ANALYST BRIEFING Q22020 Engro Polymer & Chemicals Limited - - PowerPoint PPT Presentation

ANALYST BRIEFING Q2’2020

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International Business Context

Engro Polymer & Chemicals Limited

International PVC Price

600 800 1000 1200 January February March April May June July August September October November December 2016 2017 2018 2019 2020

In Q2, PVC prices fell as demand declined due to lockdown in most countries and accumulation of inventory in China. Prices once again surged despite monsoon season due to planned shutdown of Formosa plant

International Ethylene Price

300 600 900 1200 1500 January February March April May June July August September October November December 2016 2017 2018 2019 2020

Ethylene prices hit bottom as crude prices entered record low levels in April. Prices showed sharp recovery in June as major crackers went off-line for maintenance and resultantly shortage of inventory in market

USD/Ton

Q1 Q2 Q3 Q4

USD/Ton

Q1 Q2 Q3 Q4

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Ethylene, Crude Oil & PVC

Engro Polymer & Chemicals Limited

Analysis of Ethylene and Crude oil prices

Oil prices hit bottom in April mainly driven by lack of storage capacity and insufficient oil demand. Prices have started picking up due to easing of lockdown and producers decision to cut global supply

PVC – Ethylene Core Delta

PVC – Ethylene core delta declined in Q2 as PVC and Ethylene prices started to recover from May, with recovery in Ethylene prices outpacing that of PVC prices

20 40 60 80 300 600 900 1,200 1,500 May-18 Jun-18 Jul-18 Aug-18 Sep-18 Oct-18 Nov-18 Dec-18 Jan-19 Feb-19 Mar-19 Apr-19 May-19 Jun-19 Jul-19 Aug-19 Sep-19 Oct-19 Nov-19 Dec-19 Jan-20 Feb-20 Mar-20 Apr-20 May-20 Jun-20 Ethylene Crude Brent USD/Ton USD/bbl

• 200

400 600 January February March April May June July August September October November December 2016 2017 2018 2019 2020 USD/Ton

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Domestic Market Overview

Engro Polymer & Chemicals Limited

PVC

PVC domestic market remained slower against LY due to COVID related sluggish demand in down stream segments and nationwide lockdown However, post easing of lockdown, the market has started recovering strongly

Caustic

Caustic soda demand declined as textile segment was adversely impacted by the pandemic with some recovery seen in June We expect Caustic sales to remain slightly lower till textile demand picks up completely

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Business Highlights

Engro Polymer & Chemicals Limited

Chlor Alkali (KT) Q2 2020 Q2 2019 1H 2020 1H 2019 Caustic Production 15* 26 30 52 Caustic Domestic Sales 9 20 24 41 Vinyl (KT) Q2 2020 Q2 2019 1H 2020 1H 2019 PVC Production 35* 45 57 94 PVC Domestic Sales 33 48 66 98 *Lower production vs. LY: Production remained lower during the quarter due to following factors: Termination of operations due to COVID-19 lockdown (28 days of lockdown) Lower demand in country

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Financial Summary

Engro Polymer & Chemicals Limited

• Rs. Mn

Q2 2020 Q2 2019 1H 2020 1H 2019 Total Revenue 5,816 9,256 12,874 18,600 Profit After Tax 30 452 223 1,544 EPS (PKR/share) 0.03 0.50 0.24 1.70

• In 1H 2020, the Company’s revenue declined by 31% on account of lower production
• Profitability was constraint by the following factors:
• Gas rate change (~ - Rs. 350 Mn)
• Lower Sales (~ - Rs. 1,400 Mn)
• Financial charges (~ - Rs. 450 Mn)
• Core Delta/margin impact (~ + Rs. 300 Mn)
• IFRS 16 impact (~ + Rs. 275 Mn)

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Key updates from Q2 & Outlook

Engro Polymer & Chemicals Limited

• EPCL shutdown its production on 24th March’20 due to government mandated lockdown. Production was resumed on 20th

April’20.

• Demand improved post lockdown and resultant impact on sales was also observed.
• With declining cases and government’s measures to revive the construction industry, we foresee a surge in demand going

forward; a lot still depends on government interventions related to COVID-19.

• International prices recovered due to shift in global demand as lockdowns eased in most countries in general.
• Going forward, PVC/Ethylene prices will continue to be influenced by global economic sentiment, COVID-19, supply and

demand situation.

• Caustic soda market dynamics will depend on how the textile export would recover in 2H
• Construction work related to PVC expansion and VCM debottlenecking projects resumed effective May 21st
• Completion timeline with respect to the project has been revised, and we are now targeting COD in the 1Q 2021.
• Currently work on other announced projects is on hold and the timelines are being reviewed.

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