Company

Company Information 05
Our Vision 07
Engro is humbled to have had its share Core Values 09
of challenges and milestones over the Engro Corp at a Glance 10
course of a 54-year journey that began Board of Directors 11
in 1957. In 2019, we spent a lot of time Directors’ Profile 13
looking inward and taking a deeper look Notice of the Meeting 19
into the pressing issues faced by our
homeland today. This introspection led Corporate Governance
to the creation of a new central narrative
for Engro – one in which we identified Chairman’s Message 23
four primary verticals in which we feel President’s Message 25
we possess the acumen to help address Recognition of Our Efforts 27
some of Pakistan’s major challenges. Directors’ Report 31
In specific, food & agriculture against food Governance Control Framework 55
scarcity, energy & related infrastructure Statement of Compliance with the 57
against the energy shortage, Code of Corporate Governance
petrochemicals to aid in balance of Independent Auditor’s Review Report 59
payments, and telecommunication Statement of Compliance with the 60
Public Offering Regulations, 2017
infrastructure as a conduit that drives
Independent Assurance Report to 61
inclusion.
the Board of Directors on the
Statement of Compliance with
Through these verticals, we are working Public Offering Regulations, 2017
towards our primary goal of enabling
growth for Pakistan. Financial Statements

Independent Auditor’s Report (Standalone) 79

Financial Statements (Standalone) 83
Independent Auditor’s Report (Consolidated) 133
Financial Statements (Consolidated) 139
Proxy Form 244
Standard Request Form 246
Circulation of Annual Audited Accounts
In a relentless pursuit to play our part in enabling nutrition, we focus on enriching soils through a
number of seed-to-harvest solutions. With one of the largest product portfolios, and our experienced
and specialized field teams, Engro empowers farmers to maximize crop yields. Always projecting
the best of Pakistan to the world, Engro also exports premium rice, and has Asia’s largest paddy
cleaning and drying capacity. Through its numerous initiatives across agri value chains, Engro has
developed champions to positively transform the agricultural landscape of Pakistan.
 Annual Report 2019

company information key figures

Board of Directors Auditors Revenue 171,568 2018
Hussain Dawood - Chairman A.F. Ferguson & Co (Rs. in millions) 225,920 2019 128,593 2017
Abdul Samad Dawood - Vice Chairman Chartered Accountants
Muhammad Abdul Aleem State Life Building No. 1-C
Henna Inam I.I. Chundrigar Road
Shahzada Dawood Karachi-74000, Pakistan
Rizwan Diwan Tel: +92(21) 32426682-6 / 32426711-5 EBITDA 70,901 2019 49,378 2018
Khawaja Iqbal Hassan Fax: +92(21) 32415007 / 32427938 (Rs. in millions)
40,066 2017
Waqar Ahmed Malik
Raihan Ali Merchant
Ghias Khan - President
Share Registrar
FAMCO Associates (Private) Limited
8-F, Near Faran Hotel, Nursery, Block-6
Profit After Tax (attributable to owners) 16,533 2019 12,708 2018
Chief Executive Officer PECHS, Shahrah-e-Faisal, Karachi
(Rs. in millions) 9,407 2017
Ghias Khan
Registered Office
Company Secretary 22.06
Faiz Chapra
7th & 8th Floors, The Harbour Front Building
HC # 3, Marine Drive, Block 4, Clifton
Earnings Per Share 28.69 2019 2018

Karachi-75600, Pakistan
(Rs.)
16.33 2017
Tel: +92(21) 35297501 – 35297510
Chief Financial Officer Fax: +92(21) 35810669
Hasnain Moochhala
e-mail: [email protected]
Website: www.engro.com Total Assets 550,245 2019 393,155 2018
Bankers (Rs. in millions) 323,860 2017
Allied Bank Ltd
Askari Bank Ltd
Bank Al-Falah Ltd
Bank Al-Habib Ltd Total Equity 195,249 2019 185,587 2018
Citi Bank N.A (Rs. in millions) 171,074 2017
Faysal Bank Ltd
Habib Bank Ltd
Habib Metropolitan Bank Ltd
JS Bank Ltd Capital Expenditure 46,975 2019 36,580 2018
MCB Bank Ltd
Meezan Bank Ltd
(Rs. in millions) 29,883 2017
National Bank of Pakistan Ltd
Soneri Bank Ltd
Standard Chartered Bank (Pakistan) Ltd
Cash Flow from Operation 38,614 2019 28,940 2018
United Bank Ltd
(Rs. in millions) 21,120 2017

Dividends 23,615 2019 18,843 2018

(Rs. in millions) 17,096 2017

Market Capitalization 152,463

198,920 2019
2018
(Rs. in millions)
143,910 2017

05 06
to be the premier Pakistani enterprise with a global reach,
passionately pursuing value creation for all stakeholders
Operating in diverse industries and spread over geographical landscapes, the Engro employees are knit into one big
family, united by a drive for success, passion for Pakistan, and the same core values. Our values form the basis of 3,976
12,713
everything we do – from open communication to fostering an environment of trust and guaranteeing the well-being
and safety of our people. At Engro, we never forget what we stand for.
50,039
121,355
225,920
Fertilizers Consolidated Revenue
(Rs. in millions)
Polymer
Energy
Terminals
Others
37,837

Health, Safety & Ethics & Community &

109,347
18,043
38,365
Environment Integrity Society
To Providers of Capital Wealth Distributed
(Rs. in millions)
cares deeply about has impeccable character nurtures passion to serve 9,835
To Government
environmental impact and and lives by highest country, community, and
safety of people standards of integrity and company, with strong belief 749 To Society
accountability in the dignity and value of To Employees
people
Retained for reinvestment
and future growth
42,354

112 101

2,619
36 298
Corporation
304 Fertilizers Total Employees
Polymer
Energy
Terminals
508 Digital
1,260 Eximp Agriproducts

89
166

Livelihoods
866
Total Social Spend in 2019
Education (Rs. in millions)
70
Health
Infrastructure
21
Management Cost
240 Others
280

*This includes an amount of Rs. 36 million paid through associate and joint venture
(from left to right)
Muhammad Abdul Aleem - Director
Rizwan Diwan - Director
Henna Inam - Director
Abdul Samad Dawood - Vice Chairman
Hussain Dawood - Chairman
Ghias Khan - President
Shahzada Dawood - Director
Waqar Ahmed Malik - Director
Khawaja Iqbal Hassan - Director
Raihan Ali Merchant - Director
Hussain Dawood on the Board for Teach the World Foundation, aiming Ghias Khan launch of the Engro Leadership Academy, which serves
Chairman to address the challenge of illiteracy through technology President as a platform to develop effective leaders. Further, Ghias is
based on self-learning. spearheading Engro’s OneSAP initiative, which is bringing
Hussain Dawood is Chairman of Dawood Hercules, a family- Ghias Khan is the 4th President & CEO of Engro Corporation. the group onto a singular technology platform, laying the
owned group of businesses with a history of entrepreneurship He is an active member of the World Economic Forum Since he came on board at the end of 2016, Ghias has foundation for a digital future. Under his guidance, Engro
spanning over a century. For over half the century, Mr. since 1992. For his contributions to improving international been instrumental in revamping Engro’s strategy, culture, has also earned numerous awards, both locally and
Dawood has driven the Group and its investments with a business relations, he was conferred the award “Ufficiale and global outreach. Ghias, along with the Board of globally, for enabling a thriving business environment,
vision of purpose to serve the nation. Today, the Group is Ordine Al merito della Repubblica Italiana” by the Republic Directors, have defined a powerful central narrative for investing in the development of its people, upholding high
recognised as a diversified conglomerate that endeavours of Italy in 2008. Engro Corporation that will chart its path for years to come. standards of corporate governance, and promoting Health,
to make notable contributions to sectors that are drivers of Safety, & Environment in the workplace.
economy and society. Hussain Dawood holds a MBA from the Kellogg School There have been several notable achievements for Engro
of Management, Northwestern University, USA, and is a under Ghias’ guidance thus far. He has stewarded Engro’s Former CEO of Inbox Business Technologies, an enterprise
Mr. Dawood also serves as Chairman of Engro Corporation, graduate in Metallurgy from Sheffield University, UK. renewed commitment in the petrochemical sector, with technology company that he co-founded in 2001 and
one of Pakistan’s leading corporates with businesses falling several growth initiatives in Engro Polymer & Chemicals and remained with till 2015, Ghias grew the employees to
under four primary verticals, meant to help address some other greenfield projects, consolidated the management over 1900 and pivoted the company from a computer
of Pakistan’s most pressing challenges: food & agriculture of all energy assets under one platform with a long-term manufacturer to a systems integrator, and then to a
against food scarcity, energy & related infrastructure against strategy of investing in the overall energy value chain, paved technology-enabled digital services company.
the energy shortage, petrochemicals to aid in the balance the way for more cooperation with our long-time partner,
of payments issue, and telecommunication infrastructure, Royal Vopak, through their entry in Engro Elengy, and was In his final year at Inbox, it was voted the largest technology
as connectivity is a conduit that enables social and financial contributory in the robust turnaround of the rice business company in Pakistan by Domestic Spend. Ghias has also
inclusion. of Engro Eximp Agriproducts, which won its first-ever Top previously served as Executive Director of Dawood Hercules.
Exporter Award in 2018. In addition, during his Presidency,
Under the stewardship of Mr. Dawood, Engro has emerged as Engro’s Thar power plant achieved Commercial Operations Currently, Ghias also serves as Chairman on the Boards
a partner of choice for international companies looking to work and set out to fulfill its promise of contributing 660 MW of Engro Fertilizers Limited, Engro Polymer & Chemicals
in Pakistan, including Royal Vopak, Royal FrieslandCampina, to the national grid and a global record was set by Engro Limited, Enfrashare (Pvt) Limited, and Engro Energy
Mitsubishi, China Machinery Engineering Corporation, Elengy amongst LNG terminals with the fastest 200 ship- Limited. He holds a MBA from the Institute of Business
and International Finance Corporation, to name a few. to-ship transfers. Finally, with a firm belief that connectivity Administration, Karachi.
is the conduit that enables social and financial inclusion,
The Dawood legacy reflects a continued commitment to Ghias was involved in the launch of Enfrashare. Enfrashare Ghias was part of the Hong Kong under 16 cricket team,
Human Development, and Mr. Dawood also Chairs the aims to drive the development of the country’s connectivity has represented Pakistan in the junior bridge team, and, in
Board of Trustees for The Dawood Foundation. Set up infrastructure and has already partnered with all major 2015, won the amateur singles championship at Karachi
in 1962, the Foundation focuses on creating collective telcos in the country. Golf Club.
change by building interactive spaces for formal and
informal learning. He is the Founder & Chairman of the Ghias is leading several innovative transformations at Engro,
Board of Governors of Karachi School of Business & including an extensive HR transformation that focuses on
Leadership, a graduate management school focused revamping all talent management, development, and reward
on inspiring Effective Leaders. Mr. Dawood is also philosophies. In this vein, Ghias was the force behind the
Abdul Samad Dawood Rizwan Diwan Henna Inam Muhammad Abdul Aleem
Vice Chairman Director Director Director

Abdul Samad Dawood has 16 years of experience in Rizwan Diwan joined the Board of Engro Corporation in Henna Inam joined the Board of Engro Corporation in 2017 Muhammad Abdul Aleem joined the Board of Engro
management and governance. He joined the Engro 2018 and also serves as Chair of the Board People Committee. Corporation in 2015 and is Chairman of its Audit Committee.
Corporation Board in 2009 and now serves as Vice
Chairman of the Board. He is a family member of the G&T Group which is a 70 Ms. Inam is the CEO of Transformational Leadership Inc., Mr. Abdul Aleem is currently the CEO and Secretary
years old business group involved in polyester textile, an organization that helps Fortune 500 companies grow General of Overseas Investors Chambers of Commerce &
Mr. Dawood is also Chairman of the Board of packaging, cotton textile, retail, energy and has operations transformational leaders. She is a former C-suite executive Industry (OICCI). He has worked in senior positions within
FrieslandCampina Engro Pakistan Limited, and Director in the Middle East and North America. who drove transformation throughout her corporate both Exxon Chemicals and Engro Corporation, serving in
on the Boards of Dawood Hercules Corporation Limited, career, including roles such as: Global Head e-Innovation both Singapore and Pakistan. Thereafter, he has worked
Engro Fertilizers Limited, Enfrashare Private Limited, Reon He is an Executive Director of Novatex Ltd, which is in the at Novartis, and Chief Marketing & Innovation Officer and with British American Tobacco Group UK (BAT) in Pakistan
Private Limited, Dawood Industries Limited, and Pakistan business of PET Resin, Preforms, Bottles and BOPET film Region President for the Americas at Ciba-Vision. and overseas, where he ultimately served as CEO of BAT
Business Council. In addition, he is a Trustee on the Board and the fourth largest exporter of Pakistan. Over the last Operations in Cambodia, Mauritius, and Indian Ocean
of The Dawood Foundation and a member of the Young 26 years he has led many innovations in the field of Rigid She believes that our fast-changing world needs each of territory. Since 2004, he has served in senior positions with
Presidents’ Organization. & flexible packaging in Pakistan as well as in the region. us to be inspired leaders who make the world better for large Government-owned organizations in Pakistan. His
all. Partnering with Fortune 500 organizations, she helps last assignment was as the Managing Director, Pakistan
Mr. Dawood has previously served as Independent Director Mr. Diwan has taught at the Institute of Business leaders at pivot points thrive in disruption. Ms. Inam is on State Oil Company Ltd.
of International Industries Limited and Independent Non- Administration, Karachi, which is his alma mater from where a mission to grow transformational leaders globally. She
Executive Director of Sui Northern Gas Pipelines Limited. he holds a Masters Degree in Business Administration. believes the world and workplaces need leaders at every Mr. Abdul Aleem has been a Director and Chairman of
He has also served on the Boards of Engro Eximp Private level who are inspired by the work they do, and lead with Audit Committee of Dawood Hercules Corporation and
Limited, Inbox Business Technologies Private Limited, The agility from the core of who they are. Meezan Bank until 2018 . In the past Mr. Aleem was also
Hub Power Company Limited, Tenaga Generasi Limited, a Director of Pakistan Tobacco , Lahore University of
Dawood Lawrencepur Limited, Pebbles Private Limited, Ms. Inam is an executive coach and trusted advisor to Management Sciences, Pakistan Institute of Corporate
and World Wildlife Fund for Nature – Pakistan. He was C-level leaders and their teams. She is an author of the Governance and Pakistan Refinery Ltd, and Chairman of
previously Chief Executive of Dawood Hercules Corporation book Wired for Authenticity, and a contributor to Forbes on Faysal Asset Management Company.
Limited and Cyan Limited, and also commands operational leadership. She brings a global perspective, having lived
experience gained at Dawood Lawrencepur Limited and and worked in seven countries across four continents. As a supporter of leading non-profit organizations in
Dawood Hercules Chemicals. She is passionate about advancing women in leadership the field of education, Mr. Abdul Aleem is currently Vice
and is the founder for TEDxWomen in Atlanta. She is Chairman of Professional Education Foundation and
Abdul Samad Dawood is a graduate in Economics from also a founding charter member of OPEN Atlanta. OPEN Chairman of Intellect School Governing Board .
University College London, UK, and a Certified Director is the largest Pakistani entrepreneurship and leadership
of Corporate Governance from the Pakistan Institute of organization in the world. Muhammad Abdul Aleem is a Fellow Chartered Accountant
Corporate Governance. (Gold Medalist) and a Fellow Member of the Institute of
Ms. Inam completed her MBA from Wharton Business Cost & Management Accountant. He has also attended
School at the University of Pennsylvania, and participated extensive international management training programs
in Executive Education programs at Harvard Business including at Stanford University.
School.”
Khawaja Iqbal Hassan Waqar Ahmed Malik Shahzada Dawood Raihan Ali Merchant
Director Director Director Director

