Engro Polymer plans Rs7.6bln investment for expansion

KARACHI: Engro Polymer and Chemicals on Wednesday unveiled Rs7.6 billion investment plan to increase production of pipes and fittings to capitalise on growth in construction activities in the country and tap regional demand.

“The board of directors has resolved that the company intends, in the near future, to carry out a right issue of ordinary shares at a premium,” the company said in a notice to Pakistan Stock Exchange. “However, the share price to be determined in the future for the proposed right issue will not exceed Rs30/share.”

The estimated overall capital expenditure of the said expansion project is approximately Rs7.6 billion, which is intended to be partially funded through issuance of right shares of approximately Rs5.4 billion.

The aggregate amount of proposed right issue will be utilised to fund the addition of new polyvinyl chloride (PVC) plant of 100,000 tons and vinyl chloride monomer’s plant debottlenecking of 50,000 tons per annum.

Engro Polymer and Chemicals is the only fully integrated chlor-vinyl chemical complex in Pakistan. It is a subsidiary of Engro Corporation, involved in the manufacturing, marketing and distribution of chlor-vinyl allied products and PVC.

The board would approve and announce the actual right issue at a future date in accordance with the applicable laws and necessary approvals.

Engro Polymer posted a profit of Rs2.053 billion for the year ended December 31, 2017, while the company’s revenue clocked in at Rs27.7 billion during the year. The company said construction sector has grown nine percent in 2017 and strong growth bodes well for company’s primary segment covering pipes and fittings.

The country’s PVC market grew at the rate of 11 percent in 2017. But, Pakistan’s per capita consumption of PVC is the lowest in South Asian region standing at 1.2 kilogram as compared to 2.3kg in India. This phenomenon exists primarily because Pakistan uses PVC in conventional applications.

Engro Polymer is focusing on new PVC products, including PVC foam board, PVC wood plastic and PVC wall panels to capitalise on the increasing size of the market. Moreover, regional PVC demand has outpaced production capacity, giving an opportunity to the company to export its products into the regional market.

Imran Anwer, chief executive officer of Engro Polymer said domestic demand, energy dynamics and the international vinyl chain prices would continue to play a vital role in company’s profitability.

“… anti-dumping duty will be key to ensuring value creation,” Anwer said in a company’s annual report.

National Tariff Commission has been slapping anti-dumping duties on imports of polyvinyl chloride resin exported to Pakistan at dumped prices from China, South Korea, Thailand and other countries and which caused material injury to local industry.