Engro Fertilizers Ltd. · PSX:EFERT

Engro Fertilizers — Investor Presentation (May 2016)

37 slides from Engro Fertilizers's investor presentation, May 2016

1. Slide 1: Company Presentation

   Company Presentation May 2016

2. Slide 2: Important Disclaimer

   Important Disclaimer THIS PRESENTATION IS NOT AN OFFER OR SOLICITATION OF AN OFFER TO BUY OR SELL ANY SECURITIES. This presentation has been prepared by Engro Fertilizers Limited (“Engro”) solely for information purposes. No representation or warranty express or implied is made as to, and no relianc

3. Slide 3: Table of Contents

   Table of Contents 1. Pakistan Overview 2. Engro Corp Overview 3. Engro Fertilizers Overview 4. Key Investment Highlights and Business Strategy 5. Financial Performance Company Presentation 3

4. Slide 4: 1. Pakistan Overview

   1. Pakistan Overview

5. Slide 5: Macroeconomic Snapshot

   Macroeconomic Snapshot Strategic Location Economy Highlights  GDP growth of c.5% annually until 2019E China  6th largest country by population Overview  Agricultural sector contributes c.24% of GDP Iran  Country’s FX reserves have recently India Recent reached a record high of US$20bn+ in 2016 M

6. Slide 6: Macroeconomic Snapshot

   Macroeconomic Snapshot Population and GDP per Capita GDP and GDP Growth (US$ in billions) 6% (%) 5% 5% 5% 5% (million) (US$) 4% 5% 4% 197 3% 189 206 180 6,022 172 2% 156 163 5,765 144 149 5,491 140 5,259 5,051 4,812 4,624 4,460 205 4,209 4,322 201 193 197 185 189 4% 5% 181 4% 4% 174 177 4% 170 4% 4%

7. Slide 7: Macroeconomic Snapshot (Cont'd)

   Macroeconomic Snapshot (Cont’d) FX reserves State Bank of Pakistan Discount Rate at Historical Low (US$ in millions) 20% The State Bank of Pakistan cut the discount rate, by 50 15% basis points to 6.5%, in September 2015 20,196 10% 18,699 18,244 16,750 5% 2009 2010 2011 2012 2013 2014 2015 15,289 14

8. Slide 8: Improvements in Credit Ratings

   Improvements in Credit Ratings Pakistan CDS Spread and Agency Ratings(1) Rating Agencies Outlook 40% • Ratings rationale: Upgraded to CCC+ – Improved economic growth prospects that are 35% Agency Current Rating expected to further improve Pakistan’s budgetary Moody's B3 position 30% S&P B‐ – Governm

9. Slide 9: Growth Witnessed in the Stock Market

   Growth Witnessed in the Stock Market Index has one of the lowest valuations compared Index value increased c.5x since 2009 to peers (P/E ratio) 40x 35x 30x 25x 20x 15x 10x 5x – 2009 2010 2011 2012 2013 2014 2015 2016 Pakistan China India Vietnam Malaysia Indonesia Despite the recent market volatilit

10. Slide 10: 2. Engro Corp Overview

    2. Engro Corp Overview

11. Slide 11: Engro Corporation Limited – An Introduction

    Engro Corporation Limited – An Introduction Engro Corporation Limited (“Engro Corp” or “ECorp”) is one of Pakistan's largest conglomerates. It seeks to be the premier Pakistani enterprise with a global reach passionately pursuing value creation for all stakeholders. ECorp has over 50 years of experi

12. Slide 12: Engro Corp's Evolution

    Engro Corp’s Evolution 2009 2015 2011 2005‐06 Engro enters into Commences 50th the largest public private partnership Engro acquires Al 2013 year since inception of the company 1968 Engro enters energy business and begins in the history of Pakistan by setting Safa Halal in Canada Entered in to a Eng

13. Slide 13: Engro Corporation – Conglomerate Organogram

    Engro Corporation – Conglomerate Organogram* [shareholding as of March 2016] Engro Corporation Engro Elengy Engro Engro Eximp Engro Engro Engro Foods Polymer & Engro Vopak Terminal Fertilizers Agri Products Powergen Foundation 87.1% Chemicals 50% Pakistan** 78.8% 100% 100% 56.2% 100% Engro Engro Sin

