Engro Chemical (Pak) Ltd.
Mid year report to the shareholders Program
Aug 13 - 19, 2001
On behalf of the Board of Directors of Engro
Chemical Pakistan Limited, we are pleased to present the un-audited
accounts for the half-year ended June 30, 2001.
The overall market demand for urea declined by 2%
over the corresponding period of last year due to shortage of
irrigation water and reduced financial liquidity of the farming
community. During the period under review the Government increased the
price of gas and levied General Sales Tax (GST) on a deemed price of
urea. At the request of the Government and in view of the difficulties
faced by the farming community due to drought conditions, the GST was
absorbed by the producers. The price of urea in the domestic market
was approximately 20-25% below international price levels.
The price of urea for the period recovered from the
unusually depressed levels experienced last year. In addition the
Company benefited from an exchange rate gain on company's foreign
currency deposit. The net profit for the first half was Rs 287 million
compared to Rs 73 million recorded in the prior period. Based on these
results your Board of Directors is pleased to declare an interim
dividend of Rs 2.00 per share which is the same as for the
corresponding period last year.
The Company sold 284,000 tons of urea of which
268,000 tons was own product. Compared to last year, the urea sales
volume increased by 3% and the Company marginally improved it's market
share to 16.4% from 15.7% achieved last year. The Company's sale of
imported phosphatic and potassic fertilizers at 30,000 tons was down
15% versus last year mainly due to depressed demand. Production of
Engro urea at 368,000 tons was down 2% from the record level achieved
last year mainly due to equipment limitations. A new, redesigned rotor
was installed in April, 2001 but other limitations surfaced which
precluded achievement of design production rates. These are being
addressed on priority as part of a comprehensive reliability assurance
programme. During the period under review we implemented a project
which has appreciably improved the quality of our urea and our Daharki
manufacturing site obtained ISO 9002 Certification.
Early in the year the company entered the Seed
business through marketing of imported hybrid seeds of corn, sunflower
and sorgum. Inspite of a difficult market environment for oil seeds,
the company was able to make an impact and establish it's brand name
"Bemisal" in the market. The company also achieved
mechanical completion of its new 100,000 tons p.a. NPK plant on
schedule and within the $10m budget. Towards the end of the period,
commercial production and marketing activities were commenced.
Engro Vopak Terminal Limited, our first 50% owned
joint venture posted an un-audited profit after tax of Rs. 104 million
during the first half of 2001 compared to Rs. 127 million for the same
period last year. The decline in profit is primarily attributable to
exchange losses on foreign currency loans. Engro Asahi Polymer and
Chemical Limited, our second 50% owned joint venture incurred an
unaudited after tax loss of Rs. 37 million. The amount of loss has
been sharply reduced when compared to the Rs. 226 million incurred in
the same period last year. Market development activities and other
operational improvements are being pursued to make the venture
profitable in the near future.
The recent rainfall is likely to have a beneficial
impact on the demand for urea during the forthcoming Rabi season which
bodes well for the country's agriculture. However, of great importance
to the fertilizer industry is the outcome of the much awaited
Fertilizer Policy which has been under consideration of the Government
for some time. A favorable policy will encourage private sector
investment in privatization and new capacity buildup. A strong
domestic fertilizer industry is essential to ensure steady and
reliable supply of this vital agricultural input.
The tragic demise of Mr. Shaukat R. Mirza. Chairman
of the Board of Directors is a great loss to the company, industry and
country. His contributions to the growth and development of the
company and the high standards of professionalism, excellence and
corporate governance that he enunciated are recognized and appreciated
by the Board of Directors.
The Board elected Mr. Nisar A. Memon as the new
Chairman of the Board. Mr. Memon has been a member of the Board since