Feb. 11, 2022 (MLN): Engro Fertilizers Limited (PSX: EFERT), a wholly owned subsidiary of Engro Corporation Limited, will continue to pay out the maximum to shareholders and any CAPEX required for the debottlenecking of the urea plant could easily be achieved through debt financing because the company has a healthy balance sheet and credit ratings if internal cash generation is to be used only for payments, company management advised at a corporate briefing Thursday.
Throughout 2021, the company has paid dividends on 100% of its reported earnings after calculating adjusted earnings by eliminating one-time non-cash items.
On Thursday, alongside the financial statements, the company again announced an interim cash dividend for the year at Rs5 per share, or 50%, bringing the dividend for the year 2021 to Rs16.50 per share, which also exceeded industry expectations.
While updating investors on financial performance, management noted that the company settled 2021 in the green zone where the fertilizer giant saw a 16.32% year-on-year increase in profitability to reach 21 billion rupees against 18.13 billion rupees in CY20. .
Profitability was primarily due to higher urea margins, a gain on a commercial portfolio and sales tax registration of dealers. Meanwhile, turnover increased thanks to the highest ever urea sales of 2.3 million tonnes, an increase of 11.6% compared to last year, as well as a better pricing of phosphate products.
The company pointed out that a reduction in depreciation of 1.7 billion rupees was taken in the last quarter after assets with zero value on the books were still in use, which led to a revaluation useful life and scrap values of assets.
On the GIDC front, management informed that there is no solid development on the issue of GIDC payment or preferential gas tariff. Discussions are ongoing with the government and SNGPL to extend the period during which gas has not been supplied to the company at a preferential rate, in line with the takeaways from the briefing covered by Darson Securities.
Meanwhile, the company has discontinued cumulative sales to unregistered persons above Rs 100 million per annum, an income tax provision in this regard has been charged this year, but the risk associated with this was mitigated by reduced exposure.
However, a claim of Rs 8.94 billion is outstanding as government sales tax refunds accrued over several years are the source of the problem, management said.
For gas depletion, management believes that the MARI reserves will be there for at least 10 years until there are collaborative industry efforts to resolve this issue.
On the issue of gas supply depletion, the house was explained the difference between low BTU and high BTU gas – the depletion of which is of extreme concern, where management advised that the fertilizer industry uses low BTU gases of which Pakistan has vast reserves.
Management believes that 700 tonnes of excess urea capacity could be exported, if permitted, where it could bring in between $400 million and $700 million for the national treasury while creating no shortage locally, it said. she noted.
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Published on: 2022-02-11T11:06:08+05:00