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

ANALYST BRIEFING Q2’2020

Engro Polymer & Chemicals Limited International Business Context International PVC Price USD/Ton In Q2, PVC prices fell as demand declined due to 1200 Q1 Q2 Q3 Q4 lockdown in most countries and accumulation of 1000 inventory in China. Prices once again surged despite 800 monsoon season due to planned shutdown of Formosa plant 600 January February March April May June July August September October November December 2016 2017 2018 2019 2020 International Ethylene Price USD/Ton Q1 Q2 Q3 Q4 Ethylene prices hit bottom as crude prices entered 1500 record low levels in April. Prices showed sharp 1200 recovery in June as major crackers went off-line for 900 maintenance and resultantly shortage of inventory in 600 market 300 January February March April May June July August September October November December 2016 2017 2018 2019 2020 2

Engro Polymer & Chemicals Limited Ethylene, Crude Oil & PVC Analysis of Ethylene and Crude oil prices USD/Ton USD/bbl 1,500 80 Oil prices hit bottom in April mainly driven by lack of 1,200 storage capacity and insufficient oil demand. Prices 60 900 have started picking up due to easing of lockdown and 40 600 producers decision to cut global supply 300 20 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 PVC – Ethylene Core Delta USD/Ton PVC – Ethylene core delta declined in Q2 as PVC and 600 Ethylene prices started to recover from May, with 400 recovery in Ethylene prices outpacing that of PVC prices 200 - January February March April May June July August September October November December 2016 2017 2018 2019 2020 3

Engro Polymer & Chemicals Limited Domestic Market Overview PVC Caustic PVC domestic market remained slower against Caustic soda demand declined as textile LY due to COVID related sluggish demand in segment was adversely impacted by the down stream segments and nationwide pandemic with some recovery seen in June lockdown We expect Caustic sales to remain slightly However, post easing of lockdown, the market lower till textile demand picks up completely has started recovering strongly 4

Engro Polymer & Chemicals Limited Business Highlights 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 5

Engro Polymer & Chemicals Limited Financial Summary 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: o Gas rate change (~ - Rs. 350 Mn) o Lower Sales (~ - Rs. 1,400 Mn) o Financial charges (~ - Rs. 450 Mn) o Core Delta/margin impact (~ + Rs. 300 Mn) o IFRS 16 impact (~ + Rs. 275 Mn) 6

Engro Polymer & Chemicals Limited Key updates from Q2 & Outlook EPCL shutdown its production on 24 th March’20 due to government mandated lockdown. Production was resumed on 20 th • 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 21 st • 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. 7

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