14. Slide 14: Engro Corporation Limited – Key Figures

    Engro Corporation Limited – Key Figures Total Assets Sales (US$ in millions) (US$ in millions) 1,742 1,794 2,160 1,530 2,047 1,327 1,340 1,952 1,969 1,874 2011 2012 2013 2014 2015 2011 2012 2013 2014 2015 Market Capitalization Net Profit* (US$ in millions) (US$ in millions) 7% 7% 5% 4% 1,397 1% 1,15

15. Slide 15: Engro Corp's Growth Strategy

    Engro Corp’s Growth Strategy Engro Corp history  Engro Corp has historically raised significant capital (debt and equity) to finance growth in the fertilizer & agri‐inputs, energy & related infrastructure and consumer verticals  While achieving success Engro has also gained trust of reputable inte

16. Slide 16: 3. Engro Fertilizers Overview

    3. Engro Fertilizers Overview

17. Slide 17: Engro Fertilizers Limited – An Introduction

    Engro Fertilizers Limited – An Introduction  Engro Fertilizers Limited (“EFERT” or the “Company”) is a Pakistan‐based fertilizer company, engaged in the manufacturing and marketing of fertilizers in Pakistan  It offers Urea, NPK (Potash / Zarkhez) and Di‐Ammonium Phosphate (DAP) fertilizers under

18. Slide 18: Journey & Key Milestones

    Journey & Key Milestones 1965 1978 2014 The 2007 Successful 2015 Construction 2010 Esso company Pakistan 1991 Enven plant IPO In 1QCY15 was Exxon of World’s Fertilizer started Engro Corp. incorporated divests its largest as Esso 1968 Company equity from 2005 single‐train producing 2011 sold its Limi

19. Slide 19: Company Overview

    Company Overview  EFERT is a subsidiary of Engro Corporation Limited involved in the production of 90 warehouses Urea and NPK (Potash) based fertilizers and is also a leading importer and seller of across Pakistan Phosphate (DAP) products, which are marketed extensively across Pakistan  Pakistan’s

20. Slide 20: Fertilizer Sector - Structural Overview

    Fertilizer Sector ‐ Structural Overview  Installed capacity of Urea 7 million tons which is 6th largest in world, against domestic demand of around 5.5 million tons; making Pakistan self sufficient, with the potential to export if installed capacity is fully operated  However, due to gas shortage,

21. Slide 21: Products & Brands Overview

    Products & Brands Overview EFERT’s product offering spans across Urea, Potash/Zarkhez & DAP fertilizers which are marketed under 7 unique brands as illustrated below Urea ‐ Revenue share 67% Engro Urea  EFERT is the first company to have setup urea production facility in Pakistan, a landmark event

22. Slide 22: 4. Key Investment Highlights and Business Strategy

    4. Key Investment Highlights and Business Strategy

23. Slide 23: Key Investment Highlights

    Key Investment Highlights 1 Well Established Player in the Fertilizer Market 2 1 Robust Operating and Financial Performance 3 1 Lowest Cost Producer in Pakistan – Enven Plant 4 1 Sustainable Dividend Payout 5 1 Supported By a Strong Local Shareholder 6 1 Led By a Highly Experienced Management and Bo

24. Slide 24: Well Established Player in the Fertilizer Market

    1.1 Well Established Player in the Fertilizer Market  Engro Fertilizers Limited maintains a successful operating history with beginnings dating as far back as 1957  The Company has an established and well‐recognized brand name with leading market shares in its product offerings  In addition to ex

25. Slide 25: Robust Operating and Financial Performance

    2. 2 1 Robust Operating and Financial Performance Urea Production NPK Production (MT) (MT) 0.13 1.97 0.12 1.82 1.56 0.09 0.09 1.25 0.07 0.97 2011 2012 2013 2014 2015 2011 2012 2013 2014 2015 Revenue LT Debt / Capital (US$ in millions) (LT Debt / Capital) 853 81% 79% 70% 608 56% 494 46% 363 328 2011

