Karachi, February 21, 2024 – Engro Polymer and Chemical Limited (EPCL) has contributed Rs 1.7 billion as super tax for the calendar year 2023.
During the 2023 Corporate Briefing Session held today, EPCL management disclosed a total tax payment of Rs 4.8 billion, with Rs 1.7 billion designated as super tax, according to insights from analysts at Topline Securities.
The company’s financial performance and future outlook were deliberated upon during the briefing. Notably, PVC sales in 4Q2023 experienced a 23.5% quarter-on-quarter decline, settling at 52K tons in comparison to 68K tons in 3Q2023. This reduction was attributed to decreased construction activities. Overall PVC sales for 2023 amounted to 221K tons, down 8.3% year-on-year from 241K tons in 2022, with 56% of PVC allocated to the Pipes and Fittings segment.
EPCL’s management cited a 9% contraction in the domestic PVC market in 2023 due to high inflation, reduced construction activities, and lower government spending on infrastructure projects. However, they anticipate a recovery in local PVC demand in 2024 as construction activity is expected to rise with the formation of a new government.
Looking ahead, global oversupply and weak demand are anticipated to lead to a decline in international PVC prices in 2024. The management also expects ethylene prices to reach US$1,000/ton by year-end, driven by higher crude oil prices. Geopolitical tensions in the Red Sea could further tighten the supply.
Caustic Soda, including flex sales, decreased from 23K tons in 3Q2023 to 19K tons in 4Q2023, bringing total sales to 78K tons in 2023, up by only 2K tons from 2022. Higher gross margins in 4Q2023 were attributed to increased caustic soda prices, currently hovering around Rs134K per ton.
EPCL successfully exported 22K tons of PVC and 22K tons of caustic, generating inflows of US$26 million in 2023. Challenges persist in the local caustic soda market, influenced by rising energy costs. Gas availability at competitive rates remains a key challenge, with an average gas cost of Rs2,500 per mmbtu in 4Q2023.
The Hydrochlorination of TDI (HTDC) project is set to come online in mid-2024, reducing gas consumption. Additionally, the Hydrogen Peroxide plant is expected to commence operations in the same period.
EPCL’s finance costs in 4Q2023 were reduced due to benchmarking adjustments. The company also made significant debt payments, retiring US$35 million IFC debt in 2023 and US$6 million in Jan-2024.
EPCL reported earnings of Rs3.5 billion (EPS: Rs3.69) in 4Q2023, a 50% year-on-year increase. Full-year earnings amounted to Rs8.9 billion (EPS: Rs9.12), reflecting a 29% decline year-on-year. The company announced a final cash dividend of Rs1 per share in 4Q2023, bringing the total payout for the year to Rs6 per share in 2023.
