Engro Polymer & Chemicals (EPCL) announced its 2Q2024 result today. The company recorded a consolidated loss of Rs688mn (LPS of Rs0.76). This took 1H2024 loss to Rs1.6bn (LPS of Rs1.75) against the profit of Rs2.7bn (EPS of Rs3.02) in 1H2023.

The 2Q2024 loss came higher than industry expectations due to higher-than-expected finance costs.

We estimated the finance cost of Rs1.2bn for 2Q2024; however, the actual finance cost was Rs2.1bn, up 37% YoY and 27% QoQ due to higher borrowings.

The company’s net sales declined by 6% YoY to Rs17.8bn in 2Q2024 due to lower PVC prices, at US$810/MT vs. US$830/MT in 2Q2023.

Gross margins were 8% in 2Q2024 vs. 30% in 2Q2023, mainly due to lower primary margins and an increase in gas prices. On a QoQ basis, gross margins improved by 163bps compared to 7.3% in 1Q2024.

The core delta for 2Q2024 remained at US$318/MT, compared to US$309/MT in the preceding quarter and US$385/MT in 2Q2023.

Distribution expense increased by 33%/29% YoY/QoQ to Rs185mn mainly derived by inflationary environment.

Other income decreased by 64%/32% YoY/QoQ in 2Q2024 to Rs120mn, possibly due to lower short-term investments and declining interest rates.

Similarly, other expenses decreased by 92% YoY in 2Q2024 due to the absence of exchange loss.

EPCL booked a tax reversal of Rs639mn in 2Q2024 against the taxation of Rs1.85bn in 2Q2023.

Courtesy – Topline Pakistan Research