26. Slide 26: Lowest Cost Producer – Enven Plant

    3 1 Lowest Cost Producer – Enven Plant  The concessionary gas price along with efficiency provides a strong competitive advantage and is the key driver of Engro Fertilizer’s profitability  Engro’s new plant, Enven, was commissioned in 2011  It is a state of the art modern plant with the one of th

27. Slide 27: Sustainable Dividend Payout

    4 1 Sustainable Dividend Payout LT Debt and EBITDA Dividend Per Share (US cents) (US$ in millions) 2015 Dividend yield* 6.9% 780 689 5.84 565 442 346 2.97 297 205 229 230 126 – – – 2011 2012 2013 2014 2015 2011 2012 2013 2014 2015 EBITDA LT Debt  Post commissioning of the new plant in 2011 and reso

28. Slide 28: Supported By a Strong Local Shareholder

    . 5 1 Supported By a Strong Local Shareholder Engro Corporation Limited (“Engro Corp” or “ECorp”) is one of Pakistan's largest conglomerates with ECorp’s business portfolio spanning across a wide array of sectors, including chemical fertilizers, PVC resin, a bulk liquid chemical terminal, LNG termin

29. Slide 29: Led by a Highly Experienced Management and Board

    4. 6 1 Led by a Highly Experienced Management and Board Board of Directors Business Executives Khalid Siraj Subhani, Chairman Ruhail Mohammed, CEO  President of Engro Corporation Limited since 2015  Chairman and Director on various Engro Corporation Limited subsidiaries Ruhail Mohammed, President

30. Slide 30: Key Business Risks and Mitigants

    Key Business Risks and Mitigants 1 Gas Availability  The Fertilizer sector competes with the power, industrial and domestic sectors for gas supply  EFert receives gas supply for its new plant (Enven, from where bulk of its EBITDA is generated) from a dedicated gas network, with a long term gas sup

31. Slide 31: Business Strategy

    Business Strategy Continued 2 Plant Operations • EFERT to pursue continued 2 plant operations, in order to sustain prevailing cashflows • There are long term contracts in place to ensure continuous operations for the new plant. For the old plant, the management is in discussions with the relevant qu

32. Slide 32: 5. Financial Performance

    5. Financial Performance

33. Slide 33: Historical Financial Performance

    Historical Financial Performance Revenue Gross Profit (US$ in millions) (US$ in millions) 853 53% 44% 608 37% 37% 32% 494 363 313 328 194 218 224 106 2011 2012 2013 2014 2015 2011 2012 2013 2014 2015 Gross Profit Margin EBITDA Net Profit (US$ in millions) (PKR in billions) 17% 56% 15% 11% 13% 46% 38

34. Slide 34: Balance Sheet Strength

    Balance Sheet Strength LT Debt (US$ in millions) 780 689 565 442 346 Dec '11 Mar '12 Jun '12 Sep '12 Dec '12 Mar '13 Jun '13 Sep '13 Dec '13 Mar '14 Jun '14 Sep '14 Dec '14 Mar '15 Jun '15 Sep '15 Dec '15 LT Debt / EBITDA LT Debt / Capital (x) (LT Debt / Capital) 5.5x 81% 79% 70% 3.8x 56% 46% 2.5x 1

35. Slide 35: Q1 2016 Performance

    Q1 2016 Performance Key Highlights  EFERT Q1 2016 PAT stood at PKR 2.1 B (US$20mn) vs PKR 3.1 B (US$30mn) in Q1 2015  Q1 2016 urea production stood at 514 KT, compared to 486 KT in Q1 2015 mainly due to better gas availability  However, due to poor crop economics, sales remained lower at 286 KT v

36. Slide 36: Current Situation and Outlook

    Current Situation and Outlook  Urea offtake has been low for the start of 2016 mainly due to poor crop economics, low international prices and subsidy rumors on urea. However we expect the local urea demand to recover in the upcoming Kharif season for which the industry is supplied with adequate in

37. Slide 37: Thank You Q&A

    THANK YOU Q&A

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