Engro Polymer & Chemicals Ltd (EPCL) management held an analyst briefing session to discuss the company’s performance for CY24 and future outlook.

Brief Takeaways

• To recall, the company posted a loss after tax of PKR 161mn (LPS: PKR 0.40) in CY24, compared to a profit of PKR 8,932mn (EPS: PKR 9.12) during SPLY. On a quarterly basis, the company’s bottom-line stood at PKR 2,128mn (EPS: PKR 2.34), down 61% YoY.
• Total sales declined by 7% YoY during CY24 due to lower international PVC prices, which were partially offset by a jump in caustic and PVC domestic sales. The management mentioned the downturn in PVC prices is witnessed due to a slowdown in the construction sector in China and the USA.
• The hike in the gas price for captive power plants during CY24 (from PKR 2,750/mmbtu to PKR 3,000/mmbtu in July 24) eroded EPCL’s gross margins.
• The management attributes the improvement in gross margin on a QoQ basis in 4QCY24 to lower depreciation being charged post-reassessment of the plant’s useful life and residual value during CY24.
• Considering the massive surge in gas prices for captive power plants (PKR 3,500/mmbtu effective from Feb’25, along with an additional levy of 5% up to Jun’25, 10% from Jul’25, 15% from Feb’26, and 20% from Jul ’26), the company is evaluating alternative power options.
• The major demand for PVC in Pakistan (~53%) comes from the pipes and fittings segment.
• The PVC market increased by 8% during CY24 due to EPCL’s market development efforts and imports from Indonesia and China.
• PVC prices declined during 2HCY24, from USD 948/ton in Jun’24 to USD 798/ton in Dec’24, driven by normalized freight rates and eased supply constraints. Meanwhile, average global operating rates climbed to 77% in CY24 (76% in CY23). The management forecasts PVC prices to remain stable at ~USD 810/ton.
• Caustic soda price towards the end of 4QCY24 increased in the international market owing to a resurgence of demand.
• Hydrogen Peroxide and High-Temperature Direct Chlorination (HTDC) projects will come online in 1QCY25.

 Courtesy – AHL Research