2010
- Exchange loss of Rs. 294 million on foreign loan was capitalized in consultation with the auditors
During the first nine months of operations, the plant demonstrated billable availability factor
of 95%
Outlook
Based on current demand supply situation the Qadirpur power plant is expected to achieve
very high dispatch rates
Engro Powergen Qadirpur listing is planned during 2011
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2010 Business Highlights (Contd.)
In 2010, the Sindh Engro Coal Mining Company Limited (SECMC) completed the detailed
feasibility study (DFS) as per the target deadline, confirming the technical, social and
environmental viability of the Thar Coal Mining Project (Block II)
Estimated Exploitable Coal Reserves of 1.57 Billion ton sufficient to produce 5,000 MW for
50 years
Fiscal Incentives Package ( including guaranteed 20% IRR for Coal Mining & Power Projects )
was approved by ECC on Oct 15, 2010
However economic viability cannot be ascertained without approval of Coal Pricing
Mechanism and Infrastructure Projects by Government of Sindh / Government of Pakistan
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Chemical Storage
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2010 Business Highlights
The Company completed 13 years of safe operations without lost work
injury in November 2010
The companys achieved its highest ever throughput for a year of 1,104 kT
vs. 1,063 kT in 2009, including LPG import of 31 kT vs. 40 kT in 2009
Engro Vopak also achieved a first in the history of LPG imports in the
country by handling the largest ship (5,000 tons) to dock in Pakistan
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Industrial Automation
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Business Highlights
Avanceon is a leader in the design, development, and implementation of manufacturing
technology solutions that result in reliable control automation and information management
systems
The company also offers power and energy management integrated solutions as well as high
end software to integrate production and business applications.
Based out of Pakistan, it has subsidiaries operating in the UAE and the US.
Total revenues of Rs 1,828 million during 2010 vs. Rs 1,614 in 2009
Avanceon Limited posted a consolidated loss of Rs (217) million vs. a profit of Rs 35 million
during the same period last year. However US operations posted a profit of Rs. 72 million.
Sales in Pakistan and UAE declined due to macroeconomic slowdown
Outsourced hours increased from 3,230 hrs (3.6%) in 2009 to 6,443 hrs (9.4%) in 2010
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Engro Rupiya Certificates
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Highlights
Introduced Engro Rupiya with the objective to have a
portfolio of long and short termproducts to benefit the
average Pakistani by providing them the opportunity to
share its growth through superior returns and added
convenience
Achieved the target of Rs. 4 billion with individuals
subscribing to almost 80% of the issue
Engro Rupiya Certificate has been a successful alternate
for the company to raise funds for its borrowing
requirements froma previously untapped investor base
Engro intends to develop Engro Rupiya as a long term
source of funding for which it plans to offer subsequent
TFC offerings with the 2
nd
issue in 2Q, 2011
Rs. 3,125 million,
2,460 Investors
Rs. 875 million,
81 Institutions
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Corporate Social Responsibility
Engro contributed over Rs.136 million under its social investments commitment in 2010, as
compared to Rs. 58 million in 2009
Engro was also heavily involved in the relief and rehabilitation efforts following the floods
during the summer of 2010(total budget Rs. 61.75m)
Engro Corporation hosted the first Engro Excellence Awards in January, 2011. The recipients
were selected based on lifetime accomplishment and excellence in their respective fields and
received a cash prize of PKR 5 Million each at an exclusive award ceremony
Recipients of Engro Excellence Award 2011
Sir Syed award for Humanitarianism Abdul Sattar Edhi
Ghalib award for Literature Mushtaq Ahmed Yusufi
Dr Abdus Salam award for Applied
Sciences
Dr Ataur Rahman
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Q & A
Thank You