engro security analyst briefing 1st quarter 2011

Security Analyst Briefing YTD March - 2011

Financial Highlights

Revenue

Rs. Million YTD March

2011

YTD March

2010

Engro Fertilizers 5,882 4,620

Engro Foods 6,431 4,741

Engro Polymer 4,124 3,284

PAT

Rs. Million YTD March

2011

YTD March

2010

Engro Fertilizers 1,397 773

Engro Foods 117 (15)

Engro Polymer (59) (154)

Engro Powergen 1,844 107

Engro Eximp 3,173 3,768

Engro Vopak 494 532

AVANCEON 370 340

Engro Corporation

(Consolidated*)

21,848 16,859


* Engro Share

Engro Powergen 345 47

Engro Eximp 164 897

Engro Vopak 239 265

AVANCEON (9) (64)

Engro Corporation

(Consolidated*)

2,054 1,889

Fertilizer Business

Security Analyst Briefing 1st Quarter - 2011

� Market size for urea, during the 1Q 2011 was 1.2 million tons, a decline of 14% over the sameperiod last year (1.4 million tons). Major reason for the decline was shortage of product due togas curtailment.

� Domestic production estimated at 1.1 million tons was 8% lower as compared to 1.2 million tonsduring the same period last year on account of gas curtailment as well as extended winter gasload shedding.

Urea Market Environment

Total Benefit to Farmer - Rs. 20bn� Average selling price of domestic Urea during

1Q 2011 was Rs. 999/bag (Excluding impact of

3

17

Total Benefit to Farmer - Rs. 20bn

Govt Contribution

(Differential of Feed and

Fuel gas prices, net of taxes

paid)

Fertilizer producers'

contribution

1Q 2011 was Rs. 999/bag (Excluding impact ofGST), while average landed cost of importedUrea was Rs. 1,940/bag (C&F USD 400/ton)

� By maintaining domestic Urea pricessignificantly lower than international prices,the industry gave benefit of Rs. 17 billion in 1Q2011 to the farmer fraternity


Phosphates Market Environment

� Phosphates demand in Pakistan declined to 174kT from 216 kT in 1Q,2010

- Decline is due to higher international prices (USD 600/Met 1Q, 2011 Vs. USD365/Met in 1Q, 2010)

� Total Phosphate imports during 1Q 2011 were 49kT vs. 120kT in 2010� Total Phosphate imports during 1Q 2011 were 49kT vs. 120kT in 2010

� DAP price (C&F Karachi) during March was USD 680/ton (NorthAfrica)


50%20%

4%

10%2%

Urea Market Share

Industry Demand and Market Shares

(1) Urea and Phosphates numbers are estimates and finalnumbers will be confirmed once communicated by NFDC.

14%

FFC and FFBL NFML EngroDH Pak Arab Agri Tech

Total Market (1)

Sales Domestic Supply

Urea 1.2 MT 1.1 MT

Phosphates 174 kT 118 kT


Business HighlightsUrea:

� Revenue from urea sales was Rs. 4.5 billion vs. Rs. 3.8 billion last year – an increase of 18%

- Increase in revenue is attributable to price increase because of gas curtailment and load management

� Due to gas curtailment urea production was 232kT vs. 257kT achieved in 1Q2010 – a decrease of 10%

� As a result of lower industry in 1Q 2011, Engro’s urea market share improved to 21% from 18% last year

� PAT from urea was Rs. 1,245 million vs. Rs. 725 million in 1Q2010 – impact of price increase due toload management

Zarkhez

� Revenue from Zarkhez was Rs. 1,325 million vs. Rs. 780 million last year – due to higher raw materialprices

� Against production of 28kT (26kT in 1Q10) sales were 29 kT vs. 21 kT during the same period lastyear.

⁻ Increase is attributable to focused marketing of the product as well as demand substitution dueto rising phosphate prices(shortage of phosphates in face of rising demand).

� PAT was Rs. 144mn vs. Rs. 75mn earned in 1Q2010 – mainly due to inventory gains and highervolumes


Business Highlights – cont.

Purchased Products (Phosphates)

� Revenue from purchased products was Rs. 3 billion as compared to Rs. 3.6 billion lastyear primarily due to lower volumes

� Engro imported 49kT (100% import share) of Phosphates during 1Q 2011 vs. 120 kT in 1Q,2010

� Phosphates sales were 49 kT in 1Q 2011 (27% market share) vs. 78 kT in 1Q, 2010

PAT was Rs. 210 million as compared to Rs. 923 million earned in 1Q, 2010 - due to� PAT was Rs. 210 million as compared to Rs. 923 million earned in 1Q, 2010 - due towindfall trading gains in 2010

Outlook

� Gas supply scenario remains volatile with fertilizer plants on Sui networks subjected tounprecedented gas load shedding in winter months.

� Shortfall of 700 kT is expected in Urea supply – Cost to GoP, in form of subsidy, will be~Rs 10 billion


Fertilizer Expansion Project

� Due to the extended outage and intermittent gas supply, commissioning activity at thenew fertilizer plant was hampered and delayed

� Engro has filed a case, in the Honorable High Court of Sindh, against the suspension ofgas supply

en en 1.3en en 1.3

� Court has restrained SNGPL from disconnecting the current supply of 80 MMSCFD of gasand directed that efforts to be made to provide the maximum amount of gas (100MMSCFD) as committed

� The new plant is expected to achieve commercial production in 2nd quarter, 2011.


