engro corporation limited(presentation)

Corporate Briefing

Lahore Stock Exchange

Engro Corporation Limited

Corporate Briefing


February 24, 2011

Corporate Briefing


Presence in Strategic Sectors

Strategic SectorsEngineering Expertise

Government relations

Ability to raise capital for large scale projects

Knowledge of agricultural sector

Ability to attract top quality Human Resources

Agri based economy

One of the fast growing developing countries

with a growing middle class

Growing energy demand-supply gap

Fertilizer

Food and Agri Business

Power & Infrastructure

Petro Chemicals (niche player)

Project management experience

Business sectors were chosen by combining company strengths with country fundamentals

Vision“To be the premier Pakistani enterprise with a global

reach, passionately pursuing value creation for all stake

holders”

Corporate Briefing


A Diversified Conglomerate

Engro Vopak

Terminal Ltd.

50%

Engro Polymer &

Chemical Ltd

56%

100%100%

100%

63%

Engro Powergen

Qadirpur Limited

95%

Engro Fertilizers

Ltd 100%

85%

10%

http://www.engro.com/

Corporate Briefing


Presence Across Pakistan

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**

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*

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http://images.google.com.pk/imgres?imgurl=http://www.whitehouse.gov/omb/budget/fy2006/images/other-5.jpg&imgrefurl=http://www.whitehouse.gov/omb/budget/fy2006/other.html&usg=__-3TJfg-JNM3Ih9JGm_G0-MypaMc=&h=480&w=313&sz=47&hl=en&start=16&um=1&tbnid=O9909ZAhFgTIDM:&tbnh=129&tbnw=84&prev=/images?q=transmission+lines&hl=en&um=1

http://www.engro.com/

Corporate Briefing


Engro Corporation Limited -Insights

Engro Corporation Limited, formerly known as EngroChemical Pakistan Limited, was the result of ademerger of fertilizer business into a new subsidiaryEngro Fertilizers Limited on Jan 1st 2010.

Engro Corporation is the holding company responsibleto manage talent, core values and investments acrossthe holding companies

It is now one of Pakistan’s largest conglomerates withits portfolio consisting of multiple businesses whichinclude chemical fertilizers, Petrochemicals, a bulkliquid chemical terminal, industrial automation, foods,power generation and commodity trade.

Engro Corporation is one of Pakistan's largestinvestors with USD 1.8 Billion invested in the last fiveyears.

Major shareholders of Engro Corporation Limitedinclude Dawood Group, Engro employees, annuitantsand their relatives. Other shareholders are local,foreign institutions and general public

Key Information

* 1Q, 2011

Corporate Briefing


Businesses

Corporate Briefing


Esso Pakistan Fertilizer Co. Ltd was incorporated in 1965 –

Expanded from 173 kT of annual urea production to 273

kT till 1991

Exxon divested its equity in 1991 – Management buyout -

Company renamed Engro Chemical Pakistan Ltd

Through expansion and debottlenecking achieved

current annual urea production capacity of 975 kT/annum

World’s largest single train urea plant of 1.3m ton of

annual production capacity is near completion – will

increase total annual production capacity to 2.3 m tons

Engro Fertilizer is a premier fertilizer manufacturing and

marketing company having a portfolio of fertilizer

products with significant focus on balanced crop nutrition

and increased yield

Engro Fertilizer Limited

7

Corporate Briefing


Massive growth in urea market share from 15% to 33% after production starts from the new

Urea plant.

High focus on health, safety and environment – aligned with DuPont safety standards.

To facilitate sale of its products, Engro employs an extensive distribution network which

provides access to the wider market

Exploring offshore expansion opportunities specially in phosphates

Engro Fertilizer Limited (cont…)

8

Corporate Briefing


Engro Foods Limited Fully owned subsidiary – launched in 2006 with all purpose

milk - Olpers

Aggressive growth in revenue from PKR 3.6b in 2007 to PKR

21b in 2010

Tarang, liquid tea whitener, launched in 2007 was also a

great commercial success.

Current milk processing capacity is 1million lpd

Highest market share of 39% in UHT liquid industry in Nov

2010

Foods has also expanded into ice-cream, Omore, through

commissioning of its 17 million liters per annum facility at

Sahiwal – 17% market share in 2010

Plans to expand product portfolio as well as capitalize on

potential opportunities outside Pakistan - Acquisition of a

Halal meat company in North America is in process

Corporate Briefing


Engro Polymer & Chemicals Limited Pakistan’s sole manufacturer of PVC (polyvinyl chloride)

resin was set up in 1997 as a 50:50 Joint Venture with

Mitsubishi & Asahi Glass to manufacture PVC from VCM

with production capacity of 100,000 Tons per annum.

