In CY24, Engro Polymer & Chemicals Limited (EPCL) reported a net loss of PKR 160.58 million (LPS: PKR 0.40), compared to a net profit of PKR 8.93 million (EPS: PKR 9.12) in the previous year.
Revenue declined by 7% YoY to PKR 75.71 billion, primarily due to lower international PVC prices, partially offset by higher domestic sales of caustic soda and PVC. Exports declined by 50% YoY to USD 13 million.
The drop in EBITDA was attributed to a lower core delta and higher gas prices. The higher margins in Q4 resulted from a reassessment of the useful life and residual value of our plants, leading to lower depreciation for the quarter.
Hydrogen Peroxide projects are expected to be commissioned in 1QCY25. Revenue segmentation stood at 81% from PVC and 19% from the Chlor-Alkali segment. PVC production declined to 212KT in CY24 from 230KT in the SPLY due to preponed January outage in September CY24, while CSL production remained stable at 95KT. VCM production dropped to 216KT from 224KT, with no VCM imports reported in FY24.
Total inventory stood at 20KT in cY24 PVC prices hit record lows, while the core delta declined to around $337 due to oversupply, rising feedstock prices, and new plant startups in the US, China, Thailand, and Qatar. Sluggish construction activity and geopolitical factors further dampened PVC demand. Current PVC prices stand at $760/ton.
However, management does not anticipate further price cuts due to narrow producer margins, instead focusing on optimizing operating rates. Industrial gas prices have risen to PKR 3,500/MMBtu, and gas availability remains a challenge. EPCL is engaged with key ministries to explore alternative energy solutions, including coal-based power generation.
Despite an 8% decline in the cement sector, the domestic PVC market grew by 8%, supported by PVC imports of 40KT. Downstream PVC product demand increased by 20-25%. The company maintained its market share through a stable pricing strategy and ensured product availability, with 53% of sales directed to the pipes and fittings segment. Management noted that short-term borrowings helped lower the cost of sales.
Looking ahead, lower interest rates are expected to drive domestic PVC demand, while core delta and margins are likely to remain stable in CY25 due to lower PVC prices and range-bound ethylene prices. Favorable macroeconomic indicators are expected to support higher PVC demand.
Important Disclosures
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