Engro Chemical Pakistan Limited
YTD September 2009 Business Results
Security Analyst Briefing
October 29th, 2009
Urea Market Environment

Market demand for Urea stood at 4.6 million tons for the first nine months of 2009,
up from 4 million tons in the same period last year (15%)

The increased demand was met primarily through higher imports (1,036 kt vs 211
kt) as domestic production at 3.74 million tons remained level compared to last
year (3.74 million tons)
Another 600Kt imported urea is expected to arrive for Rabi season


The increase in demand is attributable to:
•
Improved crop economics, particularly for wheat, with support price
maintained at Rs. 950/maund
•
Increase in area under cultivation of BT Cotton
YTD Sep 2009 Business Results
Security Analyst Briefing
Urea Market Environment, continued…

Local urea prices increased by Rs. 30/bag to Rs.730/bag at the start of September

International Urea prices remained stable during the third quarter. Spot landed price
of imported Urea is Rs. 1,323/bag ($ 290/ton)

The domestic fertilizer industry continues to play its role in welfare of the farmer and
economic growth of the country by maintaining domestic prices well below
international levels. The industry thus contributed Rs.31 billion benefit to the farmer
in first the nine months of 2009
YTD Sep 2009 Business Results
Security Analyst Briefing
Urea Industry Supply and Demand
Volume kT
YTD Sep 2009
YTD Sep 2008
62
148
Production
3,738
3,741
Imports
1,036
211
Sales
4,636
4,024
186
62
Opening Inventory
Closing Inventory (Net)
YTD Sep 2009 Business Results
Security Analyst Briefing
Phosphates Market Environment

Industry wide sales volume of phosphatic fertilizers increased to 1,130 kt from 300 KT
in the same period last year

Industry demand in 2009 has increased due to

Decline in local DAP prices to Rs. 1,910/bag at the end of September, from
Rs.3,050/bag last year

Improved farmer liquidity primarily due to a healthy wheat crop and favorable
economics, in turn driving increase in fertilizer application on subsequent
(cotton) crops as well

Speculative buying by dealers (particularly in 3Q 2009) to build up inventories
ahead of the Rabi sowing season as international prices reached USD 400 from
levels of USD 350 earlier during the year

Spot international DAP price is USD 350/ton (C&F)

Government has not given any subsidy on phosphatic fertilizer during the year
YTD Sep 2009 Business Results
Security Analyst Briefing
Wheat Crop Economics
Year
2005-6
2006-07
2007-8
2008-09
2009-10*
Yield - maund/acre
30
30
30
30
30
Rate - Rs/maund
390
425
625
900
925
Fertilizer cost (Rs/acre)**
1,969
1,837
2,440
4,450
3,500
Other Expenses (Rs/acre)
5,855
6,735
8,730
12,090
14,700
Net Income (Rs/acre)
5,376
7,478
10,580
13,460
13,290
* Estimated for Rabi 2009-10 season
** Based on 1 DAP, 2 Urea bags per acre
Wheat crop economics trend has been positive over the last 5-years, resulting in adequate
Urea and Phosphate fertilizer application on the crop, while improving farmer liquidity for
subsequent crops as well
YTD Sep 2009 Business Results
Security Analyst Briefing
Engro YTD Sep 2009 Highlights
Urea
• Engro Urea production during YTD September 2009: 689 kT vs. 740 kT in 2008.
Production was lower in 2009 because of a 14-day plant turnaround and a couple of
plant outages in the first half
• Effective July 01, 2009, feed gas price was increased to Rs. 102.01/mbtu from Rs.
94.78/mbtu and fuel gas price was lowered to Rs. 324.30/mbtu
• Engro Urea weighted average NSR of Rs. 690/bag for YTD Sep 2009 was 23% higher
vs. 2008
• Due to the improved crop economics it is expected that urea demand will remain
strong
YTD Sep 2009 Business Results
Security Analyst Briefing
Engro YTD Sep 2009 Highlights cont’d…
Zarkhez



Zarkhez production for the first 9 months was 34 kT. Sales volume was 38kT compared to
54kT in 2008, lower by 30%
The principal factor was the increase in International prices of potassium fertilizers.
MOP/SOP prices were at US$ 750/ton level for part of the year
Other factors include the decline in sugar cane acreage in Punjab by 30% over last year as
well as the delay in potato season due the hot weather conditions
Engro NP

Sales of Nitrophos were 35kT vs. 17kT last year due to lower price in comparison to DAP.
The Nitrophos industry grew by 197% as compared to 2008 for the same reason
Phosphates


Sales volume was 235kT for YTD Sep 2009 compared to 47kT for the same period last year
Engro achieved a 16% market share in YTD Sep 2009
Zingro (Zinc Sulphate)
•
Micronutrient under brand name Zingro saw its highest ever sales volume, through effective
YTD Sep 2009 Business Results
branding and marketing strategy, targeting primarily the rice crop
Security Analyst Briefing
Engro Operating Highlights
Volume kT
YTD Sep 2009
YTD Sep 2008
Urea
689
740
Zarkhez
69
78
Engro Urea
673
787**
Zarkhez
73*
71
Phosphates
235
47
Urea market share
15%
20%
Production
Sales
*including NP.
** excludes sale of 17kT imported urea
YTD Sep 2009 Business Results
Security Analyst Briefing
Engro Financial Highlights
YTD Sep
2009
YTD Sep
2008
Sales
20,850
14,682
COGS
(15,952)
Gross Profit
Rs Million

