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Engro Polymer and Chemicals Limited (EPCL) has reported notable financial losses for the first nine months of the ongoing calendar year 2024 compared to the corresponding period of 2023, mainly due to a steep drop in global polyvinyl chloride (PVC) prices, reports WealthPK.

According to Pakistan Stock Exchange (PSX), the company posted a consolidated net loss of Rs2.29 billion in 9MCY24 compared to a net profit of Rs5.39 billion recorded during the same period last year. Thus, the company registered a basic loss per share of Rs2.74 in 9MCY24 compared to an earnings per share of Rs4.46 recorded in 9MCY23. Likewise, the company suffered a standalone net loss of Rs1.75 billion compared to a net profit of Rs5.4 billion in 9MCY23. Established in 1997, EPCL is a subsidiary of Engro Corporation Limited. The company primarily manufactures, markets and sells PVC, vinyl chloride monomer (VCM), caustic soda and related chemicals.

It also supplies surplus power from its power plants to Engro Fertilizers Limited. During the nine months of CY24, EPCL’s consolidated revenue declined by 12% to Rs54.45 billion from Rs62.04 billion in the previous year, mainly due to lower sales volumes and persistently bearish global PVC prices throughout the year. According to the PSX financial report, the downturn is primarily driven by reduced demand for PVC, further exacerbated by weak global economic conditions and seasonal factors. Furthermore, the company’s gross profit took a significant hit, shrinking from Rs15.88 billion in 9MCY23 to just Rs3.60 billion in 9MCY24.

During the period under review, the falling PVC prices and rising production and financing costs further constrained the profitability as finance expenses jumped to Rs5.76 billion from Rs3.97 billion in 9MCY23, reflecting higher borrowing costs and financial strain caused by broader economic pressure. As the domestic textile sector also grappled with high energy prices, it dampened the demand for PVC products. Despite these obstacles, EPCL is actively working on strategies to improve operational efficiency and stabilise its financial position. The company also plans to boost hydrogen peroxide production. Furthermore, to enhance its profit margins, ECPL is also introducing cost-cutting measures.

Looking ahead, PVC prices are expected to remain stable or slightly bearish mainly because of oversupply and weak global demand. EPCL hopes the reduction in domestic interest rates could stimulate local demand for its products. The firm anticipates the ethylene market to stabilise between $900 and $950 per tonne. Additionally, trends in the caustic soda market will play a key role in shaping its future profitability. The management remains cautiously optimistic about potential market recovery in months ahead as the recent Chinese stimulus policies will drive construction activity and revive PVC demand. The firm is also committed to making strategic investments in efficiency boosting initiatives to position it comfortably in a highly competitive landscape.

Credit: INP-WealthPk