In 2007, Asahi divested its share; Engro Asahi becomes

Engro Polymer & Chemicals Ltd

Recently completed expansion and back integration of

PVC along with a caustic facility at a project cost of USD

265 m

Sole player in PVC and 30%+ market share in Caustic

Soda

Current shareholding - Engro (56%), IFC (15%), Mitsubishi

(11%) and General Public (18%)

Current Annual Production Capacities (K Tons)

PVC 150

VCM 150

EDC 127

CAUSTIC 106

Corporate Briefing


Engro Powergen In 2006, Engro diversified into Energy sector

In 2008, Engro Powergen Ltd was incorporated to undertake

power distribution business. Later, became the holding company

of Engro Powergen Qadirpur Limited

Engro Powergen Qadirpur Limited, Engro’s first Independent

Power Plant, has set up 217 MW power plant – utilizing low btu &

high sulphur permeate gas (a by-product of gas purification

process) which was previously being flared

Lowest Cost IPP among comparable power projects –

completed in shortest timeline

Complies with World Bank Emission Standards

Cheapest tariffs among gas fired IPPs and is very high on

power dispatch merit order

9 months of operations have demonstrated better than name plate

capacity and efficiency

Sindh Engro Coal Mining Company, in association with Govt. of

Sindh is working on Thar Mining & Thar Power Energy Project

Project Location –

Qadirpur, Sindh

Corporate Briefing


Engro Vopak Terminal Limited

Modern liquid chemical & LPG terminal set up in 1996 as

a 50:50 JV with Royal Vopak of the Netherlands - the

world’s Largest Bulk Liquid Chemical Handling Company

Vopak offers storage and handling solutions for liquid

and gaseous chemicals, petrochemicals, bio-fuels,

vegetable oils and Liquefied Natural Gas

Engro Vopak handles 70% of liquid chemical imports into

Pakistan

Pakistan’s first cryogenic storage facility established in

2009

Corporate Briefing


Business Results2010

Corporate Briefing


Engro’s Performance

1,277 13,068 20,240 34,121

58,152 79,976

201020092007200620041990

134 1,719 2,107 2,834 3,807

6,790

*

Revenues

PAT

Rs. Million

Total Assets

* Assets as of Dec 31,1989

Corporate Briefing


Business Wise Financial Highlights - 2010

Revenue

Rs. Million Full year

2010Full year

2009

Engro Fertilizers Ltd 19,018 16,231

Engro Foods Limited 21,050 14,665

Engro Polymer & Chemicals Limited

14,618 11,632

Engro Energy/Engro Powergen 5,727 -

Engro Eximp Private Limited 17,720 10,522

Engro Vopak Terminal Limited 2,303 2,136

Avanceon Limited 1,828 1,615

Engro Corporation (Consolidated)

79,976 58,152

Profit After Tax (based on 100%)

Rs. Million Full year

2010Full year

2009

Engro Fertilizers Ltd 3,730 2,351

Engro Foods Limited 177 (435)

Engro Polymer & Chemicals Limited

(770) (194)

Engro Energy/Engro Powergen 1,100 -

Engro Eximp Private Limited 1,732 1,451

Engro Vopak Terminal Limited 1,109 917

Avanceon Limited (195) 24

Engro Corporation (Consolidated)*

6,790 3,807

*Engro Share

Corporate Briefing


Fertilizer Business

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23

1764

Total Benefit to Farmer - Rs. 104 bn

Govt Contribution (Differential of Feed and Fuel gas prices, net of taxes paid)

Direct subsidy

Fertilizer producers' contribution

Pakistan’s urea industry declined by 5% in the past year to 6.2 million in 2010 from 6.5 million tons in 2009,

after facing the worst ever floods in the country’s history.

Average selling price of domestic Urea during 2010 was Rs. 810/bag, while average landed cost of imported

Urea was Rs. 1,640/bag (C&F USD 340/ton) - By maintaining domestic Urea prices significantly lower than

international prices, the industry gave benefit of Rs. 64 billion in 2010 to the Farmer fraternity

UREA & Phosphates Market Environment

The phosphate fertilizer demand in Pakistan

declined to 1.4Mn tons from 1.8Mn tons in 2009

due to floods and high international and domestic

prices

Total Phosphate imports during 2010 were 679 kT

vs. 995kT in 2009.

