Fertiliser ENGRO CHEMICAL PAKISTAN LIMITED - Year ended 31

							   Fertiliser: ENGRO CHEMICAL PAKISTAN LIMITED - Year ended 31.12.2005


    OVERVIEW (April 04 2006): The company is manufacturing Urea fertiliser at Dharki (Sindh) and NPK
fertiliser at Port Qassim, Karachi (Sindh) and marketing under the brand names s of ENGRO and ZARKHEZ
                        respectively. It is also marketing imported phosphate fertilisers.

As a diversification strategy into profitable ventures, it has made massive investment into joint ventures (JV)
 engaged in chemical terminal and storage (Engro Vopak Terminal Limited), PVC resin manufacturing and
  marketing (Engro Asahi Polymer and Chemicals Ltd) and automation and control business (Innovative
    Automation & Engineering (Private) Ltd). The company also produces and markets hybrid and open
         pollinated seeds but the company has decided to make exit from this business in phases.

  During the year under review the company generated net sales in the sum of Rs 18.276 billion (2004: Rs
12.798 billion) registering fantastic growth of 42.8 percent over the preceding year's. Pre-tax profit of Rs 3.22
                 billion and post tax profit of Rs 2.32 billion were new record for the company.

     Higher dividend incomes from Engro Vopak, Engro Eximp and first time dividend from Engro Asahi
                                       advanced its profitability.

The Board of Directors declared total dividend of Rs 11 per share which is Rs 2.50 higher than the previous
   year's profit distribution of Rs 8.50 per share. The workshop of its Dharki plant is ISO 9002 certified.

   The company has excellent track record of socially responsible corporate citizenship. In this field Engro
 Chemical Pakistan Limited has impressive list of activities. In addition, it embarked upon rehabilitation plan
for the earthquake victims by rebuilding more than 100 houses around Balakot at an estimated cost of Rs 45
                                                   million.

  Moreover, the company initiated work on the first Telemedicine project in 2004 that delivers health care
 services from specialist doctors in Karachi to selective rural areas using communication technologies for
 diagnosis, treatment and prevention of diseases. The facility includes electronic online transmission of X-
      rays, Electro Cardiograms and patients' live heart beats for real time consultations by experts.

  In 2004 the company, made significant investments in information technology as it implemented SAP, an
 enterprise Resource Planning system. IT provides cutting edge competitiveness in terms of cost efficiency
                                          and potential resource.

 Engro Chemical Pakistan Limited (Engro) is the second largest producer of urea in the country. This public
  limited company was incorporated in 1965 in the province of Sindh. The address of its registered office is
    PNSC Building, Moulvi Tamizuddin Khan Road Karachi and the URL of its web site is www.engro.com.

  The company was formerly Exxon Chemical Pakistan Limited until 1991 when Exxon (Esso) decided to
  divest their fertiliser business on global basis and sold off its equity of 75% shares in the company. The
  Employees of Engro, in partnership with leading international and local financial institutions bought out
                  Exxon's equity and the company was renamed as Engro Chemical limited.

 The company was listed at the Karachi Stock Exchange in 1968.Its shares are also quoted on the Lahore
 and Islamabad Stock Exchanges. Engro shares invariably command very high market value. On 24/03/06,
  closing price of the share was quoted at Rs 209.50 per share which is nearly 21 times of the par value.
             During the last one year market value of the share peaked at Rs 243.90 per share.

   Engro has invested in joint ventures/other entities engaged in chemical related activities and industrial
                                                automation.

  In 1995, the company established a $60 million 50:50 joint venture company viz Engro Vopak Terminal
Limited which built a modern Jetty & Terminal at Port Qasim, Karachi for handling and storage of bulk liquid
                                                chemicals.

 In October 1997, Engro entered another 50/50 Joint Venture (JV) company in collaboration with Mitsubishi
   Corporation and Asahi Glass of Japan, named Engro Asahi Polymer & Chemicals Limited. The JV was
   formed and built the first world scale PVC resin manufacturing facility at a cost of US $80 million at Port
                                              Qasim, Karachi.

 In April 2003, acquired 51% interest in the Automation & Control Division of Innovation (Private) Limited, a
 Lahore based company that provides process control industrial solutions in the knowledge based services
                                                  sector.

  Engro announced plans to set up a milk processing facility at Sukkur (Sindh) to produce and UHT milk,
                  cream and other milk products at an estimated cost of Rs 1 billion.

