Engro Polymer and Chemicals Ltd. has inked a “interim arrangement” with the state-owned Sui Southern Gas Company Ltd. (SSGC) for the supply of fuel based on the industrial/commercial price for re-gasified liquefied natural gas in light of the anticipated gas shortages during the winter season (RLNG).
The corporation will purchase the imported gas, whose price is more than three times greater than that of the locally sourced fuel provided by the same state-owned utility, at the price announced from time to time on an as-and-when-available basis by the Oil and Gas Regulatory Authority (Ogra).
Rao Aamir Ali, an analyst at Arif Habib Ltd, claims that the business is now purchasing gas at a cost of Rs. 1,087 per million British thermal units (mmBtu). The tariff of imported gas, or RLNG, as reported by Ogra for November is $14.81, or Rs 3,318 per mmBtu.
The price of polyvinyl chloride (PVC), a firm product that is among the most popular polymers with a wide range of uses in industrial, technological, and daily applications, would rise due to the threefold increase in fuel costs.
The company will have to increase PVC prices by $285 per tonne to fully pas on the impact of higher gas prices. However, due to lower international PVC prices, we assume the company will only pass on half the impact of higher gas prices, said Mr Ali.
PVC’s international price was under $800 per tonne at the end of last week, down over 50% from a year earlier, according to statistics provided by AKD Securities.
According to Mr. Ali, the company’s earnings will decrease by Rs 1.82 per share if it fully absorbs the effects of increasing gas prices. For the three months of July to September, the company’s profits per share were Rs 2.27.
The business claimed the month-long annual turnaround of its PVC plant, which involves the manufacturing facility being down for yearly inspection, was scheduled for the end of 2022 in a briefing conducted for stock market analysts in October.