+
Higher Phosphates
Sales
(9,527)
•
Higher urea margins
4,898
5,155
•
Selling and distribution expenses
(1,314)
(1,062)
Decrease in financial
charges (offset by
higher investment in
subsidiaries)
Financial/other charges (net)
(1,247)
(1,295)
Other Income
1,159
1,612
Profit before Tax
3,496
4,410
Tax
(897)
(1,051)
PAT
2,599
3,359
•
•
Lower urea
production/sales in
subsidiaries
Lower phosphates
margins
YTD Sep 2009 Business Results
Security Analyst Briefing
Fertilizer Expansion Project
en en 1.3

Overall EPC progress by the end of September was 86%

Engineering and procurement is substantially completed

Construction completion stands at 80%

All heavy lift items (Absorber, Flash Vessel, Waste Heat Boiler) rigged
safely

Most of the owner scope systems (EDG, Effluent, Water Treatment,
Fire Water, Offsite, etc.) have been successfully commissioned

Hiring of Operations and Start-up team has been completed

Start-up expected by early 3rd Quarter 2010

Project Cost Outlook remains at US$ 1,050 million
YTD Sep 2009 Business Results
Security Analyst Briefing
April 2007
Sep 2009
Aerial View of Ammonia-3
Ammonia-3 Back End
Primary Reformer (F-201)
Insulation works in progress at CO2 Stripping Column
Aerial View of Urea-3
Stacks installed on Cooling Tower
Construction works in progress at Utility Tanks
Erection of Roof Rafters & Beams in progress at Ammonia Storage Tank
Joint Venture & Subsidiary Highlights
Engro Vopak

Vopak boasted a revenue of Rs. 1.5 billion; an increase of 83% over the same period last year

Profit after tax of Rs. 635 million was double that of period last year due to commissioning of
ethylene handling facility, higher LPG & VCM volumes and exchange rate gains

Engro Chemical’s share of dividend paid out by Engro Vopak amounted to Rs. 225 million
Engro Polymer & Chemicals Ltd (Formerly Engro Asahi)

Revenue during the year was Rs 8.2 billion as against Rs 6.5 billion last year

Engro Polymer posted a loss of 19 million vs. Rs. 589 million profit YTD Sep. period last year

3Q-2009 domestic sales volume at 93 kT versus 78 kT in 3Q 2008

EDC exports (18kt), caustic soda sales (15 kt), sale of power to KESC and Hypo sales (~3kt)
have begun

Commercial production of EDC and Chlor Alkali plant was declared on 1st Aug 2009

VCM production expected by end 2009

EPCL market share 3Q-2009 at 84%
YTD Sep 2009 Business Results
Security Analyst Briefing
Joint Venture & Subsidiary Highlights cont’d…
AVANCEON (Formerly Engro Innovative)

Demand for the services remained low due to the global economic slowdown, however,
an upturn is expected in 4th quarter

Revenue decreased to Rs 943 million during 3Q 2009 vs Rs. 1,248 million in 2008.

Posted net loss of Rs 119 million as against loss of Rs 128 million loss for the same period
last year.
Engro Energy & PowerGen

Qadirpur Power Project is on track to start commercial production by end of Dec ‘09/
beginning of Jan ‘10.

Slight Delay due to construction activities and transmission issues.

Overall EPC progress of 92% achieved.

Total manpower at Site has reached 2430 out of which 1198 are Chinese workers

Sindh Engro Coal Mining Company Limited has been formed as a JV with the Government
YTD Sep 2009 Business Results
of Sind.
Security Analyst Briefing
Joint Venture & Subsidiary Highlights cont’d…
Engro Foods Ltd.

Engro Foods turnover was Rs 10.6 billion versus Rs 5.6 billion last year.

Engro Foods posted a loss of Rs. 391 million for the nine months ended, which was
better than expected. Of this, dairy business loss was Rs. 28 million.

Engro Foods UHT market share now at 38%, equal to that of Nestle’.

Distribution network now stretches to over 212 towns

Farm has over 500 milking animals at September 30th, with the remainder expected to
start milking by November (total of 1,925 animals).

Ice Cream now has 36 SKUs launched and reaches 12 towns

Omore’ ice cream is in the number 2 position behind Walls
YTD Sep 2009 Business Results
Security Analyst Briefing
New Ventures
North Africa

Engro continues to pursue growth opportunities both domestically and abroad in
order to create value for its shareholders.

Currently exploring opportunities in North Africa to setup phosphatic fertilizer
manufacturing plants in partnership with local companies.
Rice
•
BoD has approved entering into rice processing and exports business
•
A rice processing plant of 20Kt capacity will be setup in Central Punjab at a cost of
Rs.3.2 Billion
•
The plant will come online by 4Q 2010
•
Processed rice will be exported to the Middle East and European Union
YTD Sep 2009 Business Results
Security Analyst Briefing
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