Engro Corporation, Pakistan’s renowned and biggest business conglomerate, seems to take a U-turn from the road to growth to road to crisis with imminent severe challenges ahead after a leadership vacuum created with sudden departure of its top-brass members in the recent days.
The leading corporation having a tremendous performance track record and successful history is feeling the pinch of energy crisis when the natural gas is not available to run its world’s biggest urea producing plant—Engro Fertilizers.
Engro Fertilizers, one of the biggest subsidiaries of corporation, has become major bone of contention among the leadership crisis as it made it extremely difficult for company’s board member to convince their investors regarding the slow production of the urea producing plants that has dragged the overall corporation into red zone.
The company huge quarterly profit of Rs. 2.054 billion (Rs 200 Crore) translated into loss of Rs 649 million (Rs 65 Crore) losses in the first quarter of 2012, showing a grim financial situation for the business conglomerate to maintain itself in the green zone going foward.
The revenue of the company stood at Rs. 22.9 billion for the first quarter 2012, as compared to Rs 21.8 billion in the same period last year.
Engro Fertilizers registered a decline of its market share to 8% as opposed to 20% in the same period last year due to lower sales volumes and high depreciation & financial costs.
Engro Fertilizers set up its new fertilizer plant in 2011, the world’s largest single train ammonia-urea plant, in Daharki with the huge investment of $1.1 billion (Pakistan Rs 99 Billion).
The vision was strong to be self-sufficient in Urea production at national level primarily and expanded corporation size in exploiting its expertise of the production of most essential ingredient in profitable sector of agriculture.
The plant could save $500 million of country on the account of Urea import and saves its foreign exchange on the other hand as Pakistan’s urea demand stands at approximately 6.2 million tons, whereas local production is approximately 5.2 million tons.
The plant’s production capacity of 1.3 million tons per annum enhanced Engro Fertilizer’s total annual urea production capacity to 2.3 million tons.
But unfortunately, the strong vision was vandalized and its execution was stagnant, when the subsidiary was supplied 140 days natural gas only in the 365 days of 2011, which was against the agreement between the corporation and the government.
Legal Battle and Government Talks
The company has filed a suite against Ministry of Petroleum and Natural Resources (MNPR) and Sui Northern Pipeline Gas Ltd (SNGPL) on the failure of 100 MMCFD uninterrupted supplies to its plant.
The legal action was taken by the corporation because the expansion of plant had been carried out on the back of transparent license bidding process for allocation of gas from Qadirpur gas field that ensures 100 MMCFD under Gas Supply and Purchase Agreement (GAS).
But different pressure groups comprising mainly of Punjab’s textile companies went to Supreme Court and now the hearing and verdict on the petition are pending.
The then CEO of Engro Corporation, Asad Umar, approached this matter to President Asif Ali Zardari but he was disappointed and it was reported that he was asked to pay millions on high level meeting.
Engro Internal Rift
The expansion was planned by the then President and CEO Engro, Asad Umar, but the whole corporation came into trouble after he and another board member and CEO of Engro Fertilizers Khaild Mansoor, who also resigned from his post recently, was under immense grilling of the fellow board members.
Asad Umar and Khalid Mansoor were reportedly at loggerhead on the issue of Engro Fertilizers slow production but both were also come under immense grilling of fellow board members.
Few of them said that the expansion plan was a failed plan and it proved to be complete disasters to entire corporation because the legal battle seems to be delayed for longer period and gas supplies will be volatile and uninterrupted for the fertilizers plant.
“Asad Umar found it opportunity to leave the company in the situation, which is though not very bad at present but it will be worse in future. So, Asad prevented himself from facing all blame in coming months,” a friend of Asad said on the condition of anonymity.
On the other hand, Khalid Mansoor, who was CEO of Engro Fertilizers and Sindh Engro Coal Mining Company, tendered his resignation when Aliuddin Ansari, a relatively junior board member, was made CEO of the corporation.
The departure of two key board members has left Engro in trouble because these were the executives who closed associated with projects and its legal and operational affairs.
Though as an exemplary corporate company, the leadership may not issue for Engro Corporation but the abrupt dramatic situation may lead to more challenges for the company to face a tough time for maintaining its profitability in future.
Aliuddin Ansar has been one of the board members of Engro Corporation since 2009 and must have served company’s interest CEO of Dewan but he has not headed any of the subsidiaries of Engro. Meanwhile, no person has been promoted or appointed in the place of Khalid Mansoor so far for heading two companies– Engro Fertilizers and Sindh Engro Coal Mining Company.
Engro Foods, its subsidiary, has kept the balance sheet of company at quite stable situation. The foods business turnover grew by 54 percent to Rs. 9.9 billion in the first quarter of 2012 as compared to Rs. 6.4 billion for the corresponding period last year. In addition, the Engro Foods investment in the Halal Foods business in Canada, Al Safa, also achieved sizable sales revenue of Canadian $ 2.5 million in the first quarter of 2012.
Engro Corporation comprises of six subsidiaries- Engro Fertilizers, Engro Foods, Engro Polymer and Chemicals, Engro Powergen, Engro Eximp and Engro Vopak.
Despite five subsidiaries in businesses, the whole corporation came in great trouble owing to its major organ, Engro Fertilizers.
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- Exclusive: Khalid Mansoor, Engro Fertilizer’s CEO also left Engro Corporation
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