Khawaja Iqbal Hassan joined the Board of Engro Waqar A. Malik joined the Board of Engro Corporation in Shahzada Dawood joined the Board of Engro Corporation Raihan Ali Merchant joined the Board of Engro Corporation
Corporation in 2018. 2015. in 2003. Mr. Dawood also serves as Vice Chairman of the in 2018.
Board of Dawood Hercules Corporation Limited, Director
Mr. Hassan currently also serves as a Director on the Mr. Malik also currently serves as Non-Executive Chairman on the Board of Dawood Lawrencepur Limited, and Mr. Merchant is currently Chairman & CEO of Z2C Pakistan
Board of ICI Pakistan Ltd and is a Trustee on the Boards for Pakistan Oxygen Limited, Non-Executive Director Chairman of Inbox Business Technologies, an enterprise and Chairman of Brainchild Communications Ltd and
of the Karachi Grammar School, the Layton Rehmatullah of Standard Chartered Bank Pakistan Limited, Non- digital services firm. Blitz (Pvt) Ltd. He started Pakistan’s 1st Media Agency, in
Benevolent Trust and the Cardiovascular Foundation. Executive Director on the Boards of TPL Insurance 1997, creating a new business within the communications
He is also Chairman of the Advisory Committee of the Limited and TPL Life Insurance Limited, and as Founder A Trustee of both The Dawood Foundation, in support of and advertising industry. He introduced the concept of
Development Corporation Advisers, a wholly owned Chairman Noesis (Private) Limited. He is also Trustee education initiatives, and also Engro Foundation, promoting research-based decision making for choice of media and
subsidiary of the CDC Group Plc of the United Kingdom. for I-Care Pakistan, Member of the Advisory Board human development interventions across Engro’s value that of People Meters to measure TV audiences, worked
Mr. Hassan has previously served as a Member of the of Institute of Business Administration, and visiting chains, Mr. Dawood believes in inclusive business models with PEMRA on TV governance regulations, consulted
Monetary Policy Committee of Pakistan and has also faculty at Pakistan Institute of Corporate Governance. that develop low-income communities to maximize social media organizations on building revenue streams, and
been a Member of the Board of Directors of the State Bank and economic impact and build along business interests. helped launch Pakistan Super League – now the largest
of Pakistan, Civil Aviation Authority of Pakistan (CAA), Mr. Malik spent over 27 years with the ICI Plc group based cricket event in Pakistan. His current projects include
Pakistan Steel Mills, Habib Bank Ltd, National Fullerton in the UK and then Akzo Nobel in the Netherlands. In Committed to a clean energy future, Mr. Dawood has development of AI & BI tools in media, the launch of web
Asset Management Company Ltd, NIB Bank, Lahore Pakistan, he was Country Head of ICI Pakistan Limited. In to his credit the title of change agent for initiating group publishing houses, development of sports as passion
University of Management Sciences, Global Securities 2017, he cofounded a semi-private equity company, Adira investment in Reon, a leading Solar and Storage Solution. points and a specialized Sports Marketing Company in
Ltd, Citicorp Investment Bank Pakistan, The Pakistan Capital Holdings. Pakistan.
Fund and the Central Depository Company of Pakistan. Mr. Dawood serves as a Member of the Global Advisory
Waqar A. Malik is a fellow of The Institute of Chartered Board, Prince’s Trust International, contributing towards its In recognition of his development work in the industry, Mr.
Mr. Hassan holds a diploma in Accountancy from the U.K. Accountants in England and Wales and is also an Alumnus vision of every young person having a chance to succeed. Merchant was honored with the Tamgha-e-Imtiaz from the
and a BSc in Finance and Marketing from the University of the Harvard Business School and INSEAD. He was He is also in the Founder’s Circle of The British Asian Trust. President of Pakistan in 2012.
of San Francisco. He started his career in 1980 with awarded Prince of Wales medal as a Trustee of the Prince
Citibank N.A. and in 1994 founded Global Securities of Wales Pakistan Recovery Fund for the flood victims in Mr. Dawood holds a MSc in Global Textile Marketing Raihan Merchant holds a Masters Degree in Business
Pakistan Ltd, a former joint venture partner of UBS AG 2010.” from Philadelphia University, USA, and an LLB from Administration from the Institute of Business Administration,
and leading stockbroking and investment banking firm. In Buckingham University, UK. He is also a Certified Director Karachi.”
2003 he founded NIB Bank Ltd. which, in partnership with of Corporate Governance from the Pakistan Institute of
Temasek Holdings of Singapore, became a top 10 ranked Corporate Governance.
commercial bank in Pakistan within a period of 4 years.

Mr. Hassan was awarded the Sitara-i-Imtiaz by the

Government of Pakistan for meritorious contribution
to national interests.
 Annual Report 2019

notice of meeting (6) In compliance with section 150 read with Division I of Part III of the First Schedule of the Income Tax Ordinance, 2001
withholding tax on dividend income will be deducted for ‘filer’ and ‘non-filer’ shareholders at 15% and 30% respectively.
A ‘filer’ is a taxpayer whose name appears in the Active Taxpayers List (ATL) issued by the FBR from time to time and
NOTICE IS HEREBY GIVEN that the Fifty-Fourth Annual General Meeting of Engro Corporation Limited a ‘non-filer’ is a person other than a filer. To enable the Company to withhold tax at 15% for filers, all shareholders
(the “Company”) will be held at Karachi School of Business & Leadership, National Stadium Road, Opp. are advised to ensure that their names appear in the latest available ATL on FBR website, otherwise tax on their cash
Liaquat National Hospital, Karachi on Tuesday, April 07, 2020 at 10:00 a.m. to transact the following dividend will be deducted at 30% for non-filers. Withholding tax exemption from the dividend income shall only be
allowed if a copy of valid tax exemption certificate is made available to the share registrar of the Company by the first day
business: of book closure.
A) Ordinary Business
(7) The FBR has clarified that in case of joint account, each holder is to be treated individually as either a filer or non-filer and
(1) To receive, consider and adopt the Standalone and Consolidated Audited Financial Statements of the Company for the year
tax will be deducted on the basis of shareholding of each joint holder as may be notified by the shareholder, in writing
ended December 31, 2019 together with the Directors’ and Auditors’ Reports thereon and Chairman’s Review Report.
as follows, to the Company’s share registrar, otherwise it will be assumed that the shares are equally held by the joint
shareholders:
(2) To declare, as recommended by the Directors, the payment of a final cash dividend at the rate of PKR 1.00 (10%) for the
year ended December 31, 2019. Company Name Folio/CDS Account No. Total Shares Principal Shareholder Joint Shareholder (s)

(3) To appoint Auditors of the Company and fix their remuneration. The Members are hereby notified that the Audit Committee Name & CNIC No. Name & CNIC No.
and the Board of Directors have recommended the name of retiring auditors M/s A.F.Ferguson & Co. for re-appointment Shareholding Shareholding
as auditors of the Company. proportion (No. of proportion (No. of
Shares) Shares)

By Order of the Board

(8) In pursuance to Circular No. 10 of 2014 dated May 21, 2014, if the Company receives consent from members holding in
aggregate ten percent (10%) or more shareholding residing at geographical location, to participate in the meeting through
Karachi, Faiz Chapra video conference at least seven (7) days prior to the date of the meeting, the Company will arrange video conference
Dated: February 21, 2020 Company Secretary and General Counsel facility in that city subject to availability of such facility in that city. The Company will intimate members regarding venue
of video conference facility at least five (5) days before the meeting along with complete information necessary to enable
N.B. them to access such facility. In order to avail this facility please provide the following information to our share registrar:
(1) The Share Transfer Books of the Company will be closed from Wednesday, March 25, 2020 to Tuesday, April 07, 2020
(both days inclusive). Transfers received in order at the office of our Registrar, M/s. FAMCO Associates (Private) Limited,
I/We, of being a member of Engro Corporation Limited holder of Ordinary Share(s) as per Register Folio No.
8-F, Near Hotel Faran, Block 6, P.E.C.H.S. Shahra-e-Faisal, Karachi, PABX No. (92-21) 34380101-5 and email info.
_____________ hereby opt for video conference facility at (Please insert name of the City)
[email protected] by the close of business (5:00 p.m) Tuesday, March 24, 2020 will be treated as being in time for
the purposes of payment of final cash dividend to the transferees and to attend and vote at the meeting.

(2) A member entitled to attend and vote at this Meeting shall be entitled to appoint another person, as his/her proxy to
__________________
attend, speak and vote instead of him/her, and a proxy so appointed shall have such rights, as respects attending,
Signature of member
speaking and voting at the Meeting as are available to a member. Proxies, in order to be effective, must be received by
the Company not less than 48 hours before the Meeting. A proxy need not be a member of the Company.
Update under the Companies (Investment in Associated Companies or Associated Undertakings) Regulations, 2017:
(3) Pursuant to Companies (Postal Ballot) Regulations 2018, for the purpose of election of Directors and for any other In the Annual General Meeting held on April 24, 2018, the shareholders of the Company approved to lend/provide to the
agenda item subject to the requirements of sections 143 and 144 of the Companies Act 2017, members will be allowed following associated companies, short term funded and unfunded financing facilities / security of up to the amounts stated
to exercise their right of vote through postal ballot, that is voting by post or through any electronic mode, in accordance below in respect of each. The facility was approved for one year, but renewal of the same for four further periods of one year
with the requirements and procedure contained in the aforesaid Regulations. each was also approved.

(4) In accordance with the provisions of section 242 of the Companies Act 2017, a listed Company is required to pay • Engro Fertilizers Limited – PKR 9 billion
cash dividend only through electronic mode directly in to the bank account designated by the entitled shareholders. • Engro Polymer & Chemicals Limited – PKR 6 billion
Accordingly, the shareholders are requested to provide the information mentioned on an E-Dividend Mandate Form • Engro Vopak Terminal Limited – PKR 1 billion
available at the website of the Company to the share registrar. The CDC account holders must submit their information • Elengy Terminal Pakistan Limited – PKR 1 billion
directly to their broker (participant) / Central Depository Company of Pakistan Limited. • Engro Elengy Terminal Pvt. Limited – PKR 2 billion
• Engro Powergen Qadirpur Limited – PKR 2 billion
(5) In accordance with the directives of the SECP, the dividends of shareholders whose CNIC copies have not been received
by the Company shall not be electronically credited until receipt thereof. Therefore, the individual shareholders who have During the year, Engro Powergen Qadirpur Limited has utilized the above facility of PKR 150 million as security while Engro
not submitted their CNIC copies are requested to send the same at the earliest to the share registrar of the Company. Vopak Terminal Limited has utilized PKR 200 million as a funded facility.
Corporate entities are requested to provide their NTN. While providing their CNIC/NTN, shareholders must quote their
respective folio numbers. The physical shareholders are requested to notify any change in their addresses to the share The above facility is being renewed as earlier approved by the shareholders.
registrar of the Company and in case of CDC shareholders to their broker (participant).

19 20
Fueled by an inherent need to meet new challenges and enable progress, we aim to improve
energy efficiency. Be it through one of the few green power plants in Pakistan earning carbon
credits, mining and using the country’s natural resources for fuel, or Pakistan’s first liquefied
natural gas terminal, we aim to see our country shine!
 In order to effectively thrive in this challenging environment, for their skills. Entrashare has already partnered with major
we believe that investment in people is absolutely paramount. telcos in the Country, and we look forward to furthering our
To meet these challenges, Engro has committed itself to put growth in this industry.
people and their development at the core of our organisation.
The Board acknowledges the unwavering commitment and
We believe that the best people are those who have the passion of the Management and the Employees which led
best Character and Good Manners, combined with the Company to have a fantastic year with strong financial
relevant competencies. These people would ensure us results, and numerous awards won in this year 2019. A few
long-term competitiveness and success, and would make of the most notable awards include Engro Corporation’s
our Corporation the most desirable institution to work for. Living the UN Global Compact Business Sustainability
Award, SAP Quality Awards Gold Winner in the Fastest
This transformation entails many aspects, including how Delivery Category in MENA, and Asiamoney’s Most
we define what success looks like, how we measure and Outstanding Company in Pakistan - Industrial Sector, Engro
reward performance, how we ensure timely and accurate Polymer & Chemicals’ Islamic Financing News Pakistan Deal
information by investing in the latest information technology, of the Year Award 2019, Engro Fertilizers’ Asia Responsible
and how we develop partnerships with global organisations. Enterprise Award, Taiwan and Shared Value Award, Australia
for Project PAVE, National Safety Council, USA Award for
With this passion, to develop Inspirational Leadership and a high number of Rising Safety Leaders, and International
good Decision-Making skills, we established the Engro Fertilizers Association Award, Paris, Engro Powergen Thar’s
Leadership Academy at the Karachi School of Business and Asian Power Award for Coal Power Project of the Year 2019,
Leadership. The Academy is the first of its kind in Pakistan, and numerous awards across our companies on health,
with a purpose of creating and sustaining a culture of safety, and environment, as well as on global diversity and
learning and development. The Academy is facilitated by inclusion.
globally-recognised experts, ensuring a carefully designed
curriculum suited to the needs of our nation. While 2019 was an important step in our company’s journey,
we welcome the New Year with even more passion and zeal.
Simultaneously, we created a company called Enfrashare, In that spirit, we are grateful to all the support we have received
which is focused on creating a national connectivity from various stakeholders, including the Government, the
infrastructure. The purpose for this is to accelerate internet Regulators, Service Providers, Partners, Stakeholders, and
access for everyone by reducing the cost and reach of Shareholders. We look forward to continue building on
digital services. Democratising internet access will be what has been achieved and developing more meaningful
essential to position Pakistan for the future by providing partnerships and engagements so that we may create
people with the opportunity to improve their skills, connect a world where we all have a chance to live in peace and
Dear Shareholders, narrative for Engro, which we call the Central Idea. We
to local and global markets, get access to financial services, prosperity.
identified four primary verticals based on their importance
and even get quality healthcare. It cannot be overstated how
On behalf of the Board of Directors, it is our privilege to for the country and where we believe we are better able
important it is to bridge the digital divide, lest we are left with We are particularly grateful to you, our fellow shareholders,
present to you the Annual Report of Engro Corporation to use our capabilities, resources, and partnerships,
a country where millions of people do not have a market for your continued trust, confidence, and support.
Limited for the year ended 31 December 2019. to create a positive impact for our stakeholders. These
are 1) providing affordable, quality nutrition to a growing
Your continued confidence and unwavering trust in Engro population, 2) affordable and sustainable energy to power
Corporation is deeply appreciated. Your faith in your the economy, 3) addressing international competitiveness
Corporation fuels our passion for Pakistan and enhances through petrochemicals, and 4) bridging the digital divide
our determination to work towards progress and prosperity through shared telecommunication infrastructure.
for the Country. We would like to congratulate the entire
team at Engro Corporation on achieving some remarkable Pakistan is at a very important stage of its development.
milestones in 2019, under the able leadership of the President Given the world we live in, the path for the Country’s Hussain Dawood Abdul Samad Dawood
and CEO Ghias Khan, and with the valuable support and prosperity will be different to the ones we have seen Chairman Vice Chairman
insight of the Board members. other countries take before us. Globally, we are living in a Engro Corporation Limited Engro Corporation Limited
time of unprecedented change. Not only do we need to
For over 50 years, Engro has been committed to the vision of provide an inclusive model for growth and prosperity, but
an empowered Pakistan. While focusing efforts on instilling we must do so in an environment where climate change
truth, trust, and the relentless pursuit of excellence to build and technological disruptions continue to fundamentally
Character in our people and businesses, Engro aims to redefine business models, supply chains, and markets. No
champion such people to lead Pakistan’s progress into the longer is it necessary to sit in one room to work together
future. - embracing technology would mean remote working, real-
time collaboration from across the world, complete industrial
In 2019, we spent considerable time introspecting, taking a reinvention, and much more, adapting to all of which requires
deeper look into the pressing issues faced by our homeland an extremely agile mindset.
today. This introspection led to the creation of a new central
 I am delighted to acknowledge that all our businesses have Once again, I would like to thank the Chairman, Vice
been consistently recognized with numerous local and global Chairman, and Board of Directors for their invaluable
awards. Both Engro Corporation and Engro Fertilizers were guidance, our stakeholders for trusting us, and the entire
recognized by the Pakistan Stock Exchange among the PSX Engro family for its undeniable contribution through sheer
Top 25 companies of Pakistan. The CFA Society of Pakistan hard work and dedication, working every day towards the
recognized us for our strong investor relations, and the betterment of our economy and citizens of this Country.
United Nations Global Compact awarded us, second year
in a row, for Living the UNGC Business Sustainability Award.

Among our milestones for 2019 is our ceremonious

partnership with the Quetta Gladiators, who emerged as
the Champions of PSL 2019. We are thrilled to continue this
victorious partnership for another season.

As we march ahead into the new decade, Engro will stay

true to its commitment to Pakistan by striving to play a
meaningful role in solving some of its most pressing issues.
We will continue to be the conduit of sustainable business Ghias Khan
practices by keeping the interest of our communities at the President & Chief Executive Officer
forefront of our operations. Engro Corporation Limited

By the grace of God, I am humbled to report that 2019 and demonstrated our resolve to improve food security
has been another incredible year of accomplishments and in Pakistan. In our Energy business, we took a key step
accolades for Engro. I am pleased to share that the Group towards ensuring energy security for Pakistan. Our Thar coal
has delivered strong business results and has demonstrated mine and power project declared Commercial Operations,
operational excellence. It is my pleasure to share with you the proving our ability to deliver large scale projects that enable
highlights of Engro Corporation’s performance in 2019 and development for the people of Pakistan. We also achieved
the deliberate effort we are making to ensure a sustainable the fastest 200 ship-to-ship transfers, setting a global record
operating model. across all terminals in the world.

Engro Corporation posted a consolidated profit after tax We believe that our Polymer business has the potential to
of PKR 30.3 billion for 2019, up from PKR 23.6 billion the not only fulfill growing domestic demand, but also enhance
previous year. On a standalone basis, our profit was PKR the Country’s exports. In our effort to enhance digital
14.3 billion, our earnings per share were PKR 24.83, and access across the Country, we launched Enfrashare which
our total dividends were PKR 24 per share for the year. This has forged strategic partnerships with all major telecom
translated into an overall dividend payout of 96.7%. providers.