DAP price (C&F Karachi) during December was

USD 633/ton (Black Sea)

Corporate Briefing


Industry Demand and Market Shares

Total Market Urea = 6.2 MT; Domestic Supply = 5.2 MT

Phosphates = 1405 Kt; Domestic Supply = 638 Kt

7%

49%

15%

5%

16%

6%

Market Share - Urea

DH FFC & FFBL Engro

AgriTech NFML Pak Arab

1%

50%

23%

1%3%

22%

Market Share - Phosphates

RG FFC & FFBL Engro

AgriTech DH Pvt Importers

* Estimated

Corporate Briefing


2010 Business HighlightsUrea

In 2010, the company produced 972 kT of urea, which is 2% higher than the 952 kT produced in 2009

The gas curtailment impact was offset by a record production in the first half, as well as no planned

turnaround during the year

The company sold 971 kT of urea Vs 958 kT in 2009

Price of Engro-Urea was increased by Rs. 190/bag on December 24 to Rs. 1,020/bag , an unprecedented

hike, in response to announced gas curtailment & load management

Zarkhez

Sales for the year stood at 95 kT vs. 101 kT in 2009

Zarkhez plant produced a total of 100 kT of blended fertilizers, which includes 63 kT of Zarkhez and 37 kT

of E-NP, as compared to a total of 92 kT tons produced during 2009

Although demand for potash remained healthy throughout 2010 , the NP industry declined by 17%

compared to 2009, in line with a decline in the phosphate market

Engro Fertilizers’ net profit for the year 2010, was Rs. 3,730 million including one time earnings of Rs. 574 million ( gain on sale of land & tax reversal)

Corporate Briefing


Fertilizer Expansion Project

The plant was unable to continue

operations as SNGPL commenced a 45-

day gas outage on January 7, 2011, as part

of a gas load management program

The company expects to receive gas by

the end of February, commercial

production is expected soon after the

plant is stabilized

en en 1.3en en 1.3

EnVenInvestment USD 1.1 bn

Capacity: 1.3 Million tons

Estimated Forex Saving USD 500Mn/year

Total Man Hours : 50 million

Trial Production: December 29th

In 2010, the company achieved mechanical completion

and started trial production of its urea expansion

project at Daharki which is the worlds largest single

train ammonia-urea plant

It is the largest private sector industrial investment in

Pakistan

Corporate Briefing


2010 Business Highlights(Contd.)Purchased Products (Phosphates)

The business sold 327 kT of phosphates in 2010, against 357 kT in 2009

Net profit for the business stood at Rs. 1,854 million vs. Rs. 1,262 million in 2009 signifying an increase of

over 47%

Higher margins due to increasing international price

Engro Phosphate imports during year were 324 kT vs. 277kT in 2009

Outlook

With the new urea expansion coming online, installed urea production capacity allows the country to

become self-sufficient in urea

Gas curtailment, against firm contracts, will affect the production negatively thus the company has

increased urea price by PKR190 per bag (23%).

With the reduced supply there is again a shortage of urea in the country and hence the company does not

foresee any issues with selling its entire production

Engro Fertilizers listing is planned during 2011

Corporate Briefing


Foods Business

Corporate Briefing


2010 Business Highlights

During 2010, foods business revenues grew by more than

43% to above Rs. 21 billion

Foods Business posted a Profit of Rs 177 million as

opposed to a loss of Rs (435) million in 2009

The company achieved volume growth of 27% during 2010

increasing its volumes to 309 million liters from 243

million liters in 2009 in UHT

Tarang volumes grew by 47% to 169 million liters and

maintained its leadership in tea creamers with segment

share of 62%

Olpers grew by 9% to 137 million liters achieving a market share of 39%in the all-purpose milk segment, which was

almost stagnant in 2010

Omore volumes increased by 100% to 12.2 million liters in 2010from 6.1 million liters in 2009, and Omore market

share was estimated at 17% during 2010

The company’s Nara Diary Farm is currently producing 21,500 liters per day, with a total herd size of 2,591

animals of which 1,269 are milking

Corporate Briefing


2010 Business Highlights (Contd.) The rice Plant started its drying operation in November 2010. Commercial production of

milling and parboiling facilities is expected in March 2011

In the rice trading business, Engro Eximp successfully built relationships with premium

buyers in international markets, and exported 5,000 tons of rice during the year

Outlook

The foods business will continue to increase its market share in the processed milk and

ice cream segments with ice cream business increasing its geographical reach

2011 will also see the beginning of sales from its own rice processing plant

Foods is entering the Halal food business in America and Canada through its planned

acquisition of ‘Al Safa Halal’ (subject to regulatory approvals). This will be foods’ first

international venture

Listing of Engro Foods is planned during 2011

Corporate Briefing


Petrochemicals Business

Corporate Briefing


2010 Business Highlights The integrated facility became fully operational after the VCM plant achieved commercial

operations in September 2010

Polymers business posted a loss of Rs. (770) million in 2010 primarily due to delay in VCM plant COD.