Foods Business


Business Highlights

� Foods business revenue was Rs. 6.4 billion vs. Rs. 4.7 billion last year – an increase of 36%

� Foods posted a Profit of Rs 117 million as opposed to a loss of Rs. (15) million in thecorresponding period last year – more than 70% growth in dairy business profitability i.e.Rs. 270 million vs. Rs. 157 million for the corresponding period last year

� UHT sales were up by 19% vs. the same period in 2010, driven largely by the growth ofTarang

- Olpers volumes were 375 klpd vs. 362 klpd last year – an increase of 4%

- Tarang volumes were 567 klpd vs. 424 klpd last year – an increase of 34%

� Foods retained market leadership in UHT with a market share of 37%

� Omorè has achieved volume growth of 72% YoY with total sales of 3,124 klitres vs. 1,821klitres in 1Q 2010 – Revenue from ice cream was Rs. 438 million vs. Rs. 223 million last year.

� Dairy farm produced 21 klitres per day in 1st quarter 2011. Revenue earned was Rs. 90million vs. Rs. 73 million in 1Q 2010.



� Launches and geographical expansions:

⁻ Omore was launched in Karachi, continuing its geographical expansion towardsachieving a higher market share.

⁻ Olfrute Juices & Nectars were re-launched during the period, with new packaging andadditional flavors.

⁻ New flavors of Owsum milk were also added to the portfolio during 1Q 2011.

⁻ Olpers Lite was launched in 200ml and 1000ml SKUs

RiceRice

� During the 1st quarter, 2011, Rice business revenues grew by 58% to Rs. 112m vs. Rs. 71m inthe corresponding period last year

� Exported 1.5 kT of rice to premium customers in Europe and Middle East during thequarter, as compared to 1 kT in the same period last year - Additional commitments of 8kT sales have also been made

� The rice processing facility, owned and operated by Engro Foods Supply Chain, will befully operational during the second quarter of the year.



Al-Safa Acquisition:

� During January 2011, Engro Corporation signed an agreement with Al-Safa Halal topurchase its halal food business in North America

� The business will be managed by Engro Foods and shares will be transferred to EngroFoods once regulatory approval is received.

Outlook

� Sustained growth in the foods business is expected� Sustained growth in the foods business is expected

� However, Revised General Sales Tax (RGST) on milk will remain a key risk to dairy segmentoutlook, although RGST is not expected to have any impact on rice, ice cream and juicessegments.


Petrochemicals Business


Business Highlights

� Revenue for the quarter was Rs. 4.1 billion, showingan increase of 25% over Rs. 3.3 billion earned in thecorresponding period last year.

� Growth is attributable to increased sales volumes andhigher product prices as compared to the sameperiod last year.

29

2422

20

Sales Production

PVC - kT

1Q, 2011

1Q, 2010

� Import of PVC resin in the country declined duringthe quarter as compared to 1Q 2010 mainly becauseof increased supplies by the company.

� VCM production was 14 kT as compared to 2 kTduring the corresponding period last year

2022

1719

Sales Production

Caustic - kT

1Q, 2011

1Q, 2010


� Polymer incurred a loss of Rs. (59) million compared to a loss of Rs. (154) million duringthe same period last year - The loss was primarily due to decreased production as aresult of plant turnaround.

Outlook

� PVC prices are expected to remain high with strong domestic demand from theagricultural and construction sector as well as exports to Afghanistan.


� The business’s margins are expected to improve as the integrated facility continuessmooth operations


Energy and Power Business


Business HighlightsQadirpur

� Total turnover for the company was Rs. 1,844 million vs. Rs. 107 million in 1Q, 2010

� Qadirpur dispatched 99.6% of its installed capacity(217 MW) to the national grid duringthe first quarter of 2011

� The plant underwent its first planned outage, which was safely completed as scheduled.

� Engro Powergen Qadirpur posted a profit of Rs. 349 million, as compared to a loss of Rs.� Engro Powergen Qadirpur posted a profit of Rs. 349 million, as compared to a loss of Rs.(49) million in 1Q, 2010.

Outlook

� Business will continue to focus on performance improvement at its power plant inQadirpur to ensure reliability and availability to the national grid.

� Continue progress on Thar coal project


Chemical Storage & Terminal Business


Business Highlights

� Engro Vopak Terminal Limited had smooth operations in the quarter - TotalRevenue was Rs. 494 million vs. Rs. 532 million in 1Q, 2010.

� Volumes during the first quarter of this year were 225 MT vs. 259 MT in1Q2010 - lower volumes of phosphoric acid and LPG

� Vopak posted a profit of Rs 239 million, as compared to a profit of Rs. 264� Vopak posted a profit of Rs 239 million, as compared to a profit of Rs. 264million during the same period last year.

� Hearing on CCP show cause notice was held on April 14, 2011


Automation Business


Business Highlights

� During 1Q2011, company’s revenue increased by9% to Rs. 370 million in from Rs. 340 million in1Q 2010

� Outsourcing engine is delivering as per theexpectations – outsourced hours increased by26%

3,431

2,713

International Execution –

No of Hours

16% 11%

26%

� The loss for the period was Rs (9)million ascompared to the loss of Rs. (64) million duringthe corresponding period last year

1Q, 2011 1Q, 2010


Q & A

Thank You


engro security analyst briefing 1st quarter 2011

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