Our success would not have been possible without the trust To remain agile in rapidly changing times, we have embarked
and support of our Board, our leadership, our employees, on Organization-wide centralized initiatives. 2019 marked
and our shareholders. Hence, before all else, I would like the year in which we rolled out Engro’s Central Idea which
to thank the entire Engro family for their crucial role in has become the reference point on our future direction.
embodying Engro’s purpose of solving some of Pakistan’s Staying true to our core value of putting our people first, we
most pressing issues. implemented a world-class human capital transformation
project. We have initiated a Cost Excellence Program to bring
We have had a strong year despite macroeconomic volatility. our cost structures in line with international best practices
This demonstrates our capability to be a resilient and agile and realize significant savings. To achieve higher business
Organization. I am pleased to share that Engro Fertilizers efficiencies, we invested in OneSAP to bring technology to
achieved the highest ever production of over 2 million tons the centre of our key operations.
enabling a thriving business environment
Engro Corporation
• Asiamoney Asia’s Outstanding Companies Poll 2019: Most Outstanding in Pakistan – Industrial Sector
• SAP Quality Awards Gold Winner in the Fastest Delivery Category in MENA

Engro Powergen Thar

Asian Power Awards: Coal Power Project of the Year 2019

Engro Polymer & Chemicals

Islamic Finance News Awards: Pakistan Deal of the Year 2018

enabling stronger corporate governance

Engro Fertilizers
• 35th Annual MAP Corporate Excellence Awards: Top Trophy in Industrial Category for 2019
• CFA Society Pakistan’s 16th Annual Excellence Awards: 2nd Best Investor Relations 2018
• Pakistan Stock Exchange Awards: Top 25 Companies of the Years 2017 & 2018
• ICAP & ICMA Awards: 2nd Best Corporate Report 2018 in the Chemical and Fertilizer Sector
• South Asian Federation of Accountants Awards: Merit Certificate in Corporate Governance

Engro Corporation
Pakistan Stock Exchange Awards: Top 25 Companies of the Year 2018

enabling a safe and sustainable future

Engro Fertilizers
• National Safety Council, USA: Daharki awarded for being a breeding ground for the Next Generation of Safety Leaders
through the First Ten Years of the Rising Stars of Safety Awards
• World Wildlife Federation, under WWF Finland: Zarkhez Plant recognized for achieving the Highest Ever Score in Pakistan’s
Green Office Network
• International Fertilizers Association Awards, Paris: Excellence in Safety, Environmental Compliance, and Energy Efficiency
• NFEH’s 16th Annual Environment Excellence Awards 2019: Best Environmental Performance & Tree Plantation
• NFEH’s 9th Fire Safety & Security Awards: Best HSE Practices and Fire Safety Management

Engro Polymer & Chemicals

• 5th International Summit on Environment, Health, And Safety: Award for Commitment to Safe Operations
• EFP’s 14th Organizational Safety, Health, & Environment Awards: Promoting Occupational Safety & Health

Engro Energy
NFEH’s 16th Annual Environment Excellence Awards 2019: Best in Sustainability Interventions & Resource Conservation
Initiatives

enabling the development of our people

Engro Polymer & Chemicals
EFP’s 7th Employer of the Year Awards 2019: 2nd in Medium National Category

Engro Energy
• Diversity Hub Pakistan’s 2020 GDIB Awards: Best Practices in two categories of D&I Learning and Education, and
Community, Government Relations, & Social Responsibility
• The Centre for Global Inclusion, USA: Sindh Engro Coal Mining Company Awarded for Best Practices in Social
Responsibility toward Women Empowerment

Engro Fertilizers
Diversity Hub Pakistan’s 2020 GDIB Awards: Best Practices in six categories of D&I Vision and Strategy, Leadership &
Accountability, Job Design & Compensation, Recruitment & Development, Benefits & Work-life Balance, and Assessment
& Measurement
With a firm belief that enabling connectivity shall be a conduit for social and financial inclusion,
we envision enhancing digitization throughout the country. While our expertise and investment
in connectivity infrastructure allow mobile operators to reduce the cost of access to consumers,
we aim to engage with all stakeholders in the telecom ecosystem in order to help realize a larger
goal of digitizing Pakistan.
 Annual Report 2019

directors’ report Segmental Review of Business Performance

The Board of Directors of Engro Corporation Limited has reviewed the performance of the Company and is pleased to submit Business Revenue (PKR in Mn) Profit After Tax (PKR in Mn)
its annual report and audited accounts for the year ended December 31, 2019. 2019 2018 2019 2018
Fertilizers 121,355 109,197 16,871 17,414
Principal Activity
The principal activity of the Company is to manage its investments in subsidiaries, associates and joint ventures, engaged Energy 50,039 11,955 8,813 1,597
in fertilizer manufacturing and trading, PVC resin manufacturing and marketing, food, power generation, coal mining, Polymer and chemicals 37,837 35,272 3,696 4,930
telecommunication infrastructure, LNG and bulk chemical handling terminal and storage businesses. Terminals 16,704 15,881 5,142 3,779
Foods 42,516 34,977 (942) 82
Business Performance Overview
The macroeconomic environment remained challenged during 2019 as the country suffered from twin deficit concerns and
inflationary pressures. To address these issues, the government turned towards tightening of monetary and fiscal policies as
well as a market-based exchange rate mechanism resulting in devaluation of the Pak Rupee. These measures have led to a
contraction in domestic demand in some sectors.

Against this backdrop, Engro Corporation performed reasonably well. The Company’s consolidated revenue grew by 32%
from PKR 171,568 million during 2018 to PKR 225,920 million mainly driven by the energy projects coming online during
July 2019 and augmented by higher turnover of Fertilizers and Petrochemicals businesses. Considering the weak financial
performance of the dairy sector due to the challenging macroeconomic environment, the Company booked a one-off
impairment provision, as required by accounting standards of PKR 1,224 million against its investment in FrieslandCampina
Engro Pakistan Limited. Owing to the start of the Thar projects’ contribution towards the bottom line, the consolidated Profit-
After-Tax (PAT) for 2019 was PKR 30,288 million – up by 28%, while PAT attributable to the shareholders increased to PKR
16,533 million from PKR PKR 12,708 million in 2018, resulting in an Earnings per Share (EPS) of PKR 28.69 compared to
PKR 22.06 for 2018.

On a standalone basis, the Company posted a PAT of PKR 14,303 million against PKR 12,720 million for the comparative
year, translating into an EPS of PKR 24.83 per share. Increase in standalone profitability is primarily on account of higher
dividends from the subsidiaries as well as higher interest income on investments.

31 32
Business achieved a historic milestone of highest ever urea production of 2,003 KT due to
better plant efficiency and higher gas availability. Sales revenue witnessed an increase of 11%
over the last year on the back of improved product availability due to enhanced production
as well as higher fertilizer prices. The business recorded a PAT of PKR 16.9 billion - down by
3% from last year - decrease mainly attributed to one-off deferred tax impact of higher future
corporate tax rates introduced through Finance Act, 2019.
2019 proved to be an important year for the Polymer business. The business successfully
initiated commercial production from its caustic flake plant, commenced export, announced
Hydrogen Peroxide and other diversification and efficiency projects. Efforts on PVC expansion,
VCM de-bottlenecking and Oxygen based VCM production projects are progressing well. The
business core profitability remained in line with last year, despite higher gas prices and volume
decline, however, PAT decreased as compared to last year due to higher financial cost and
certain one-off benefits booked in 2018.
Within our Energy vertical, the development of phase I of the Thar Block II 3.8 Mt per annum mine concluded
on 03 June 2019. Thereafter, COD for both mining and the 2x330MW Thar power plant was declared on 10
July 2019. From COD till the yearend, the mine supplied 2.28 million tons of coal to the power plant. Further,
the mining project commenced construction of Phase II of the mine expansion and achieved Financial Close on
December 31, 2019, which will enhance production of coal from the mine to 7.6 Mt per annum. During the year,
the power plant achieved 87% availability with a load factor of 79%. Plant operations remained smooth since
COD, and dispatched ~2,000 GwH to the national grid. The Qadirpur Power Plant continued to demonstrate
excellence owing to the strategic operational and HR transformation and recalibration carried out at the plant
during the year. The plant displayed a billable availability factor of 99.9% during 2019. However, it dispatched a
total net electrical output of 1,097 GwH to the national grid demonstrating a load factor of 58.8% compared to
81.9% last year. The decrease in load factor was primarily due to lower merit order ranking and consequently
lower dispatch given that newer plants were commissioned during the year. Circular debt remains a persistent
problem in the domestic energy sector.
Witnessed a volumetric increase of 6% for chemicals and LPG handled over last year, which is mainly
attributable to higher chemical imports. The business completed 22 years of safe operations without lost work
injury and continued to maintain health, safety and quality standards.

Handled 74 cargoes during the year. Elengy terminal delivered 216.6 bcf re-gasified LNG into the SSGC
network. The availability factor remained at 97.4% for the year. The LNG terminal currently fulfills more than
12% of the country’s gas requirements. Since its commencement in March 2015, the terminal has handled
over 17 million tons of LNG. Through the consistent supply of gas via LNG import, the fertilizer and CNG
sectors as well as over 500 industrial units have been revived, whilst the country has saved nearly USD 3 billion
to date due to replacement of import of more expensive furnace oil and diesel with LNG.
The Dairy business witnessed strong growth momentum on the back of strong volumetric
sales in both Dairy and Ice Cream segments and reported a revenue of PKR 39 billion – up by
20% over last year. However, the profitability was significantly impacted by the sharp economic
headwinds, particularly steep increase in commodity prices due to PKR depreciation, higher
interest rates and one-off deferred tax charge due to higher future corporate taxes. The business
has taken price increases across its portfolio in the last six months to offset these inflationary
pressures. The business posted a post-tax loss of PKR 955 million for the year.
Increased focus on the Rice business continued in 2019 and the business closed the year
in profit for the second time in a row. Rice exports also continued to grow and witnessed a
volumetric increase of 22% over 2018. External quality audit by Bureau Veritas for quality re-
certification was successfully completed, maintaining ratings of ‘AA’. The Rice business has the
highest number of quality certifications amongst rice players in Pakistan.
 Annual Report 2019

Distribution to Shareholders Energy

The Board endeavors to maximize dividends on a quarterly basis and is pleased to propose a final cash dividend of PKR 1.00 The Qadirpur power plant engaged stakeholders to agree on alternate gas solution as gas from Qadirpur field is depleting.
per share for the year ended December 31, 2019. The total dividend attributable to the year is PKR 24.00 per share including The business will continue to actively work towards achieving the same.
the total interim cash dividends of PKR 23.00 per share during the year.
Circular debt remains a challenge for the government and the energy sector in the medium term, despite measures being
Strategic Direction taken by the government to control the issue. Although our energy businesses’ performance and profitability remain robust,
Engro’s investment strategy is governed by its Central Idea which states that we create value by solving pressing issues the buildup of overdue receivables may have an adverse impact on the liquidity.
faced by the Country in a way that creates value for our stakeholders, improves the lives of the people of Pakistan and has
a positive impact on the society we operate in. Taking this vision forward, our business portfolio encompasses the following The Energy business continues to seek new opportunities in partnership with international players to utilize Engro’s unique
verticals: engineering and project management skillset. The business continues to work extensively to gain foothold in the renewables
market and initial studies on wind and solar power projects as well as waste-to-energy power project are in progress. The
• Food & Agriculture – enhance the agricultural productivity of the country and enhance food security business continues to explore more opportunities including hybrid solutions for third parties in the renewable energy sector
• Energy & Related Infrastructure – provide cost effective energy infrastructure to help reduce the energy shortage across the country.
• Petrochemicals – grow the industry through projects that enable import substitution and develop export potential
• Telecommunication Infrastructure – develop infrastructure to provide data and information access to the population at large Polymer and Chemicals
The Polymer business is well positioned to capitalize on the promising potential available to it. It has crafted a holistic strategy
With regard to the Energy & Related Infrastructure vertical, 10 July 2019 was a historic day for Engro, as both Sindh Engro to achieve its vision to lead Pakistan in polymers and allied chemicals with an international footprint. In this regard, several
Coal Mining Company Limited (SECMC) and Engro Powergen Thar (Private) Limited, declared Commercial Operations Date projects were successfully executed, new projects were announced, and several studies have been initiated. Alongside the
(COD) of the Thar Coal Project. With this accomplishment, Engro is using indigenous resources to help alleviate the energy on-going projects, the business is confident to display continued strong operational performance and is hopeful that the per
shortage that Pakistan faces and has, once again, proved its ability to deliver on mega projects that enable development for capita PVC consumption will maintain its upward trajectory considering the overall dynamics of the economy.
the people of Pakistan.
Terminal Services
During 2019, continuing to build on Engro’s experience in the Petrochemicals vertical, the Board approved the commencement We are pleased to continue our long-standing relationship of over twenty years with industry leader Royal Vopak, which
of a feasibility study of a polypropylene facility based on a propane dehydrogenation plant. The feasibility study is progressing continues to pave the way for Engro and Royal Vopak to collaborate in further ventures at home and abroad using their
well. combined resources and expertise.

Tower sharing market in Pakistan is largely an untapped space, with only two major Independent Tower Companies. The The LNG terminal is positively playing its role in alleviating some of the energy shortage in the country. Considering the first
market has immense potential for growth owing to multiple, redundant infrastructure and the possibility of consolidation ever dry dock activity scheduled in 2020, the business expects a challenging year ahead, however management is fully
through cost excellence. During 2019, the Board approved an investment of up to Rs 7.5 billion in the Telecommunication geared up for the challenge. Keeping in view the demand for energy in the market and leveraging on Royal Vopak’s expertise,
Infrastructure vertical under a subsidiary, Enfrashare (Private) Limited. Enfrashare will engage in the acquisition & construction we shall continue to explore new opportunities to increase shareholder value.
of shared telecom towers, provision of various telecommunication infrastructure & related services, including state of the art
network monitoring solutions. The business has progressed well, acquiring a portfolio of over 1,500 towers catering to all The chemical industry has been stable, and Engro Vopak has retained its status as the market leader. The chemical terminal
Mobile Network Operators (MNO) in Pakistan. business expects to perform well and maintain its operations and profitability in a stable fashion due to its unique and leading
position in liquid chemicals handling industry.
Future Business Outlook Foods
Investing today for a better tomorrow for Pakistan is at the cornerstone of every Engro business. Engro Corporation is
The Dairy sector continues to be impacted by an extremely challenging macroeconomic environment with rising inflation
well placed to make a major contribution in helping solve some of the the country’s pressing issues and improves the
and eroding consumer purchasing power. All these factors pose significant challenges to business profitability in the short
lives of the people of Pakistan. Keeping value creation for stakeholders at the forefront, we have developed Pakistan’s
term. Loose milk remains an untapped opportunity. Driving conversion from loose milk is a key thrust to fuel growth for
largest hydrocarbon reserves – Thar Coal, through an integrated mining and power generation plant, in partnership with the
the business. Leveraging on our partner FrieslandCampina’s expertise and heritage of 145 years, the business remains
Government of Sindh. We have built the first LNG terminal of Pakistan in the shortest possible time which is playing its crucial
committed to highest standards in the field of food safety, sustainability and transparency.
role in reducing the energy shortage of the country. We continue to grow our presence in the agri/food vertical by providing
significant farm input and procuring farm produce. We look forward to developing our four verticals and explore new avenues
The Rice business will continue its focus on improving operational efficiencies and margins, cost minimization and increasing
of growth to create long-term shareholder value.
export sales thus creating shareholder value.
Fertilizers
Telecommunication Infrastructure
Global urea demand in 2020 is expected to grow marginally by 1.7% while supply is expected to catch up as, although new
Mobile Data usage is growing exponentially in Pakistan and while revenue growth for MNOs is stagnant, the shift in pattern
capabilities will enter the international market, certain key capacities in China are forecasted to shut down. International urea
is driving MNOs towards cost optimization. Enfrashare will continue to provide optimum cost solutions in the tower sharing
prices are expected to trend higher on the back of higher demand from India, Europe, Brazil and US, and reduced export
space for all capacity and coverage requirements across Pakistan. In addition, Engro Corporation continues to seek new
supply from China. Local urea demand for 2020 is expected to normalize at 5.8 M tons as compared to 6.2 M tons in 2019.
opportunities across the entire connectivity value chain to bridge the digital divide.
Production for 2020 is expected to be 5.6 M tons (excluding LNG plants) while the gap between demand and supply will be
met by adequate channel inventory.

International DAP prices are expected to remain relatively soft in 2020. Until demand picks up for Kharif season, prices are
likely to continue to face downward pressure.