However, since stable operation of the VCM plant has been achieved the business has started

improving its profitability

The company produced 114,000 tons of PVC as compared to 116,000 tons in 2009. PVC domestic

sales volume declined to 97,000 tons in 2010 from 119,000 tons in 2009

93,000 tons of Caustic soda was produced as compared to 39,000 tons in 2009. Caustic soda sales

remained strong during the year and Company sold 80,000 tons as against 27,000 tons in 2009

Outlook:

PVC domestic demand is expected to be stable to strong in 2011 on account of reconstruction

activities in flood affected areas, demand from agricultural sector and pipe exports to Afghanistan.

Power load shedding and gas supply curtailment will continue to adversely affect demand

Caustic Soda demand is expected to remain strong and the Company is expected to sell capacity

Corporate Briefing


Energy & Power Business

Corporate Briefing



The plant dispatched a total net power of 1,201 GWh to the national grid during the year

(Plant Capacity of 217.3 MW)

Total turnover for the company was Rs. 5,727 million

The company posted a profit of Rs. 1,100 million during 2010

- Exchange loss of Rs. 294 million on foreign loan was capitalized in consultation with the auditors

During the first nine months of operations, the plant demonstrated billable availability factor

of 95%

Outlook

Based on current demand supply situation the Qadirpur power plant is expected to achieve

very high dispatch rates

Engro Powergen Qadirpur listing is planned during 2011

Corporate Briefing


2010 Business Highlights (Contd.) In 2010, the Sindh Engro Coal Mining Company Limited (SECMC) completed the detailed

feasibility study (DFS) as per the target deadline, confirming the technical, social and

environmental viability of the Thar Coal Mining Project (Block II)

Estimated Exploitable Coal Reserves of 1.57 Billion ton – sufficient to produce 5,000 MW for

50 years

Fiscal Incentives Package ( including guaranteed 20% IRR for Coal Mining & Power Projects )

was approved by ECC on Oct 15, 2010

However economic viability cannot be ascertained without approval of Coal Pricing

Mechanism and Infrastructure Projects by Government of Sindh / Government of Pakistan

Corporate Briefing


Chemical Storage

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The Company completed 13 years of safe operations without lost work

injury in November 2010

The company’s achieved its highest ever throughput for a year of 1,104 kT

vs. 1,063 kT in 2009, including LPG import of 31 kT vs. 40 kT in 2009

Engro Vopak also achieved a first in the history of LPG imports in the

country by handling the largest ship (5,000 tons) to dock in Pakistan

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Industrial Automation

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Business Highlights

Avanceon is a leader in the design, development, and implementation of manufacturing

technology solutions that result in reliable control automation and information management

systems

The company also offers power and energy management integrated solutions as well as high

end software to integrate production and business applications.

Based out of Pakistan, it has subsidiaries operating in the UAE and the US.

Total revenues of Rs 1,828 million during 2010 vs. Rs 1,614 in 2009

Avanceon Limited posted a consolidated loss of Rs (217) million vs. a profit of Rs 35 million

during the same period last year. However US operations posted a profit of Rs. 72 million.

Sales in Pakistan and UAE declined due to macroeconomic slowdown

Outsourced hours increased from 3,230 hrs (3.6%) in 2009 to 6,443 hrs (9.4%) in 2010

Corporate Briefing


Engro Rupiya Certificates

Corporate Briefing


Highlights

Introduced Engro Rupiya with the objective to have a

portfolio of long and short term products to benefit the

average Pakistani by providing them the opportunity to

share its growth through superior returns and added

convenience

Achieved the target of Rs. 4 billion with individuals

subscribing to almost 80% of the issue

Engro Rupiya Certificate has been a successful alternate

for the company to raise funds for its borrowing

requirements from a previously untapped investor base

Engro intends to develop Engro Rupiya as a long term

source of funding for which it plans to offer subsequent

TFC offerings with the 2nd issue in 2Q, 2011

Rs. 3,125 million, 2,460 Investors

Rs. 875 million, 81 Institutions

Corporate Briefing


Corporate Social Responsibility Engro contributed over Rs.136 million under its social investments commitment in 2010, as

compared to Rs. 58 million in 2009

Engro was also heavily involved in the relief and rehabilitation efforts following the floods

during the summer of 2010(total budget Rs. 61.75m)

Engro Corporation hosted the first Engro Excellence Awards in January, 2011. The recipients

were selected based on lifetime accomplishment and excellence in their respective fields and

received a cash prize of PKR 5 Million each at an exclusive award ceremony

Recipients of Engro Excellence Award 2011

Sir Syed award for Humanitarianism Abdul Sattar Edhi

Ghalib award for Literature Mushtaq Ahmed Yusufi

Dr Abdus Salam award for Applied Sciences

Dr Ataur Rahman

Corporate Briefing


Q & A

Thank You

engro corporation limited(presentation)

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