Engro Polymer & Chemicals Limited marked revenue of PKR 17.9 billion in 1QFY25 up 8% YoY from SPLY, led by higher PVC domestic volumes (54KT vs 45KT in 1QCY24). The company posted a net loss of PKR 629mn (LPS: PKR 0.69), an improvement from PKR 784mn in 1QCY24 (LPS: PKR 0.86). Global PVC prices have remained under pressure since August 2024, driven by sustained weakness in global construction activity—particularly in the US, China, and India.
The situation is compounded by oversupply, with approximately 1 million tons of new capacity added in China last year. Trade tensions between China and the US, along with India’s impending anti-dumping duties (ADDs), are creating further uncertainty. These dynamics are distorting global trade flows and have contributed to aggressive pricing in several markets, including Pakistan. The core delta (PVC – ethylene) declined to $240/MT in March 2025, significantly below historical levels.
Ethylene prices remained rangebound ($910–940/MT), affected by weak upstream crude/naphtha markets and limited downstream demand. Margins are expected to remain under pressure in the near term. Captive gas prices rose sharply to PKR 4,291/MMBtu in March 2025, following the imposition of a PKR 791/MMBtu levy. Rate of levy increase as notified is increase of 10% by July 25, 15% by February 26, and 20% by August 26. This levy is being contested in court (case pending in Islamabad High Court).
Process gas rates remain unchanged at PKR 2,150/MMBTu. With declining indigenous gas reserves, energy cost and availability pose structural risks. EPCL is actively evaluating alternative power options and engaging with relevant government ministries to ensure fuel security for its captive needs.
Compared to last year, a slightly higher share of revenue came from the chlor-alkali business, reducing PVC’s share to 78% (vs. 80% last year). On a segmental basis, the chlor-alkali business contributed a higher PAT due to favorable cost allocations, though both segments were positive on a contribution margin basis. Both PVC and caustic production volumes were higher YoY. This increase was partly due to last year’s Q1 being impacted by a plant turnaround. EPCL is currently in the midst of another scheduled outage, as disclosed on the PSX. The local PVC market grew 23% YoY, with EPCL selling 54KT in 1QCY25 versus 45KT in 1QCY24.
However, imported resin continues to pose a competitive threat due to persistently low global prices. EPCL deployed aggressive pricing strategies to contain import volumes, which showed early signs of success. Nonetheless, imports remain entrenched in the domestic market landscape. Sectoral Sales Breakdown: PVC sales remain heavily skewed toward construction:
• Pipes & Fittings: 53%
• Cable Compound: 8%
• Profiles: 7%
• Films & Sheets: ~16%
Public project spending remains sluggish, with only 28% of PSDP funds utilized over eight months.
Caustic soda prices rose early in the quarter due to tight supply conditions, before normalizing later on. Global supply is expected to rise due to new capacity additions in China and Southeast Asia.
The Chlor-Alkali space remains evenly shared between Sitara, Ittehad, Engro Polymer, and Nimir. New Projects Commissioned:
• Hydrogen Peroxide: Commissioned in February 2025
• HDDC (High-Density Dichloroethane): Commissioned in March 2025
Both plants have stabilized and are now contributing saleable product volumes (as of April 2025). EPCL is focusing on market development and partnerships across both EFS and non-EFS segments.
The management noted that EPCL sales of caustic soda is 20- 30% of the total industrial sales, in accordance with the company’s market share. PVC is currently not viable to export at current price levels of $700 per metric tons. The PVC & VCM plant is not connected to grid due to process sophistication. Nonetheless, the company is also exploring cheaper and reliable power alternatives.
The new HDDC project is expected to save around 1MMBTu per ton of overall energy requirement. Going forward, the management plans to sell 10-12 KT of Hydrogen Peroxide in FY25. The management mentioned that Descon Oxychem Limited has reduced its prices more due to decline in prices in the International Market and less due to EPCL’s capacity addition. Moreover, the dumping of Hydrogen peroxide remains a great concern for the local industry.
Important Disclosures
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