45 46
 Annual Report 2019

Credit Ratings and Gearing • 6 Independent Directors (of whom 1 is Female)

During 2019, Pakistan Credit Rating Agency upgraded the long-term credit rating of Engro Elengy Terminal (Private) Limited • 3 Non-Executive Directors
to ‘AA-’ and also reaffirmed the long-term credit ratings of the Company and its subsidiaries while maintaining their highest • 1 Executive Director
short-term ratings in its annual review.
Following are the names of persons who at any time during 2019 were directors of the Company:
Company Long-term rating Short-term rating
01. Hussain Dawood - Chairman
Engro Corporation Limited AA+ A1+
02. Abdul Samad Dawood - Vice Chairman
Engro Fertilizers Limited AA A1+ 03. Muhammad Abdul Aleem
Engro Polymer and Chemicals Limited AA- A1+ 04. Henna Inam
Engro Elengy Terminal (Private) Limited AA- A1 05. Shahzada Dawood
Engro Powergen Thar (Private) Limited A A1 06. Rizwan Diwan
Engro Eximp Agriproducts (Private) Limited A- A2 07. Khawaja Iqbal Hassan
08. Waqar Ahmed Malik
These credit ratings reflect the entities’ financial and management strength as well as favorable credit standing and are a 09. Raihan Ali Merchant
testament to our strong balance sheet and robust performance with consistent dividend payouts. 10. Ghias Khan - President

Consolidated long-term borrowings at year end increased to PKR 158,456 million from PKR 131,426 million at 2018 yearend, In 2019, the Board held ten (10) meetings to cover its complete cycle of activities. The Board has established three committees
primarily due to drawdowns for Thar coal power project. The gearing for the year ended 2019 is 45% vs. 41% as at 2018 yearend to assist it in carrying out its fiduciary duties. These committees along with their membership details are as follows:
representing a healthy balance sheet which allows the Company to increase leverage for future growth opportunities.
Board Audit Committee Board Investment Committee Board People Committee
Risk Management 4 meetings held in 2019 7 meetings held in 2019 10 meetings held in 2019
Engro Corporation and its subsidiaries use the Lean Enterprise Risk Management framework in assessing and managing risk. It is Mr. Muhammad Abdul Aleem Mr. Abdul Samad Dawood Ms. Henna Inam
our policy to view risk management as integral to the creation, protection and enhancement of shareholder value by managing the Mr. Raihan Ali Merchant Mr. Khawaja Iqbal Hassan Mr. Abdul Samad Dawood
significant uncertainties and risks that could possibly influence the achievement of our corporate goals and objectives.
Mr. Rizwan Diwan Mr. Rizwan Diwan Mr. Khawaja Iqbal Hassan
Our diversified businesses operate in a complex business environment and it requires assessment of each business’s strategy and Mr. Waqar Ahmed Malik Mr. Waqar Ahmed Malik Mr. Raihan Ali Merchant
quantum of risk that the business is willing to accept by adequately assigning responsibilities throughout the organization. Each
subsidiary assesses the probability and impact of risk that the entity is exposed to and assigns responsibilities to manage those Statement of Directors’ Responsibilities
risks on an on-going basis. Risks are identified across the organization and are ranked based on their impact and probability. Upon The directors confirm compliance with Corporate and Financial Reporting Framework of the SECP Code of Governance for
identification of risks, a strategy is devised to mitigate its impact which is monitored by the Management Committee and the Board. the following:

Engro Corporation has identified the following significant risks and mitigation strategies: - The financial statements, prepared by the management of the Company, present fairly its state of affairs, the result of its
operations, cash flows and changes in equity.
Economic and Regulatory risk: Continuous and pro-active efforts and dialogue with policy makers helps our businesses to - Proper books of accounts of the Company have been maintained.
respond to the challenges posed by economic conditions and regulatory challenges. - Appropriate accounting policies have been consistently applied in preparation of the financial statements except for
changes resulting on initial application of standards and amendments or interpretations to existing standards. Accounting
Foreign exchange risk: Our investment portfolio exposes us to foreign exchange risk. By viewing the portfolio as a whole, estimates are based on reasonable and prudent judgment.
we ensure that adequate natural hedges exist as far as possible. - International Financial Reporting Standards, as applicable in Pakistan, have been followed in preparation of the financial
Interest rate risk: Our borrowings and investment of surplus funds exposes us to interest rate risk. We mitigate this risk by statements and any departures therefrom have been adequately disclosed.
regularly monitoring interest rates for adverse movements and investing surplus funds in short-term instruments. - The system of internal control is sound in design and has been effectively implemented and monitored.
- There are no significant doubts upon the Company’s ability to continue as a going concern.
Liquidity risk: The purpose of our treasury policies is to ensure availability of sufficient funds to meet contractual commitments - There is no material departure from the best practices of corporate governance.
and requirements for potential portfolio growth. We mitigate liquidity risk through internal cash generation and committed
facilities with financial institutions. Remuneration Policy for Non-Executive and Independent Directors
Credit risk: Careful selection of strong financial institutions with a high credit rating helps us mitigate this risk. The Board of Directors has approved a ‘Remuneration Policy for Non-Executive and Independent Directors’, salient features
of which are:
Board of Directors - The remuneration shall be appropriate and commensurate with the level of responsibility and expertise of the directors,
The Board of Directors reviews all significant matters of the Company. These include Company’s strategic direction, annual
aimed at attracting and retaining the directors needed to govern the Company successfully and to encourage value
business plans and targets, decision on long-term investments and borrowings. The Board of Directors is committed to
addition. The remuneration shall not compromise nor influence in any way the independence of the directors.
maintain high standards of Corporate Governance.
- The Board, if deems appropriate, may engage independent consultant to determine the appropriate level of remuneration
of its directors.
The existing Board was elected on 24 April 2018. It comprises of 10 directors including the Chief Executive Officer and
possess a diverse mix of gender, knowledge and expertise to enhance its effectiveness. The Board consist of 1 female
director and 9 male directors, categorized as follows:

47 48
 Annual Report 2019

- No remuneration shall be paid to Executive Director and any Non-Executive Directors who are employees in other Engro Moreover, throughout the year we also worked on implementing a rigorous talent development framework which focused on
entities, for attending meetings of the Board and its committees. multi-pronged areas and ensured a healthy talent pipeline that guarantees presence of well-rounded future leaders for the
- Any travel and other necessary expenses incurred by the directors for attending meetings of the Board and its committees organization. We are proud of the engagement and association of our workforce with Engro which has helped us become
shall be reimbursed at actual. one of the leading brands in Pakistan.

Social Capital
Adequacy of Internal Financial Controls Engro focuses on creating long-term social capital by investing into communities using its expertise and resources.
The Board of Directors is ultimately responsible for Engro’s system of internal control and for reviewing its effectiveness. The
Community investments are designed with community’s input and implemented with their partnership. We use our business
Board, whilst maintaining its overall responsibility, has delegated the detailed design and operation of the system of internal
expertise to make our value chains inclusive of disadvantaged groups like smallholder farmers. This approach keeps us to
controls to the Chief Executive. Engro’s system of internal controls comprises of clear governance structures, authority limits
stay relevant to our community needs and be able to create impactful programs.
and accountabilities, well understood policies and procedures and budgeting processes. The Board meets quarterly to consider
Engro’s financial performance, financial and operating budgets, business growth and developmental plans, capital expenditure
Engro Foundation works as a singular platform for our social investments. Contributions from all Engro companies are
proposals and other key performance indicators. The Board Audit Committee receives reports on the system of internal financial
invested through Engro Foundation. Long-term human capital development through skills development and formal education
controls from the external and internal auditors and reviews the process for monitoring the effectiveness of internal controls.
remains a priority. Our technical trainings and value chain projects are imparting demand driven skills. We are supporting
health care programs in communities along with livelihood interventions. In maintaining natural environment, we are investing
Related Parties in forestation and conserving mangroves and coastal ecosystems.
The Company maintains a comprehensive list of all related parties. All related parties with whom the Company had entered
into transactions during the year, along with the nature of its relationship and percentage holdings have been appropriately Engro Corporation publishes its consolidated Integrated Report every summer – highlighting financial performance and
disclosed in Note 36 of the financial statements. sustainability dynamics under the categories of human capital, social capital, financial capital, and natural capital. This report
serves as a supplementary document to our Annual Report, and provides detailed insights across our verticals.
Certain back-office business functions e.g. human resources, information technology, corporate communications etc. have
been strategically centralized at the Company to increase the shareholder value, optimize operations, eliminate duplication Health, Safety and Environment (HSE)
and reduction of costs through synergy. It ensures robust governance and risk management as well as better and timely As Engro continues to grow in service to Pakistan, it continues to increase its focus on health, safety and the environment. We
insights due to standardized processes, systems and reporting. The Company has entered into cost sharing agreements believe in empowering our businesses to deliver the best-in-class HSE performance based on international benchmarks and
with its subsidiaries and associated entities ensuring that all transactions with its related parties arising in the normal course developing a culture that fosters a safety mindset in every individual. All of our investment decisions retain adequate provisions for
of business are carried out on an arm’s length basis at normal commercial terms and conditions. the implementation of inherent safety features at inception because we are custodians of the people coming to our workplaces.

In compliance with the Code of Corporate Governance and applicable laws, every quarter a comprehensive list of all One of the core values at Engro is stewardship for planet Earth and maintaining people’s safety and health. Engro clearly
related party transactions is placed before the Board Audit Committee for review and based on its recommendation, are acknowledges that the wellbeing and health of working people, the community and society as a whole is central to its
subsequently approved by the Board. business approach and therefore places great emphasis on reducing workplace accidents and reducing carbon emissions.

Auditors Being a corporate model citizen, Engro constantly evaluates the need for our investments to raise the bar on sustainability and sustainable
The existing auditors, A.F. Ferguson & Co., Chartered Accountants retire and being eligible, have offered themselves for growth. Increasing our share of renewable resources is the key to Pakistan’s long-term sustainability, and is part of our strategy for
re-appointment. The Board Audit Committee recommends their appointment as auditors for the year ending December 31, development. A detailed report on HSE results and growth is available on the Company’s web site in the Integrated Report.
2020. Pattern of Shareholding
Major shareholders of Engro Corporation are The Dawood Group including Dawood Hercules Corporation Limited. Other
Human Capital shareholders include local and foreign institutions and the general public.
The development of Human Capital is a top priority at Engro and an integral part of its Central Idea. We understand that
the challenges for our businesses in the future will be different from those in the past and we must invest in developing the A statement of the general pattern of shareholding along with pattern of shareholding of certain classes of shareholders
necessary leadership capabilities to meet these challenges. We know that we can only deliver on our aspirations if we have whose disclosure is required under the reporting framework and the statement of purchase and sale of shares by Directors,
the best talent on board. In that endeavor, we have worked on attracting and developing the best people as we aim to executives and their spouses including minor children during 2019 is shown in the shareholding section of this report.
enhance and sustain a performance-oriented culture of learning and leadership. Our key focus areas for 2019 remained the
HR Transformation encapsulating the new Leadership Competency Model behaviors ingrained via trainings and reinforced Material Changes due to Subsequent Events
as part of year-end performance appraisal and rewards policies in our push towards developing strong performing teams. No material changes or commitments affecting the financial position of the Company have occurred between the end of the
We celebrate an apprenticeship culture, in which people development is a critical responsibility for all managers. financial year of the Company and the date of this report.

Acknowledgment
Our leaders are expected to create learning opportunities, provide coaching and give regular, constructive feedback to all The Directors would like to express their deep appreciation to our shareholders who have consistently demonstrated their
their people; a philosophy further reinforced in the new performance management and goal-setting system. Our revamped confidence in the Company. We would also like to place on record our sincere appreciation for the commitment, dedication and
Leadership Competency Model and robust people systems/ processes promote collaboration, innovation and resilience in innovative thinking put in by each individual of the Engro family and are confident that they will continue to do so in the future.
the workforce. With this aim, we strive to provide the best systems and tools to our workforce to drive decision-making they
need via digitization and data-driven insights and capabilities.

We believe that diversity makes us stronger. We not only endeavor to give equal opportunity to all candidates, irrespective of
gender, religion or background but also strive to enable an inclusive culture. We have initiated a diversity ambition with rollout
of several frameworks geared towards developing that possibility. Hussain Dawood Ghias Khan
Chairman President and Chief Executive

49 50
 Annual Report 2019

six years summary financial ratios

2019 2018 2017 2016 2015 2014
Ratios 2019 2018 2017 2016 2015 2014
(Rupees in million)
Summary of Balance Sheet
Shareholders’ Funds / Equity 195,249 185,587 171,074 169,091 85,673 68,025 Profitability Ratios:
Long-term Borrowings 158,456 131,426 90,743 73,118 59,583 73,325 Gross Profit Ratio 30% 30% 27% 23% 25% 21%
Lease Liabilities - IFRS 16 55,348 - - - - - Net Profit to Sales 13% 14% 13% 47% 10% 4%
Capital Employed 353,705 317,014 261,818 242,209 145,255 141,350 Return on Equity 12% 9% 7% 68% 22% 13%
Property, Plant & Equipment 253,374 204,409 157,355 131,408 128,404 134,507 Return on Capital Employed 13% 10% 8% 40% 17% 13%
Net Current Assets / Working Capital 80,625 84,908 76,087 74,654 16,411 7,362
Liquidity Ratios:
Summary of Profit and Loss Current Ratio 1.59 2.26 2.49 2.92 1.39 1.11
Sales 225,920 171,568 128,593 157,208 181,652 175,958 Quick / Acid Test Ratio 1.43 2.00 2.23 2.64 1.06 0.94
Gross Profit 68,686 51,108 34,806 35,843 45,429 36,217
EBITDA 70,901 49,378 40,066 97,350 43,750 32,306 Investment /Market Ratios:
Profit After Tax 30,288 23,632 16,290 73,598 17,268 7,801 Earnings per Share (Restated) 28.69 22.06 16.33 119.94 23.92 12.16
Price Earnings Ratio 12.03 13.20 16.83 2.64 11.68 18.21
Summary of Cash Flows Dividend Yield Ratio 9% 8% 7% 9% 8% 4%
Net Cash Flow from Operating Activities 38,614 28,940 21,120 4,070 5,966 29,160 Dividend Payout Ratio 87% 95% 129% 20% 75% 49%
Net Cash Flow from Investing Activities (80,086) (12,397) (9,008) (17,019) 25,102 (29,317) Dividend Cover Ratio 1.15 1.05 0.78 5.00 1.33 2.03
Net Cash Flow from Financing Activities (5,603) 14,213 3,186 30,192 (28,300) (13,269)
Capital Structure Ratios:
Financial Leverage Ratio 0.89 0.74 0.59 0.47 0.77 1.25
Weighted Average Cost of Debt 9% 5% 6% 8% 11% 13%
Summary of Actual Production (Units) Debt to Equity Ratio 0.81 0.71 0.53 0.43 0.70 1.08
Urea Metric Tons 2,003,035 1,928,080 1,806,977 1,881,016 1,964,034 1,818,937 Interest Cover Ratio 4.12 7.68 6.34 14.57 4.06 1.89
NPK Metric Tons 134,784 132,790 109,059 94,610 126,074 117,193
PVC Resin Metric Tons 197,000 202,000 187,000 172,000 162,000 153,000
EDC Metric Tons 110,000 107,000 107,000 106,000 100,000 118,000
Caustic Soda Metric Tons 105,000 105,000 105,000 103,000 98,000 114,000
Caustic Flakes Metric Tons 4 - - - - -
VCM Metric Tons 184,000 195,000 180,000 174,000 162,000 168,000
Power Mega Watt Hours 3,097,604 1,526,309 1,737,394 1,264,667 1,424,015 1,721,959
Dairy and Juices Thousand Liters 328,627 281,903 320,344 482,958 552,532 472,735
Drying Unit of Rice
Processing Plant Metric Tons 93,689 77,008 59,371 28,474 45,982 166,801
Ice Cream Thousand Liters 21,392 18,254 17,467 19,518 19,364 16,726

51 52
 Annual Report 2019

investor relations statement of value addition

Financial Calender and distribution
Financial Year ended 31 December 2019 (Rs. in million) 2019 2018
26 April 2019 Announcement of first quarter results Rs. % Rs. %
20 August 2019 Announcement of second quarter results Wealth Generated
24 October 2019 Announcement of third quarter results
21 February 2020 Announcement of fourth quarter results Total revenue inclusive of sales tax and other income 255,899 193,216
Bought-in-material and services (146,551) (114,587)
24 April 2019 53rd Annual General Meeting
109,347 78,629

Financial Year ending 31 December 2020* Wealth Distributed

24 April 2020 Announcement of first quarter results To Providers of Capital
19 August 2020 Announcement of second quarter results Dividend to shareholders 23,615 21.6% 18,843 24.0%
Mark-up/interest expense on borrowed money 14,750 13.5% 5,453 6.9%
23 October 2020 Announcement of third quarter results
20 February 2021 Announcement of fourth quarter results To Government
* Tentative dates that are subject to change Taxes, duties and development surcharge 42,354 38.7% 34,512 43.9%

Trading Performance During the Financial Period 2019 2018 2017 To Society
Opening price 291.08 274.75 318.00 Donation towards education, health,
Closing price 345.25 291.08 274.75 environment and natural disaster 749 0.7% 308 0.4%

Highest closing price 351.54 350.22 399.16

To Employees Salaries, benefits and other costs 9,835 9.0% 7,097 9.0%
Lowest closing price 226.14 280.30 253.43
Average daily volume traded (million shares) 0.62 0.82 1.56 Retained for reinvestment and future growth
Depreciation, amortization and retained profit 18,043 16.5% 12,415 15.8%
Total Shareholder Return* 109,347 78,629
1- year period (01 January 2019 to 31 December 2019) 26.9%
3 - year period (01 January 2017 to 31 December 2019) 41.8%
5 - year period (01 January 2015 to 31 December 2019) 121.3%
* Total returns are computed based on the closing unit price on the last trading day of the preceding reporting period compared with the closing unit price on the
last trading day of the current period
16.5%
Investor Relations Enquiry:
[email protected]
Source: psx.com.pk To Providers of Capital
9.0%
To Government

To Society
0.7%
To Employees

Retained for reinvestment and

35.1%
future growth
38.7%

53 54
 Annual Report 2019

governance control framework

Internal Control Framework

Responsibility
The Board is ultimately responsible for Engro’s system of internal control and for reviewing its effectiveness. However, such
a system is designed to manage rather than eliminate the risk of failure to achieve business objectives, and can provide
only reasonable and not absolute assurance against material misstatement or loss.The Board, whilst maintaining its overall
responsibility for managing risk within the Company, has delegated the detailed design and operation of the system of
internal controls to the Chief Executive.