The Urea factory of the company is situated at Dharki in the province of Sindh. The designed capacity of the
 plant has been rated at 850,000 tons p.a. of urea. Further expansion plans are underway to debottleneck
                               plant capacity to 1.2 million tons, in stages.

The rising demand of urea would surely absorb Engro's expanded capacity. According to the Annual Report
 of the company, the urea industry witnessed robust growth of approximately 10%. The statistics show that
the industry urea demand expanded from 4.7 million tons in 2004 to 5.2 million tons in 2005. Improved farm
  economics, availability of water, continued increase in crop support prices and significant increase in the
                        availability of credit to farmers, contributed to the high growth.

   During the year, the company's production of Urea by far exceeded the rated capacity as it achieved
                                   capacity utilisation of 107 percent.

Construction of Engro's 100,000 p.a. capacity NPK at fertiliser plant at Port Qasim was completed at a cost
   of US $10 million. The plant is in production and benefiting considerably the country's agriculture by
   providing balance nutrition to improve farm yields. During 2004, product's generic name of NPK was
replaced with Zarkhez. In this product also the company surpassed rated production capacity as it attained
                                       157% percent utilized capacity.

    In 2005, overall market for phosphate grew by 13% to 1.5 milling tons and in this period the market
          remained bullish despite the fact international phosphate prices touched all time high.

  During the year the sales volume of Engro imported DAP (phosphate) more than doubled to 281,000 tons
from 135,000 tons sold in 2004. In an environment of increasing sales phosphate prices, Engro made timely
 purchase decisions and gained considerable price advantage over competition. The company improved its
                        market share for DAP/MAP to 25% compared to 16% in 2004.


Performance Statistics                    (Million Rupees)
==========================================================
31st December                          2005         2004
==========================================================
Share Capital-Paid-up:                 1,529.40 1,529.40
Reserves & Surplus:                   5,846.17 5,056.48
Shareholders Equity:                  7,375.57 6,585.88
L.T. Debts:                      2,889.79 2,579.52
Deferred Taxation:                   1,003.18        966.30
Retirement & other Service Benefits: 43.00                 68.51
Current Liabilities:                2,800.09 2,985.15
Fixed Assets:                     6,840.06 7,096.33
Intangible Assets:                    21.62         9.94
L.T. Investments:                   2,172.76 1,424.56
L.T. Loans, Advances
& Other Receivables:                     65.64        51.93
Current Assets:                    5,011.55 4,602.60
Total Assets:                    14,111.63 13,185.36
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Sales, Profit & Pay out
----------------------------------------------------------
Net Sales:                      18,276.28 12,797.66
Gross Profit:                    3,911.99 3,269.48
Operating Profit:                   2,641.29 2,232.94
Other Income:                       1,144.99       558.15
Financial (Charges):                  (280.07) (285.71)
(Depreciation) & Amortization:              (609.18) (582.31)
Profit Before Taxation:                3,219.55 2,315.05
Profit After Taxation:                2,319.08 1,610.58
Earnings Per Share (Rs):                  15.16        10.53
Dividend Per share (Rs):                 (11.00)       (8.50)
Share Price (Rs) on 24/03/06:              209.50            -
----------------------------------------------------------
Financial Ratios
----------------------------------------------------------
Price/Earning Ratio:                    13.82            -
Book Value Per Share:                     48.22         43.06
Price/Book Value Ratio:                    4.34            -
Debt/Equity Ratio:                      28:72       28:72
Current Ratio:                        1.79        1.54
Asset Turn Over Ratio:                    1.30         0.97
Days Receivables:                         11          15
Days Inventory:                          49         19
Gross Profit Margin (%):                  21.40         25.54
Net Profit Margin (%):                   12.69         12.58
R.O.A. (%):                          16.43       12.21
R.O.C.E (%):                          20.50       15.79
Plant Capacity & Actual Production (Figures in Thousands)
----------------------------------------------------------
                       Designed Annual               -
                       Capacity Actual Production
----------------------------------------------------------
                          2005              2004
----------------------------------------------------------
A) UREA            850.00          911.67             870.32
 Capacity Utilization (%) ----- 107.26                   102.39
B) NPK           100.00           157.01            120.57
 Capacity Utilization (%) ---- 157.01                   120.57
  COMPANY INFORMATION: Chairman: S. Naseem Ahmad; President & Chief Executive: Asad Umer;
  Secretary: Andalib Alavi; Registered Office: PNSC Building, Maulvi Tamizuddin Khan Road, Karachi.
                             Factory: Dharki, Web Address www.emgro.com