KARACHI (July 28 2005): Engro Chemicals profit in the six months ended June 30, 2005, rose by 50 percent because of high growth in sales following enough liquidity with the farmers during this period. Market demand for urea during the first half 2005 was 2.36 million tons, showing an increase of 20 percent over the same period of last year.
This was caused by a combination of higher agronomic demand due to high rural liquidity created by favourable government policies and some early buying. The domestic production at 2.26 million tons was up 9 percent over the first half of 2004.
Although the international prices continued to remain high, domestic urea prices saw only a modest increase. This was made possible due to a government decision to subsidise expensive imports and the local fertiliser industry continued to sell urea at well below international prices. During the first half of 2005, on average, the difference between domestic and import price parity was 115 percent.
Sales of phosphates, the other high volume fertiliser, increased by 130 percent to 0.39 million tons. Record cotton and wheat production, backed by strong support prices and some early buying, enabled the demand to grow despite high prices in the international market.
The Company's sales of urea during the first half of 2005 was 406,000 tons, which included 24,000 tons of imported product, representing an increase of 9 percent over last year.
The volume increase trailed industry growth rate due to product limitation and restricted Engro market share to 17 percent versus 19 percent in 2004. Improved plant performance enabled Engro urea production to be 402,000 tons compared to 380,000 tons achieved in the same period of last year.
The Company's sale of imported phosphatic fertilisers, DAP and Zorawar, increased 178 percent to 82,800 tons, while the Zarkhez plant produced 76,000 tons up 41 percent over the 54,000 tons produced last year and sold 65,000 tons up 48 percent over the 44,000 tons sold last year.
Engro Vopok Terminal Limited, joint venture in the bulk chemical terminal business posted an after-tax profit of Rs 205 million compared to Rs 165 million for the same period last year, The Company paid an interim dividend of 15 percent during the second quarter, which was same as last year. Engro's share of the dividend amounted to Rs 67.5 million.
Engro Asahi Polymer & Chemical Company Ltd, the company's joint venture in the PVC business, posted on after-tax profit of Rs 52 million compared to Rs 160 million for the same period last year on account of lower PVC-VCM margins. Innovative Engineering & Automation Limited, the company's 51 percent owned subsidiary, paid Rs 5 million as Engro's share of dividend.
In May, the Company obtained shareholders' approval to invest an amount of Rs 1 billion in a wholly owned subsidiary Engro Foods (Private) Limited, which will enter the business of processing and marketing of branded UHT milk, cream and related by-products. Construction of processing facility has commenced in Sukkur and is expected to become operational in October 2006 on schedule.
Based on the half-year results the Board of Directors declared an interim dividend of Rs 3.00 per share, which is Rs 0.50 higher than the corresponding period last year.
The Company expects urea demand to be robust during the second half of 2005, that is also likely to see imports of 0.3 million tons urea to meet the requirement for the Rabi season. Based on the current urea demand, the Company feels that a new urea project is required in the country and has, therefore, asked the government to allocate gas far such a project.
The company's joint ventures are expected to continue to meet the shareholders' expectations. The Company will continue to maintain its current focus on improving the operability of its urea plant to achieve both volume growth and cost efficiencies and minimise the impact of cost pressures.