Framework
The Company maintains an established risk based control framework comprising of clear structures, authority limits, and
accountabilities, well understood policies and procedures and budgeting for review processes. All policies and control
procedures are documented. The Board establishes corporate strategy and the Company’s business objectives. Divisional
management integrates these objectives into divisional business strategies with supporting financial objectives.

Review
The Board meets quarterly to consider Engro’s financial performance, financial and operating budgets and forecasts,
business growth and development plans, capital expenditure proposals and other key performance indicators. The Board
Audit Committee receives reports on the system of internal financial controls from the external and internal auditors and
reviews the process for monitoring the effectiveness of internal controls.

There is a companywide policy governing appraisal and approval of investment expenditure and asset disposals. Post
completion reviews are performed on all material investment expenditure.

Audit
Engro has an Internal Audit function. The Board Audit Committee annually reviews the appropriateness of resources and
authority of this function. The Head of Internal Audit functionally reports to the Audit Committee. The Board Audit Committee
approves the audit program, based on an annual risk assessment of the operating areas. The Internal Audit function carries
out reviews on the financial, operational and compliance controls, and reports on findings to the Board Audit Committee, The
Chief Executive and the divisional management.

Directors
As at December 31, 2019, the Board comprises of one executive director, six independent directors and three non-executive
directors. The Board has the collective responsibility for ensuring that the affairs of Engro are managed competently and with
integrity.

A non-executive Director, Mr Hussain Dawood, chairs the Board and the Chief Executive Officer is Mr. Ghias Khan. Biographical
details of the Directors have been provided in the previous section.

A Board of Directors’ meeting calendar is issued annually which schedules the meetings of the Board and the Board Audit
Committee. The full Board met 10 times including meetings for longer term planning, giving consideration both to the
opportunities and risks of future strategy.

All Board members are given appropriate documentation in advance of each Board meeting. This normally includes a detailed
analysis on businesses and full papers on matters where the Board will be required to make a decision or give its approval.

55 56
 Annual Report 2019

statement of compliance with listed companies 11. Chief financial officer and chief executive officer duly endorsed the financial statements before approval of the Board;

(code of corporate governance) regulations, 2019 12. The Board has formed committees comprising of members given below.-
a) Audit Committee
Mr. Muhammad Abdul Aleem - Chairman
Year ended December 31, 2019 Mr. Raihan Ali Merchant - Member
Mr. Waqar Ahmed Malik – Member
The company has complied with the requirements of the Regulations in the following manner: - Mr. Rizwan Diwan – Member

1. The total number of directors are Ten as per the following, - b) The Board People’s Committee i.e.HR and Remuneration Committee
a. Male: 9 Ms. Henna Inam - Chairperson
b. Female: 1 Mr. Raihan Ali Merchant - Member
Mr. Khawaja Iqbal Hassan - Member
2. The composition of the Board is as follows: Mr. Abdul Samad Dawood - Member
Category Name
13. The terms of reference of the aforesaid committees have been formed, documented and advised to the committee for
i. Independent Directors Mr. Rizwan Diwan compliance;
Mr. Raihan Ali Merchant
14. The frequency of meetings of the committee were as per following, -
Ms. Henna Inam
a) Audit Committee (Quarterly)
Mr. Muhammad Abdul Aleem b) The Board People’s Committee – Held 10 meetings
Mr. Waqar Ahmed Malik
15. The Board has set up an effective internal audit function who are considered suitably qualified and experienced for the
Mr. Khawaja Iqbal Hassan
purpose and are conversant with the policies and procedures of the company;
ii. Non-executive Directors Mr. Hussain Dawood
Mr. Abdul Samad Dawood 16. The statutory auditors of the company have confirmed that they have been given a satisfactory rating under the Quality
Control Review program of the Institute of Chartered Accountants of Pakistan and registered with Audit Oversight
Mr. Shahzada Dawood
Board of Pakistan, that they and all their partners are in compliance with International Federation of Accountants (IFAC)
iii. Executive Director Mr. Ghias Khan guidelines on code of ethics as adopted by the Institute of Chartered Accountants of Pakistan and that they and the
iv. Female Director Ms. Henna Inam partners of the firm involved in the audit are not a close relative (spouse, parent, dependent and non-dependent children)
of the chief executive officer, chief financial officer, head of internal audit, company secretary or director of the company;
3. The directors have confirmed that none of them is serving as a director on more than seven listed companies, including
this company; 17. The statutory auditors or the persons associated with them have not been appointed to provide other services except
in accordance with the Act, these Regulations or any other regulatory requirement and the auditors have confirmed that
4. The company has prepared a code of conduct and has ensured that appropriate steps have been taken to disseminate they have observed IFAC guidelines in this regard;
it throughout the company along with its supporting policies and procedures;
18. We confirm that all requirements of regulations 3, 6, 7, 8, 27, 32, 33 and 36 of the Regulations have been complied with;
5. The Board has developed a vision/mission statement, overall corporate strategy and significant policies of the company.
The Board has ensured that complete record of particulars of the significant policies along with their date of approval or
updating is maintained by the company;

6. All the powers of the Board have been duly exercised and decisions on relevant matters have been taken by the Board/
shareholders as empowered by the relevant provisions of the Act and these Regulations;

7. The meetings of the Board were presided over by the Chairman and, in his absence, by a director elected by the Board
for this purpose. The Board has complied with the requirements of Act and the Regulations with respect to frequency,
recording and circulating minutes of meeting of the Board;

8. The Board have a formal policy and transparent procedures for remuneration of directors in accordance with the Act
and these Regulations;

9. The Board has arranged Directors’ Training Program for Mr. Rizwan Diwan in 2019. However, six directors are duly
certified or exempted from the Directors’ Training Program.
Hussain Dawood Ghias Khan
10. The Board had approved appointment of chief financial officer, company secretary and head of internal audit, including Chairman President and Chief Executive
their remuneration and terms and conditions of employment and complied with relevant requirements of the Regulations;

57 58
 Annual Report 2019

independent auditor’s review report statement of compliance with the

To the members of Engro Corporation Limited public offering regulations, 2017
Review Report on the Statement of Compliance contained in Listed Companies (Code of Corporate Governance) Regulations, This statement is being presented to comply with the requirements under Public Offering Regulations 2017 issued by the
2019 Securities and Exchange Commission of Pakistan. This Statement of Compliance (the Statement) is for the year ended
We have reviewed the enclosed Statement of Compliance with the Listed Companies (Code of Corporate Governance) December 31, 2019.
Regulations, 2019 (the Regulations) prepared by the Board of Directors of Engro Corporation Limited for the year ended
December 31, 2019 in accordance with the requirements of regulation 36 of the Regulations. Engro Corporation Limited (the Company) entered into an arrangement for issue of Sukuk-2 amounting to Rs. 1,000 Million,
on July 10, 2014 for a period of 5 years (this was repaid during the year). We state that the Company is in compliance with
The responsibility for compliance with the Regulations is that of the Board of Directors of the Company. Our responsibility is the Sukuk features and Shariah requirements in accordance with Public Offering Regulations, 2017.
to review whether the Statement of Compliance reflects the status of The Company’s compliance with the provisions of the
Regulations and report if it does not and to highlight any non-compliance with the requirements of the Regulations. A review We specifically confirm that:
is limited primarily to inquiries of the Company’s personnel and review of various documents prepared by the Company to
comply with the Regulations. - The Company has established policies and procedures for all Sukuk related transactions to comply with Sukuk features
and Shariah requirements;
As a part of our audit of the financial statements we are required to obtain an understanding of the accounting and internal
control systems sufficient to plan the audit and develop an effective audit approach. We are not required to consider whether - The Company has implemented and maintained such internal control and risk management systems that are necessary
the Board of Directors’ statement on internal control covers all risks and controls or to form an opinion on the effectiveness to mitigate the risk of non-compliances of the Sukuk features and Shariah requirements, whether due to fraud or error;
of such internal controls, the Company’s corporate governance procedures and risks. - The Company has a process to ensure that the management and where appropriate those charged with governance, and
personnel responsible to ensure the Company’s compliance with the Sukuk related features and Shariah requirements
The Regulations require the Company to place before the Audit Committee, and upon recommendation of the Audit are properly trained and systems are properly updated.
Committee, place before the Board of Directors for their review and approval, its related party transactions and also ensure
compliance with the requirements of section 208 of the Companies Act, 2017. We are only required and have ensured The Sukuk features and Shariah requirements in accordance with Public Offering Regulations, 2017 comprises of the
compliance of this requirement to the extent of the approval of the related party transactions by the Board of Directors upon following:
recommendation of the Audit Committee. We have not carried out procedures to assess and determine the Company’s
process for identification of related parties and that whether the related party transactions were undertaken at arm’s length a) Requirements of Shariah Structure and Transaction Documents as stated in the Prospectus, with respect to issuance
price or not. of Sukuk-2:

Based on our review, nothing has come to our attention which causes us to believe that the Statement of Compliance a. Declaration of Trust
does not appropriately reflect the Company’s compliance, in all material respects, with the requirements contained in the b. Musharaka Agreements
Regulations as applicable to the Company for the year ended December 31, 2019. c. Master Murabaha Facility Agreements
d. Payment Agreements
e. Purchase Undertaking
f. Asset Purchase Agreement
g. Deed of Floating Charges
h. Murabaha Agency Agreement
i. Agency Agreement

b) Guidelines of the relevant Shariah Standards, issued by the Accounting and Auditing Organization of the Islamic Financial
Institutions (AAOIFI), as notified by the Securities and Exchange Commission of Pakistan (the SECP);

c) Requirements of the relevant Islamic Financial Accounting Standard as notified by the SECP; and

d) Other compliances specified in the Public Offering Regulations 2017 issued by the Securities and Exchange Commission
of Pakistan.

A. F. Ferguson & Co.

Chartered Accountants
Karachi Hussain Dawood Ghias Khan
Date: March 16, 2020 Chairman President and Chief Executive

59 60
 Annual Report 2019

independent assurance report to the board of directors on Our procedures applied to the selected data primarily comprised of:

the statement of compliance with public offering - Inquiry and evaluation of the systems, procedures and practices in place with respect to the Company’s compliance
with the Criteria;

regulations, 2017 - Verification of Sukuk related transactions on sample basis to ensure the Company’s compliance with the Criteria
during the year;
Scope of our work
We have performed an independent assurance engagement of Engro Corporation Limited (the Company) to express an - Review of Shariah structure and transaction documents, term sheet and Shariah approval letter issued by the Shariah
opinion on the annexed Statement of Compliance (the Statement) with the requirements of Public Offering Regulations, 2017 Advisor of the Sukuk; and
as notified by the Securities and Exchange Commission of Pakistan as of December 31, 2019.
- Review of the annexed Statement based on our procedures performed and conclusion reached.
Applicable Criteria
The criteria for the assurance engagement against which the underlying subject matter (Statement of Compliance for the We believe that the evidences we have obtained through performing our aforementioned procedures were sufficient and
year ended December 31, 2019) is assessed comprises of compliance with the features and Shariah requirements of Sukuk appropriate to provide a basis for our opinion.
in accordance with the requirements of Public Offering Regulations, 2017. Our engagement was carried out as required
under Rule 13 of Chapter VII of the Public Offering Regulations, 2017 as notified by the Securities and Exchange Commission Conclusion
of Pakistan. Based on our independent assurance engagement, in our opinion, the annexed Statement for the year ended December
31, 2019 has been prepared, in all material respects, in compliance with the features and Shariah requirements of Sukuk in
Responsibility of Company’s Management accordance with Public Offering Regulations, 2017.
The responsibility for the preparation and fair presentation of the Statement (the subject matter information) and for compliance
with the features and Shariah requirements of Sukuk in accordance with the requirements of Public Offering Regulations, Restriction on use and distribution
2017 is that of the management of the Company. The management is also responsible for the design, implementation This report is issued in relation to the requirements as stipulated under rule 13 of Chapter VII of the Public Offering
and maintenance of appropriate internal control procedures with respect to such compliance and maintenance of relevant Regulations, 2017 and is not to be used or distributed for any other purpose. This report is restricted to the facts stated
documentation/records. The management is also responsible to ensure that the personnel involved are conversant with the herein and the attachment.
Criteria for the purpose of the Company’s compliance.

Our Independence and Quality Control

We are independent of the Company in accordance with the International Ethics Standards Board for Accountants’ Code
of Ethics for Professional Accountants as adopted by the Institute of Chartered Accountants of Pakistan (the Code), and we
have fulfilled our other ethical responsibilities in accordance with the Code.
Chartered Accountants
The firm applies International Standard on Quality Control 1 “Quality Control for Firms That Perform Audits and Reviews of Karachi
Historical Financial Information, And Other Assurance and Related Services Engagements” and accordingly maintains a Date: March 16, 2020
comprehensive system of quality control including documented policies and procedures regarding compliance with ethical Engagement Partner: Salman Hussain
requirements, professional standards and applicable legal and regulatory requirements.

Responsibility of Independent Assurance Provider

Our responsibility is to express our conclusion on the Statement for the year ended December 31, 2019 based on our
independent assurance engagement, performed in accordance with the International Standard on Assurance Engagements
3000 ‘Assurance Engagements other than Audits or Reviews of Historical Financial Information’ (ISAE 3000). This standard
requires that we plan and perform the engagement to obtain reasonable assurance about whether the annexed Statement
reflects the status of the Company’s compliance with the features and Shariah requirements of Sukuk in accordance with the
requirements of Public Offering Regulations, 2017 and is free from material misstatement.

The procedures selected by us for the engagement depend on our judgment, including an assessment of the risks of
material non-compliances with the Criteria. In making those risk assessments; we have considered internal controls relevant
to the Company’s compliance with the Criteria in order to design procedures that are appropriate in the circumstances, for
gathering sufficient appropriate evidence to determine that the Company was not materially non-compliant with the Criteria.
Our engagement was not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control.

61 62
We aim to enable prosperity by going beyond the conventional measures of success. For us,
success is when our expansion creates local job opportunities for people who once longed for a
stable income, when we reach new heights in the level of import substitution, and when we are
able to empower local communities through education and health facilities. Hence our vision to
lead Pakistan in polymer and allied chemicals with an international footprint.
 Annual Report 2019

key shareholding & shares traded CDC - TRUSTEE ALFALAH GHP STOCK FUND
CDC - TRUSTEE ALFALAH GHP VALUE FUND
305,560
117,380
CDC - TRUSTEE ALHAMRA ISLAMIC STOCK FUND 593,630
Information of shareholding required under the reporting framework is as follows: CDC - TRUSTEE APF-EQUITY SUB FUND 73,650
CDC - TRUSTEE APIF - EQUITY SUB FUND 125,500
1. Associated Companies, Undertakings and Related Parties CDC - TRUSTEE ASKARI ASSET ALLOCATION FUND 24,950
CDC - TRUSTEE ATLAS ISLAMIC DEDICATED STOCK FUND 112,920
Name of Shareholders No. of Shares Held CDC - TRUSTEE ATLAS ISLAMIC STOCK FUND 435,000
Dawood Hercules Corporation Limited 214,469,810 CDC - TRUSTEE ATLAS STOCK MARKET FUND 1,304,700
Patek (Private) Limited 35,959,864 CDC - TRUSTEE AWT ISLAMIC STOCK FUND 25,750
Dawood Corporation (Private) Limited 3,436,290 CDC - TRUSTEE AWT STOCK FUND 6,500
Dawood Foundation 41,861 CDC - TRUSTEE FAYSAL ISLAMIC ASSET ALLOCATION FUND 20,000
CDC - TRUSTEE FAYSAL SAVINGS GROWTH FUND - MT 300
Total 253,907,825 CDC - TRUSTEE FAYSAL STOCK FUND 15,400
CDC - TRUSTEE FIRST CAPITAL MUTUAL FUND 5,000
2. Directors, Chief Executive Officer and their spouse(s) and minor children CDC - TRUSTEE FIRST HABIB ASSET ALLOCATION FUND 100
CDC - TRUSTEE FIRST HABIB STOCK FUND 21,650
Name of Shareholders No. of Shares Held CDC - TRUSTEE HBL - STOCK FUND 368,950
4,427,281 CDC - TRUSTEE HBL EQUITY FUND 49,630
Hussain Dawood
3,118,641 CDC - TRUSTEE HBL IPF EQUITY SUB FUND 41,690
Shahzada Dawood
72,941 CDC - TRUSTEE HBL ISLAMIC ASSET ALLOCATION FUND 41,340
Abdul Samad Dawood
110 CDC - TRUSTEE HBL ISLAMIC EQUITY FUND 142,930
Henna Inam
70,822 CDC - TRUSTEE HBL MULTI - ASSET FUND 22,050
Muhammad Abdul Aleem
10,143 CDC - TRUSTEE HBL PF EQUITY SUB FUND 36,460
Khawaja Iqbal Hassan
5,500 CDC - TRUSTEE JS ISLAMIC DEDICATED EQUITY FUND (JSIDEF) 730,800
Raihan Ali Merchant
2,001 CDC - TRUSTEE JS ISLAMIC FUND 82,900
Waqar Ahmed Malik
110 CDC - TRUSTEE JS ISLAMIC PENSION SAVINGS FUND-EQUITY ACCOUNT 30,500
Rizwan Diwan
3,438,321 CDC - TRUSTEE JS LARGE CAP. FUND 81,100
Kulsum Dawood w/o Hussain Dawood
15,565 CDC - TRUSTEE JS PENSION SAVINGS FUND - EQUITY ACCOUNT 29,290
Humera Aleem w/o Mohammad Abdul Aleem
44 CDC - TRUSTEE KSE MEEZAN INDEX FUND 671,300
Ayesha Dawood w/o Abdul Samad Dawood
CDC - TRUSTEE LAKSON EQUITY FUND 1,030,904
Total 11,161,479 CDC - TRUSTEE LAKSON ISLAMIC TACTICAL FUND 59,738
CDC - TRUSTEE LAKSON TACTICAL FUND 157,107
3. Executives 101,027 CDC - TRUSTEE MCB PAKISTAN ASSET ALLOCATION FUND 106,200
CDC - TRUSTEE MCB PAKISTAN STOCK MARKET FUND 1,115,080
4. Public sector companies and corporations 33,310,324 CDC - TRUSTEE MEEZAN ASSET ALLOCATION FUND 419,600
CDC - TRUSTEE MEEZAN BALANCED FUND 819,990
5. Banks, Development Finance Institutions, Non-Banking Finance Institutions, 32,134,330 CDC - TRUSTEE MEEZAN ISLAMIC FUND 8,291,673
Insurance Companies, Takaful, Modaraba and Pension Funds CDC - TRUSTEE MEEZAN TAHAFFUZ PENSION FUND - EQUITY SUB FUND 1,296,420
CDC - TRUSTEE NAFA ISLAMIC PRINCIPAL PROTECTED FUND - II 20,790
6. Mutual Funds CDC - TRUSTEE NATIONAL INVESTMENT (UNIT) TRUST 461,225
CDC - TRUSTEE NBP BALANCED FUND 150,518
Name of Mutual Fund No. of Shares Held
CDC - TRUSTEE NBP ISLAMIC ACTIVE ALLOCATION EQUITY FUND 345,990
CDC - TRUSTEE ABL ISLAMIC PENSION FUND - EQUITY SUB FUND 15,140 CDC - TRUSTEE NBP ISLAMIC REGULAR INCOME FUND 45,260
CDC - TRUSTEE ABL PENSION FUND - EQUITY SUB FUND 12,360 CDC - TRUSTEE NBP ISLAMIC SARMAYA IZAFA FUND 1,550,020
CDC - TRUSTEE ABL STOCK FUND 674,350 CDC - TRUSTEE NBP ISLAMIC STOCK FUND 1,423,420
CDC - TRUSTEE AKD INDEX TRACKER FUND 77,031 CDC - TRUSTEE NBP MAHANA AMDANI FUND - MT 2,200
CDC - TRUSTEE AL AMEEN ISLAMIC DEDICATED EQUITY FUND 587,821 CDC - TRUSTEE NBP SARMAYA IZAFA FUND 172,170
CDC - TRUSTEE AL MEEZAN MUTUAL FUND 1,579,290 CDC - TRUSTEE NBP SAVINGS FUND - MT 11,600
CDC - TRUSTEE AL-AMEEN ISLAMIC ASSET ALLOCATION FUND 268,670 CDC - TRUSTEE NBP STOCK FUND 2,060,812
CDC - TRUSTEE AL-AMEEN SHARIAH STOCK FUND 1,592,148 CDC - TRUSTEE NIT ISLAMIC EQUITY FUND 615,110
CDC - TRUSTEE ALFALAH CAPITAL PRESERVATION FUND II 11,000 CDC - TRUSTEE NIT-EQUITY MARKET OPPORTUNITY FUND 1,811,936
CDC - TRUSTEE ALFALAH GHP ALPHA FUND 216,700 CDC - TRUSTEE PAKISTAN CAPITAL MARKET FUND 77,000
CDC - TRUSTEE ALFALAH GHP ISLAMIC DEDICATED EQUITY FUND 77,679 CDC - TRUSTEE PICIC GROWTH FUND 345,870
CDC - TRUSTEE ALFALAH GHP ISLAMIC STOCK FUND 978,720 CDC - TRUSTEE UBL ASSET ALLOCATION FUND 250,300
CDC - TRUSTEE ALFALAH GHP ISLAMIC VALUE FUND 27,070

65 66
 Annual Report 2019

CDC - TRUSTEE UBL DEDICATED EQUITY FUND 25,023 Muhammad Ashiq 18-Jul-2019 - 1,000 261.0
CDC - TRUSTEE UBL RETIREMENT SAVINGS FUND - EQUITY SUB FUND 123,080 Claudette J. Santamaria (transaction 08-Aug-2019 - 4,171 240.4
CDC - TRUSTEE UBL STOCK ADVANTAGE FUND 750,526 made by husband)
CDC - TRUSTEE UNIT TRUST OF PAKISTAN 62,400 Kulsum Dawood w/o Hussain Dawood 21-Aug-2019 16,100 - 254.8
CDC TRUSTEE - MEEZAN DEDICATED EQUITY FUND 363,130 Fahad Tariq Rafi 29-Aug-2019 900 - 270.0
CDC-TRUSTEE AL-AMEEN ISLAMIC RET. SAV. FUND-EQUITY SUB FUND 310,680 Hussain Dawood 03-Sep-2019 236,000 - 255.9
CDC-TRUSTEE ALHAMRA ISLAMIC ASSET ALLOCATION FUND 387,880 Khawaja Iqbal Hassan 30-Aug-2019 6,000 - 259.6
CDC-TRUSTEE FIRST HABIB ISLAMIC STOCK FUND 24,840 Khawaja Iqbal Hassan 18-Sep-2019 4,000 - 257.1
CDC-TRUSTEE HBL ISLAMIC STOCK FUND 188,280 Waqar Ahmed Malik 26-Nov-2019 - 35,000 338.1
CDC-TRUSTEE NITIPF EQUITY SUB-FUND 41,250
CDC-TRUSTEE NITPF EQUITY SUB-FUND 17,600 * For the purpose of declaration of share trades all employee of the company are considered as “Executives”
MC FSL - TRUSTEE JS GROWTH FUND 160,160
MCBFSL - TRUSTEE ABL ISLAMIC STOCK FUND 479,940
MCBFSL - TRUSTEE HBL ISLAMIC DEDICATED EQUITY FUND 59,970
MCBFSL - TRUSTEE JS VALUE FUND 108,820
MCBFSL - TRUSTEE PAK OMAN ADVANTAGE ASSET ALLOCATION FUND 18,700
MCBFSL - TRUSTEE PAK OMAN ISLAMIC ASSET ALLOCATION FUND 58,400
MCBFSL TRUSTEE ABL ISLAMIC DEDICATED STOCK FUND 97,820
TRI-STAR MUTUAL FUND LIMITED 1,004
TOTAL 37,610,585

7. Name of Shareholders holding five percent or more voting rights in the Company:

Name of Shareholders No. of Shares Held

Dawood Hercules Corporation Limited 214,469,810
Patek (Private) Limited 35,959,864

8. Details of purchase/sale of shares by Directors, Executives* and their spouse(s) / minor children during 2019.

Name Date of Purchase / Sale Shares Purchased Shares Sold Rate

Kulsum Dawood w/o Hussain Dawood 20-Feb-2019 5,000 - 332.0
Mohammad Miqdad 15-Mar-2019 500 - 315.5
Shahzada Dawood 29-Mar-2019 48,600 - 326.8
Mohammad Miqdad 02-Apr-2019 300 - 319.0
Shahzada Dawood 03-Apr-2019 35,500 - 321.0
Shahzada Dawood 04-Apr-2019 100,000 - 318.3
Shahzada Dawood 08-Apr-2019 9,600 - 314.3
Shahzada Dawood 09-Apr-2019 1,700 - 311.9
Ghias Khan 19-Mar-2019 - 2,500 325.0
Mohammad Miqdad 29-Apr-2019 700 - 323.0
Mohammad Miqdad 06-May-2019 300 - 290.0
Kulsum Dawood w/o Hussain Dawood 10-May-2019 24,500 - 265.8
Shahzada Dawood 14-May-2019 131,000 - 258.3
Kulsum Dawood w/o Hussain Dawood 17-May-2019 20,000 - 256.5
Waqar Ahmed Malik 23-May-2019 15,000 - 276.5
Kulsum Dawood w/o Hussain Dawood 25-May-2019 25,000 - 280.7
Kulsum Dawood w/o Hussain Dawood 28-May-2019 35,000 - 278.4
Kulsum Dawood w/o Hussain Dawood 08-Jul-2019 100,000 - 269.3
Shahzada Dawood 08-Jul-2019 100,000 - 269.2
Shahzada Dawood 15-Jul-2019 200,000 - 263.5
Kulsum Dawood w/o Hussain Dawood 15-Jul-2019 150,000 - 264.0
Hussain Dawood 16-Jul-2019 125,000 - 265.2
Hussain Dawood 17-Jul-2019 85,000 - 265.8

67 68
 Annual Report 2019

pattern of shareholding Shareholding Shareholding

As at December 31, 2019 No of Shareholders From To Total Shares No of Shareholders From To Total Shares
Shareholding Shareholding 1 610,001 615,000 612,646 1 1,900,001 1,905,000 1,901,728
1 615,001 620,000 615,110 1 1,955,001 1,960,000 1,958,900
No of Shareholders From To Total Shares No of Shareholders From To Total Shares 644,212
1 640,001 645,000 1 1,995,001 2,000,000 2,000,000
2,190 1 100 77,891 5 240,001 245,000 1,208,784 1 645,001 650,000 647,927 1 2,005,001 2,010,000 2,007,214
2,670 101 500 679,591 1 245,001 250,000 250,000 2 655,001 660,000 1,320,000 1 2,060,001 2,065,000 2,060,812
1,356 501 1,000 978,681 2 250,001 255,000 505,300 1 660,001 665,000 661,290 1 2,130,001 2,135,000 2,130,585
3,072 1,001 5,000 7,216,398 1 255,001 260,000 259,246 2 670,001 675,000 1,345,650 1 2,225,001 2,230,000 2,225,920
1,051 5,001 10,000 7,413,940 1 260,001 265,000 262,948 3 695,001 700,000 2,093,171 1 2,365,001 2,370,000 2,366,770
453 10,001 15,000 5,488,304 8 265,001 270,000 2,139,702 1 715,001 720,000 716,700 1 2,475,001 2,480,000 2,479,149
241 15,001 20,000 4,206,606 2 270,001 275,000 545,585 1 730,001 735,000 730,800 1 2,635,001 2,640,000 2,636,260
191 20,001 25,000 4,297,884 3 275,001 280,000 833,040 1 740,001 745,000 740,420 1 2,735,001 2,740,000 2,739,620
141 25,001 30,000 3,862,866 1 280,001 285,000 284,330 1 750,001 755,000 750,526 1 3,105,001 3,110,000 3,109,370
99 30,001 35,000 3,225,584 1 285,001 290,000 286,370 1 755,001 760,000 756,660 1 3,115,001 3,120,000 3,118,641
60 35,001 40,000 2,274,169 1 290,001 295,000 291,511 1 780,001 785,000 780,685 1 3,295,001 3,300,000 3,299,046
67 40,001 45,000 2,855,930 2 295,001 300,000 592,222 1 790,001 795,000 791,269 1 3,350,001 3,355,000 3,350,259
47 45,001 50,000 2,261,047 2 300,001 305,000 607,243 1 795,001 800,000 800,000 2 3,435,001 3,440,000 6,874,611
54 50,001 55,000 2,882,342 3 305,001 310,000 921,010 1 815,001 820,000 819,990 1 3,495,001 3,500,000 3,497,122
42 55,001 60,000 2,406,519 1 310,001 315,000 310,680 1 825,001 830,000 828,000 1 4,425,001 4,430,000 4,427,281
22 60,001 65,000 1,365,360 2 315,001 320,000 639,000 2 830,001 835,000 1,664,615 1 5,120,001 5,125,000 5,124,326
21 65,001 70,000 1,425,146 1 320,001 325,000 321,138 3 865,001 870,000 2,603,370 1 5,250,001 5,255,000 5,254,212
26 70,001 75,000 1,890,359 4 325,001 330,000 1,316,800 1 870,001 875,000 870,496 1 5,945,001 5,950,000 5,947,370
20 75,001 80,000 1,550,169 2 330,001 335,000 667,259 1 895,001 900,000 896,500 1 7,540,001 7,545,000 7,543,440
23 80,001 85,000 1,892,987 1 335,001 340,000 336,019 1 900,001 905,000 905,000 1 8,290,001 8,295,000 8,291,673
12 85,001 90,000 1,052,477 2 340,001 345,000 688,000 1 920,001 925,000 920,710 1 13,140,001 13,145,000 13,141,324
17 90,001 95,000 1,573,454 3 345,001 350,000 1,036,960 2 925,001 930,000 1,858,010 1 18,735,001 18,740,000 18,736,700
16 95,001 100,000 1,565,344 2 350,001 355,000 707,870 1 970,001 975,000 975,000 1 20,165,001 20,170,000 20,169,000
11 100,001 105,000 1,126,504 1 355,001 360,000 357,172 1 975,001 980,000 978,720 1 35,955,001 35,960,000 35,959,864
14 105,001 110,000 1,522,333 1 360,001 365,000 363,130 1 995,001 1,000,000 1,000,000 1 214,465,001 214,470,000 214,469,810
9 110,001 115,000 1,008,180 1 365,001 370,000 368,950 1 1,030,001 1,035,000 1,030,904 12,251 576,163,230
10 115,001 120,000 1,173,268 3 370,001 375,000 1,114,981 2 1,035,001 1,040,000 2,075,010
11 120,001 125,000 1,348,555 3 375,001 380,000 1,131,988 1 1,115,001 1,120,000 1,115,080
10 125,001 130,000 1,280,022 1 380,001 385,000 381,040 1 1,135,001 1,140,000 1,138,152
7 130,001 135,000 929,247 1 385,001 390,000 387,880 2 1,145,001 1,150,000 2,292,420
11 135,001 140,000 1,511,945 2 390,001 395,000 784,940 1 1,155,001 1,160,000 1,158,361
7 140,001 145,000 996,493 4 395,001 400,000 1,599,670 1 1,205,001 1,210,000 1,210,000
12 145,001 150,000 1,766,933 1 415,001 420,000 419,600 1 1,210,001 1,215,000 1,211,324
8 150,001 155,000 1,211,208 1 425,001 430,000 429,000 1 1,215,001 1,220,000 1,218,180
7 155,001 160,000 1,101,214 1 430,001 435,000 435,000 1 1,240,001 1,245,000 1,243,000
5 160,001 165,000 819,026 1 440,001 445,000 443,449 1 1,250,001 1,255,000 1,251,431
6 165,001 170,000 1,002,717 1 445,001 450,000 448,267 1 1,295,001 1,300,000 1,296,420
7 170,001 175,000 1,207,139 2 455,001 460,000 913,150 1 1,300,001 1,305,000 1,304,700
3 175,001 180,000 531,904 2 460,001 465,000 923,456 1 1,350,001 1,355,000 1,354,359
2 180,001 185,000 361,753 1 475,001 480,000 479,940 1 1,360,001 1,365,000 1,363,736
5 185,001 190,000 937,512 1 490,001 495,000 491,070 1 1,395,001 1,400,000 1,399,720
3 190,001 195,000 578,382 1 510,001 515,000 511,910 1 1,420,001 1,425,000 1,423,420
6 195,001 200,000 1,200,000 2 520,001 525,000 1,043,948 1 1,495,001 1,500,000 1,500,000
3 200,001 205,000 605,980 1 530,001 535,000 533,912 1 1,550,001 1,555,000 1,550,020
2 205,001 210,000 417,250 1 535,001 540,000 536,700 1 1,570,001 1,575,000 1,574,890
1 210,001 215,000 213,209 2 540,001 545,000 1,086,724 1 1,575,001 1,580,000 1,579,290
4 215,001 220,000 871,160 1 570,001 575,000 570,196 1 1,590,001 1,595,000 1,592,148
2 220,001 225,000 445,686 2 580,001 585,000 1,165,150 1 1,700,001 1,705,000 1,701,000
1 225,001 230,000 227,000 2 585,001 590,000 1,176,431 1 1,705,001 1,710,000 1,706,000
4 230,001 235,000 927,330 2 590,001 595,000 1,184,636 1 1,775,001 1,780,000 1,777,914
2 235,001 240,000 476,396 1 600,001 605,000 600,630 1 1,810,001 1,815,000 1,811,936

69 70
 Annual Report 2019

categories of shareholding
As at December 31, 2019

S No. Shareholders Category No. of Shareholders No. of Shares Percentage

1 Directors, Chief Executive Officer, and their spouse and 13 11,161,479 1.94
minor children
2 Associated Companies, Undertakings and related Parties 4 253,907,825 44.07
3 NIT and ICP 1 105 0.00
4 Banks, Development Financial Institutions, Non-Banking 28 8,951,628 1.55
Financial Institutions
5 Insurance Companies 22 33,849,281 5.87
6 Modarabas and Mutual Funds 92 37,620,916 6.53
7 Shareholders holding 10% 1 214,469,810 37.22
8 General Public:
a. local 11,533 121,628,309 21.11
b. Foreign - - -
9 Others 558 109,043,687 18.93

71 72
 Annual Report 2019

shareholder information
Annual General Meeting
The annual shareholders meeting will be held at 10:00 a.m. on April 07, 2020 at Karachi School of Business & Leadership,
Karachi.

Shareholders as of March 24, 2020 are encouraged to participate and vote.

Any shareholder may appoint a proxy to vote on his or her behalf. Proxies should be filed with the company at least 48 hours
before the meeting time.

CDC Shareholders or their Proxies are requested to bring with them copies of their Computerized National Identity Card
or passport along with the Participant’s ID number and their account number at the time of attending the Annual General
Meeting in order to facilitate their identification.

Ownership
On December 31, 2019 there were 12,251 shareholders on record of the Company’s ordinary shares.

Circulation of Annual Reports through CD/DVD/USB

As notified by the Securities and Exchange Commission of Pakistan (SECP) vide S.R.O. 470(I)/2016 dated May 21, 2016
and in continuation with the SRO.787(1)/2014 dated 8th September, 2014, and approved by the Shareholders in the Annual
General Meeting of the Company held on April 06, 2017, the Company shall circulate its annual balance sheet, and profit
and loss account, auditor’s report and directors report etc. (“Annual Audited Accounts”) to its members through CD/DVD/
USB at their registered addresses, save for those who opt for a hardcopy of the Annual Audited Accounts. The Standard
Request Form for hard copies of the Annual Audited Accounts is available at the Company’s website www.engro.com.

Alternatively, members can fill up the Standard Request Forms respectively in the Annexures section at the end of the report.

E-Dividend Mandate (Mandatory)

In accordance with the provisions of Section 242 of the Companies Act, 2017, a listed company, is required to pay cash
dividend ONLY through electronic mode directly into the bank account designated by the entitled shareholders. Accordingly,
the shareholders are requested to provide the information mentioned on an E-Dividend Mandate Form available at the
Company’s website www.engro.com and send the same to your brokers/the Central Depository Company Ltd. if the shares
are held in the electronic form or to the Company’s Shares Registrar if the shares are held in paper certificate form.

Quarterly Results
The Company issues quarterly financial statements and holds periodic briefings with security analysts to discuss the results
and the business environment.

All annual/quarterly reports and periodic briefing presentations are regularly posted at the Company’s website: www.engro.
com.

Change of Address
All registered shareholders should send information on changes of address to:

M/s. FAMCO Associates (Private) Limited

8-F, Near Hotel Faran Nursery,
Block-6 P.E.C.H.S. Shahra-e-Faisal, Karachi-74000

73 74
Engro Foundation is a mark of our commitment to Pakistan. To enable opportunities that
change lives, Engro Foundation has pivoted to an inclusive business model that targets
low-income communities where Engro businesses are based. By innovatively providing low-
income communities with opportunities of skill and livelihood development, we create an
ecosystem that spurs economic growth and encourages entrepreneurship. This model enables
underprivileged members of our society to emerge as potential business partners and become
vendors, customers, and employees in our value chains.
- Auditor’s Report to the Members
- Standalone Financials
 independent auditor’s report
Annual Report 2019

To the members of Engro Corporation Limited

Report on the Audit of the Financial Statements
Opinion
We have audited the annexed financial statements of Engro Corporation Limited (the Company), which comprise the statement of
S.No. Key audit matters How the matter was addressed in our audit
financial position as at December 31, 2019, and the statement of profit or loss and other comprehensive income, the statement of
changes in equity, the statement of cash flows for the year then ended, and notes to the financial statements, including a summary - checking mathematical accuracy of the calculations
of significant accounting policies and other explanatory information, and we state that we have obtained all the information and underlying the provisions, if any; and
explanations which, to the best of our knowledge and belief, were necessary for the purposes of the audit.
- we assessed whether the disclosures made by
In our opinion and to the best of our information and according to the explanations given to us, the statement of financial position, the Company adequately discloses the matter in
the statement of profit or loss and other comprehensive income, the statement of changes in equity and the statement of cash flows accordance with the applicable accounting and
together with the notes forming part thereof conform with the accounting and reporting standards as applicable in Pakistan and give the reporting standards.
information required by the Companies Act, 2017 (XIX of 2017), in the manner so required and respectively give a true and fair view of
the state of the Company’s affairs as at December 31, 2019 and of the profit and other comprehensive income, the changes in equity
Information Other than the Financial Statements and Consolidated Financial Statements and Auditor’s Reports Thereon
and its cash flows for the year then ended.
Basis for Opinion Management is responsible for the other information. The other information comprises the information included in the annual report, but
does not include the financial statements and our auditor’s report thereon.
We conducted our audit in accordance with International Standards on Auditing (ISAs) as applicable in Pakistan. Our responsibilities
under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our Our opinion on the financial statements does not cover the other information and we do not express any form of assurance
report. We are independent of the Company in accordance with the International Ethics Standards Board for Accountants’ Code of
conclusion thereon.
Ethics for Professional Accountants as adopted by the Institute of Chartered Accountants of Pakistan (the Code) and we have fulfilled
our other ethical responsibilities in accordance with the Code. We believe that the audit evidence we have obtained is sufficient and
appropriate to provide a basis for our opinion. In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider
whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise
Key Audit Matters appears to be materially misstated.
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements
of the current period. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required
our opinion thereon, and we do not provide a separate opinion on these matters. to report that fact. We have nothing to report in this regard.

Following are the key audit matters: Responsibilities of Management and Board of Directors for the Financial Statements
S.No. Key audit matters How the matter was addressed in our audit
Management is responsible for the preparation and fair presentation of the financial statements in accordance with the accounting and
1. Income tax matters reporting standards as applicable in Pakistan and the requirements of Companies Act, 2017 (XIX of 2017) and for such internal control
as management determines is necessary to enable the preparation of financial statements that are free from material misstatement,
(Refer notes 19.1.8 and 26 to the financial statements)
whether due to fraud or error.
The Company has recognized provisions and has Our audit procedures amongst others included the
disclosed contingent liabilities in respect of certain income following: In preparing the financial statements, management is responsible for assessing the Company’s ability to continue as a going concern,
tax matters, which are pending adjudication before various disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either
appellate and legal forums. - obtaining and reviewing details of the pending tax intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so.
matters and discussing the same with the Company’s
Provisions and contingencies require management of the management;
Board of directors are responsible for overseeing the Company’s financial reporting process.
Company to make judgements and estimates in relation
to the interpretation of laws, statutory rules, regulations, - circularizing confirmations to the Company’s external
and the probability of outcome and financial impact, if advisors for their views on matters being handled by Auditor’s Responsibilities for the Audit of the Financial Statements
any, on the Company in respect of such provisions and them;
contingencies. Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material
- involving internal tax professionals to assist us in misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high
Due to significance of amounts involved, inherent assessing management’s conclusions on contingent level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs as applicable in Pakistan will always detect
uncertainties with respect to the outcome of these matters tax matters and evaluating the consistency of such
a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in
and use of significant management judgement and conclusions with the views of management and external
estimates to assess the same including related financial advisors engaged by the Company; the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial
impacts, we have considered provisions and contingent statements.
liabilities relating to income tax as a key audit matter. - reviewing correspondence of the Company with the
relevant tax authorities including judgments or orders
passed by the competent authorities in relation to the
issues involved or matters which have similarities with
the issues involved;

79 80
 Annual Report 2019

As part of an audit in accordance with ISAs as applicable in Pakistan, we exercise professional judgement and maintain professional Report on Other Legal and Regulatory Requirements
skepticism throughout the audit. We also:
Based on our audit, we further report that in our opinion:
• Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform
audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our a) proper books of account have been kept by the Company as required by the Companies Act, 2017 (XIX of 2017);
opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud
may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. b) the statement of financial position, the statement of profit or loss and other comprehensive income, the statement of changes in
equity and the statement of cash flows together with the notes thereon have been drawn up in conformity with the Companies Act,
2017 (XIX of 2017) and are in agreement with the books of account and returns;
• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control.
c) investments made, expenditure incurred and guarantees extended during the year were for the purpose of the Company’s
business; and
• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures
made by management. d) zakat deductible at source under the Zakat and Ushr Ordinance, 1980 (XVIII of 1980), was deducted by the Company and
deposited in the Central Zakat Fund established under section 7 of that Ordinance.
• Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence
obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company’s The engagement partner on the audit resulting in this independent auditor’s report is Salman Hussian.
ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our
auditor’s report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion.
Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or
conditions may cause the Company to cease to continue as a going concern.

• Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the
financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

We communicate with the Board of directors regarding, among other matters, the planned scope and timing of the audit and significant
audit findings, including any significant deficiencies in internal control that we identify during our audit.
A. F. Ferguson & Co.
Chartered Accountants
We also provide the Board of directors with a statement that we have complied with relevant ethical requirements regarding independence, Karachi
and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and Date: March 16, 2020
where applicable, related safeguards.

From the matters communicated with the board of directors, we determine those matters that were of most significance in the audit of
the financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report
unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a
matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to
outweigh the public interest benefits of such communication.

81 82
 statement of financial position Annual Report 2019

as at december 31, 2019

(Amounts in thousand) Note 2019 2018 (Amounts in thousand) Note 2019 2018
Rupees Rupees

ASSETS EQUITY & LIABILITIES

Non-current assets Equity

Property, plant and equipment 5 399,724 514,837 Share capital 15 5,761,633 5,237,848
Share premium 13,068,232 13,068,232
Right-of-use assets 6 919,857 -
General reserve 4,429,240 4,429,240
Intangible assets 7 110,165 58,248 Remeasurement of post employment benefits - Actuarial loss (23,137) (12,721)

Long term investments 8 26,437,079 24,652,289 Unappropriated profit 61,860,773 62,380,565

Total equity 85,096,741 85,103,164
Long term loans and advances 9 412,253 49,796
Liabilities
Deferred taxation 10 14,344 -
Non-current liabilities
28,293,422 25,275,170 Retirement and other service benefit obligations 50,076 50,366

Current assets Lease liabilities 753,626 -

Deferred taxation 10 - 249
Loans, advances and prepayments 11 4,466,701 350,121
803,702 50,615
Receivables 12 654,797 499,462 Current liabilities

Short term investments 13 57,266,555 64,842,059 Trade and other payables 16 2,075,420 1,386,693
Current portion of lease liabilities 275,227 -
Cash and bank balances 14 3,484,311 1,609,160
Provision 26.1 3,243,130 3,243,130
65,872,364 67,300,802 Taxes payable 2,379,973 1,431,589

TOTAL ASSETS 94,165,786 92,575,972 Borrowings 17 - 998,164
Accrued interest / mark-up - 64,357
Unclaimed dividends 18 291,593 298,260
8,265,343 7,422,193
Total liabilities 9,069,045 7,472,808

Contingencies and Commitments 19

TOTAL EQUITY & LIABILITIES 94,165,786 92,575,972

The annexed notes from 1 to 40 form an integral part of these financial statements.

Abdul Samad Dawood Hasnain Moochhala Ghias Khan

Vice Chairman Chief Financial Officer President and Chief Executive

83 84
statement of profit or loss and other comprehensive income statement of changes in equity Annual Report 2019

for the year ended december 31, 2019 for the year ended december 31, 2019
(Amounts in thousand except for earnings per share) Note 2019 2018 (Amounts in thousand) RESERVES
Rupees CAPITAL REVENUE
Remeasurement
Share General of post Unappropriated
Share employment Total
Dividend income 20 12,983,285 10,263,698 Capital premium reserve profit
benefits -
Royalty income 21 1,169,880 968,959 Actuarial loss
Rupees
14,153,165 11,232,657
Administrative expenses 22 (2,673,739) (1,614,207) Balance as at January 1, 2018 5,237,848 13,068,232 4,429,240 (12,656) 60,660,171 83,382,835
11,479,426 9,618,450
Profit for the year - - - - 12,719,875 12,719,875
Other income 23 7,739,298 8,597,203
Other comprehensive loss - - - (65) - (65)
Other operating expenses 24 (2,294,544) (1,390,898) - - - (65) 12,719,875 12,719,810
Operating profit 16,924,180 16,824,755 Transactions with owners
Finance cost 25 (155,659) (148,844) Final cash dividend for the year ended
December 31, 2017 @ Rs. 2.00 per share - - - - (1,047,567) (1,047,567)
Profit before taxation 16,768,521 16,675,911
Interim cash dividends for the year ended
Taxation 26 (2,465,203) (3,956,036) December 31, 2018:
Profit for the year 14,303,318 12,719,875 - 1st interim @ Rs.5.00 per share - - - - (2,618,924) (2,618,924)
Other comprehensive income for the year - 2nd interim @ Rs.7.00 per share - - - - (3,666,495) (3,666,495)
- 3rd interim @ Rs.7.00 per share - - - - (3,666,495) (3,666,495)
Items that will not be reclassified to profit or loss
- - - - (10,999,481) (10,999,481)
- Remeasurement of retirement benefit
obligation - Actuarial loss (net of tax) 29.2.12 (10,416) (65) Balance as at December 31, 2018 5,237,848 13,068,232 4,429,240 (12,721) 62,380,565 85,103,164
Total comprehensive income for the year 14,292,902 12,719,810
Profit for the year - - - - 14,303,318 14,303,318
Other comprehensive loss - - - (10,416) - (10,416)
Rupees
- - - (10,416) 14,303,318 14,292,902
(Restated)

Earnings per share - basic and diluted 27 24.83 22.08 Transactions with owners
Final cash dividend for the year ended
December 31, 2018 @ Rs. 2.00 per share - - - - (1,047,570) (1,047,570)
Bonus shares issued during the year in the
The annexed notes from 1 to 40 form an integral part of these financial statements. ratio of 1 share for every 10 shares held 523,785 - - - (523,785) -
Interim cash dividends for the year ended
December 31, 2019 :
- 1st interim @ Rs.7.00 per share - - - - (4,033,143) (4,033,143)
- 2nd interim @ Rs.8.00 per share - - - - (4,609,306) (4,609,306)
- 3rd interim @ Rs.8.00 per share - - - - (4,609,306) (4,609,306)
523,785 - - - (14,823,110) (14,299,325)

Balance as at December 31, 2019 5,761,633 13,068,232 4,429,240 (23,137) 61,860,773 85,096,741

The annexed notes from 1 to 40 form an integral part of these financial statements.

Abdul Samad Dawood Hasnain Moochhala Ghias Khan Abdul Samad Dawood Hasnain Moochhala Ghias Khan
Vice Chairman Chief Financial Officer President and Chief Executive Vice Chairman Chief Financial Officer President and Chief Executive

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for the year ended december 31, 2019 for the year ended december 31, 2019
(Amounts in thousand) Note 2019 2018 (Amounts in thousand)
Rupees

1. LEGAL STATUS AND OPERATIONS

CASH FLOWS FROM OPERATING ACTIVITIES
1.1 Engro Corporation Limited (the Company), is a public listed company incorporated in Pakistan. Its shares are quoted on Pakistan
Cash utilized in operations 30 (3,443,860) (2,721,115)
Stock Exchange Limited. The Company is a subsidiary of Dawood Hercules Corporation Limited (the Parent Company). The
Royalty received 992,672 830,722
principal activity of the Company, is to manage investments in subsidiary companies, associated companies and joint venture,
Taxes paid (1,527,158) (1,900,523)
engaged in fertilizers, PVC resin manufacturing and marketing, food, energy, development and operations of telecommunication
Retirement and other service benefits paid (90,961) (88,542)
infrastructure, LNG, chemical terminal and storage businesses.
Long term loans and advances - net (23,294) (17,371)
Net cash utilized in operating activities (4,092,601) (3,896,829)
1.2 These financial statements denote the standalone financial statements of the Company in which investments in subsidiaries
have been accounted for at cost less accumulated impairment losses, if any. The consolidated financial statements of the
CASH FLOWS FROM INVESTING ACTIVITIES Company and its subsidiaries have been presented seperately. Details of investments held by the Company in its subsidiaries
have been presented in note 8.
Dividends received 12,983,285 10,623,638
Income on deposits / other financial assets including income 1.3 The business units of the Company include the following:
earned on subordinated loans to subsidiaries 5,665,477 3,800,410
Proceeds from disposal of investments in subsidiary - 4,357,823 Business Unit Geographical Location
Long term investments (2,157,105) (3,480,301)
Loan disbursed to subsidiary companies and joint venture (4,034,676) - Head / Registered Office 7th & 8th floors, The Harbour Front Building, Plot Number HC-3,
Repayment of loan by subsidiary company - 896,542 Block 4, Scheme Number 5, Clifton, Karachi.
Purchase of Treasury bills, Units of Mutual Funds, Fixed income
placements and Pakistan Investment Bonds (61,815,413) (26,894,313) Islamabad Office 22 floor, Ufone Tower Jinnah Avenue, Blue Area, Islamabad.
Proceeds from sale of Treasury bills, Units of Mutual Funds and
maturity of Pakistan Investment Bonds 21,317,566 44,061,443 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Purchases of property, plant and equipment (228,627) (168,674)
Sale proceeds on disposal of property, plant and equipment 98 484
The significant accounting policies applied in the preparation of these financial statements are set out below. These policies have
Net cash (utilized in) / generated from investing activities (28,269,395) 33,197,052
been consistently applied to all the years presented, except for the adoption of new standards as disclosed in note 3.
CASH FLOWS FROM FINANCING ACTIVITIES
2.1 Basis of preparation
Payment of financial charges (147,555) (145,522)
Repayment of Engro Islamic Rupiya Certificates - II (1,000,000) - 2.1.1 These financial statements have been prepared under the historical cost convention as modified by remeasurement of certain
Lease rentals paid (320,212) - financial assets and liabilities at fair value and recognition of certain staff retirement and other services benefits at present value.
Dividends paid (14,305,992) (10,955,386)
Net cash utilized in financing activities (15,773,759) (11,100,908) 2.1.2 These financial statements have been prepared in accordance with the accounting and reporting standards as applicable in
Net (decrease) / increase in cash and cash equivalents (48,135,755) 18,199,315 Pakistan. The accounting and reporting standards applicable in Pakistan comprise of:

Cash and cash equivalents at beginning of the year 54,186,028 35,986,713 - International Financial Reporting Standards (IFRSs) issued by the International Accounting Standards Board (IASB) as
notified under the Companies Act, 2017; and
Cash and cash equivalents at end of the year 31 6,050,273 54,186,028
- Provision of and directives issued under the Companies Act, 2017.

The annexed notes from 1 to 40 form an integral part of these financial statements. Where provisions of and directives issued under the Companies Act, 2017 differ from the IFRSs, the provisions of and directives
issued under the Companies Act, 2017 have been followed.

2.1.3 Initial application of a Standard, Amendment or an Interpretation to existing Standards

a) New Standards, amendments to published approved accounting and reporting standards and interpretations which
are effective during the year:

A number of new or amended standards became applicable for the current reporting period, and the Company had to change
its accounting policies and make adjustments as a result of adopting the following standards:
Abdul Samad Dawood Hasnain Moochhala Ghias Khan
Vice Chairman Chief Financial Officer President and Chief Executive

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(Amounts in thousand) (Amounts in thousand)

- IFRS 9 “Financial Instruments” addresses the classification, measurement and recognition of financial assets and financial 2.2 Property, plant and equipment
liabilities and replaces the related guidance in IAS 39 that relates to the recognition, classification and measurement of
financial assets and financial liabilities, derecognition of financial instruments, impairment of financial assets and hedge These are stated at historical cost less accumulated depreciation and impairment losses, if any, except capital work-in-progress
accounting. It retains but simplifies the mixed measurement model and establishes three primary measurement categories which is stated at cost less impairment losses, if any. Historical cost includes expenditure that is directly attributable to the
for financial assets: amortised cost, Fair Value through Other Comprehensive Income (FVOCI) and Fair Value through acquisition of the items including borrowing costs (note 2.18). The cost of self constructed assets includes the cost of materials
Profit or Loss (FVPL). The basis of classification depends on the entity’s business model and the contractual cash flow and direct labour, any other costs directly attributable to bringing the asset to a working condition for its intended use, and the
characteristics of the financial asset. Investments in equity instruments are required to be measured at fair value through costs of dismantling and removing the items and restoring the site on which they are located. Purchased software that is integral
to the functionality of the related equipment is capitalized as part of that equipment.
profit or loss with the irrevocable option at inception to present changes in fair value in OCI, without subsequent recycling
to profit or loss.
Where major components of an item of property, plant and equipment have different useful lives, they are accounted for as
separate items of property, plant and equipment.
The standard also includes an expected credit losses (ECL) model that replaces the current incurred loss impairment
model. The ECL model involves a three-stage approach whereby financial assets move through the three stages as their Subsequent costs are included in the asset’s carrying amount or recognized as a separate asset, as appropriate, only when
credit quality changes. The stage dictates how an entity measures impairment losses and applies the effective interest rate it is probable that future economic benefits associated with the item will flow to the Company and the cost of the item can be
method. A simplified approach is permitted for financial assets that do not have a significant financing component (e.g. measured reliably. The carrying amount of any component accounted for as a separate asset is derecognized when replaced.
trade receivables). On initial recognition, entities will record a loss equal to the 12 month ECL (or lifetime ECL for trade All other repairs and maintenance are charged to the profit or loss during the financial year in which they are incurred.
receivables), unless the assets are considered credit impaired.
Disposal of asset is recognized when significant risks and rewards incidental to ownership have been transferred to buyers.
For financial liabilities, there are no changes to classification and measurement except for the recognition of changes in own Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and are recognized within
credit risk in other comprehensive income, for liabilities designated at fair value through profit or loss. ‘Other operating expenses / income’ in the profit or loss.

IFRS 9 also relaxes the requirements for hedge effectiveness by replacing the bright line hedge effectiveness tests. It Depreciation is charged to the profit or loss using the straight line method whereby the cost of an operating asset less its estimated
requires an economic relationship between the hedged item and hedging instrument and for the ‘hedged ratio’ to be the residual value is written off over its estimated useful life at rates given in note 5.1. Depreciation on addition is charged from the
month following the month in which the asset is available for use and on disposals upto the preceding month of disposal.
same as the one management actually use for risk management purposes. Impacts of adopting IFRS 9 are disclosed in
note 3.1.
The assets’ residual values, the method of depreciation and useful lives are reviewed and adjusted, if appropriate, at each
reporting date.
- IFRS 15 ‘Revenue from Contracts with Customers’ supersedes IAS 11 ‘Construction Contracts’, IAS 18 ‘Revenue’ and
related interpretations and it applies to all revenue arising from contracts with customers, unless those contracts are in the An asset’s carrying amount is written down immediately to its recoverable amount if the assets carrying amount is greater than
scope of other standards. The standard introduces a single five-step model for revenue recognition with a comprehensive its estimated recoverable amount.
framework based on the core principle that an entity should recognise revenue representing the transfer of promised
goods or services under separate performance obligations under the contract to customer at an amount that reflects the 2.3 Intangible assets - Computer softwares
consideration to which the entity expects to be entitled in exchange for those goods or services. The standard requires
entities to exercise judgement, taking into consideration all of the relevant facts and circumstances when applying each a) Acquired
step of the model to contracts with their customers. The adoption of this standard did not have any material impact on
these financial statements. These are stated at cost less accumulated amortisation and impairment losses, if any.

- IFRS 16 ‘Leases’ - IFRS 16 replaces the previous lease standard: IAS 17 Leases. It will result in almost all leases being Costs associated with maintaining computer software programmes are recognized as an expense when incurred. However, costs
recognised on the statement of financial position, as the distinction between operating and finance leases is removed. that are directly attributable to identifiable software and have probable economic benefits exceeding one year, are recognized as
Under the new standard, an asset (the right to use the leased item) and a financial liability to pay rentals are recognised. an intangible asset. Direct costs include the purchase cost of software (license fee) and related overhead cost.
The only exceptions are short-term and low value leases. The impact of changes introduced by this standard have been
Expenditure which enhances or extends the performance of computer software beyond its original specification and useful
disclosed in note 3.1.
life is recognized as a capital improvement and added to the original cost of the software.
There are other amendments to published approved accounting and reporting standards and interpretations that are Computer software and license cost treated as intangible assets are amortized from the date the software is put to use on
applicable for the financial year beginning on January 1, 2019 but are considered not to be relevant or do not have any a straight-line basis over a period of 4 years.
significant effect on the Company’s financial reporting and operations and, therefore, have not been presented in these
financial statements. b) Internally generated

b) New standards, amendments to published approved and accounting standards and interpretations that are not The cost of an internally generated intangible asset comprises all directly attributable costs necessary to create, produce and
yet effective and have not been early adopted by the Company prepare the asset to be capable of operating in the manner intended by the management. After initial recognition, internally
generated intangible assets are carried at cost less accumulated amortization and impairment losses, if any. These are amortized
There are number of other standards, amendments to the published approved accounting and reporting standards and using the straight-line basis over a period of 5 years. Amortization on addition is charged from the month following the month
interpretations that are not yet effective and have not been early adopted by the Company and, therefore, have not been in which the asset is available for use and on disposals upto the month preceding the month of disposal.
presented in these financial statements.
Expenditure on research (or the research phase of an internal project) is recognized as an expense in the year in which it is incurred.

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Development costs incurred on specific projects are capitalized when all the following conditions are satisfied: 2.7 Financial instruments

a) completion of the intangible asset is technically feasible so that it will be available for use or sale; 2.7.1 Financial assets

Classification, initial recognition and measurement

b) the Company intends to complete the intangible asset and use or sell it;
Consequent to the adoption of IFRS 9, financial assets are classified as financial assets at Amortised Cost, Fair Value through
c) the Company has the ability to use or sell the intangible asset; Other Comprehensive Income (FVOCI) or Fair Value through Profit or Loss (FVPL). The management determines the classification
of financial assets at initial recognition based on the Company’s business model for managing the financial assets and the
d) the intangible asset will generate probable future economic benefits. Among other things this requires that there is a contractual terms of the cash flows.
market for the output from the intangible asset or for the intangible asset itself, or if it is to be used internally, the asset will
be used in generating such benefits; A financial asset is measured at amortised cost if both of the following conditions are met:

e) there are adequate technical, financial and other resources to complete the development and to use or sell the intangible a) the financial asset is held within a business model whose objective is to hold financial assets in order to collect contractual
asset; and cash flows; and

b) the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal
f) the expenditure attributable to the intangible asset during its development can be measured reliably. and interest on the principal amount outstanding.
2.4 Non-current assets (or disposal groups) held-for-sale A financial asset is measured at fair value through other comprehensive income if both of the following conditions are met:

Non-current assets (or disposal groups) are classified as assets held-for-sale if their carrying amount will be recovered principally a) the financial asset is held within a business model whose objective is achieved by both collecting contractual cash flows
through a sale transaction rather than continuing use and a sale is considered highly probable. They are measured at the lower and selling financial assets; and
of their carrying amount and fair value less costs to sell.
b) the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal
and interest on the principal amount outstanding.
An impairment loss is recognised for any initial or subsequent write-down of the asset (or disposal group) to fair value less costs
to sell. A gain is recognised for any subsequent increases in fair value less costs to sell of an asset (or disposal group), but not A financial asset is measured at fair value through profit or loss if it is not measured at amortised cost or at fair value through
in excess of any cumulative impairment loss previously recognised. A gain or loss not previously recognised by the date of the other comprehensive income.
sale of the non-current asset (or disposal group) is recognised at the date of derecognition.
All financial assets are recognised at the time when the Company becomes a party to the contractual provisions of the instrument.
Non-current assets (including those that are part of a disposal group) are not depreciated or amortised while they are classified Financial assets at amortised cost are initially recognised at fair value and are subsequently measured at amortised cost using
as held for sale. Non-current assets classified as held for sale and the assets of a disposal group classified as held for sale are the effective interest method. The amortised cost is reduced by impairment losses, if any. Interest income and impairment losses
presented separately from the other assets in the statement of financial position. The liabilities of a disposal group classified as are recognised in profit or loss. Financial assets carried at FVOCI are initially and subsequently measured at fair value, with gains
held for sale are presented separately from other liabilities in the statement of financial position. and losses arising from changes in fair value recognised in other comprehensive income / (loss). Financial assets carried at FVPL
are initially recorded at fair value and transaction costs are expensed in the statement of profit or loss and other comprehensive
2.5 Investments income, in profit or loss for the period. Realised and unrealised gains and losses arising from changes in the fair value of the
financial assets and liabilities held at FVPL are included in the statement of profit or loss and other comprehensive income in the
Investment in subsidiary, associates and joint venture companies are initially recognized at cost. At subsequent reporting period in which they arise.
dates, the recoverable amounts are estimated to determine the extent of impairment losses, if any, and carrying amounts of
investments are adjusted accordingly. Impairment losses are recognized as an expense. Where impairment losses subsequently Derecognition
reverse, the carrying amounts of the investments are increased to the revised recoverable amounts but limited to the extent of
Financial assets are derecognised when the rights to receive cash flows from the assets have expired or have been transferred
initial cost of investments. A reversal of impairment loss is recognized in the profit or loss.
and the Company has transferred substantially all the risks and rewards of ownership. On derecognition of a financial asset,
in its entirety, the difference between the asset’s carrying amount and the sum of the consideration received and receivable is
2.6 Impairment of non-financial assets
recognised in statement of profit or loss and other comprehensive income.
The carrying amounts of non-financial assets are assessed at each reporting date to ascertain whether there is any indication Impairment of financial assets
of impairment. If such an indication exists, the asset’s recoverable amount is estimated to determine the extent of impairment
loss, if any. An impairment loss is recognized as an expense in the profit or loss. The recoverable amount is the higher of an The Company assesses on a forward looking basis the expected credit losses associated with its debt instruments carried at
asset’s fair value less cost of disposal and value-in-use. Value-in-use is ascertained through discounting of the estimated future amortised cost and FVOCI. The impairment methodology applied depends on whether there as been a significant increase in
cash flows using a discount rate that reflects current market assessments of the time value of money and the risk specific to credit risk.
the assets. For the purpose of assessing impairment, assets are grouped at the lowest levels for which there are separately
identifiable cash flows (cash-generating units). 2.7.2 Financial liabilities

The Company recognises a financial liability in its statement of financial position when, and only when, it becomes party to the
An impairment loss is reversed if there is a change in the estimates used to determine the recoverable amount. An impairment contractual provisions of the instrument. At initial recognition, the Company measures a financial liability at its fair value minus,
loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been in the case of a financial liability not at fair value through profit or loss, transaction costs that are directly attributable to the
determined, net of depreciation or amortization, if no impairment loss had been recognized. acquisition or issue of the financial liability. Subsequently, financial liabilities are stated at amortised cost.

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A financial liability is derecognized when the obligation under the liability is discharged or cancelled or expired. Where an 2.13.1 Current
existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing
liability are substantially modified, such an exchange or modification is treated as a derecognition of the original liability and the The current income tax charge is based on the taxable income for the year calculated on the basis of tax laws enacted or
recognition of a new liability, and the difference in respective carrying amounts is recognized in the statement of profit or loss substantively enacted at the reporting date, and any adjustment to tax payable in respect of previous years.
and other comprehensive income.
2.13.2 Deferred
2.7.3 Offsetting of financial assets and liabilities
Deferred tax is recognized using the liability method, on all temporary differences arising at the reporting date between the tax
Financial assets and liabilities are offset and the net amount reported in the statement of financial position when there is a base of assets and liabilities and their carrying amounts for financial reporting purposes.
legally enforceable right to offset the recognized amounts and there is an intention to settle either on a net basis, or realize
the asset and settle the liability simultaneously. The legally enforceable right must not be contingent on future events and Deferred tax liabilities are recognized for all taxable temporary differences. Deferred tax assets are recognized for all deductible
must be enforceable in the normal course of business and in the event of default, insolvency or bankruptcy of the Company temporary difference recognized to the extent it is probable that future taxable profits will be available against which the assets
or the Counterparty. may be utilized. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer
probable that the related tax benefit will be realized.
2.8 Receivables
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period when the asset is
Receivables are recognized initially at the amount of consideration that is unconditional, unless they contain significant financing
realized or the liability is settled, based on the tax rates and tax laws that have been enacted or substantively enacted at the
component in which case they are recognised at fair value and subsequently measured at amortized cost using effective
reporting date.
interest method less loss allowance.
2.14 Retirement and other service benefit obligations
2.9 Cash and cash equivalents

For the purpose of presentation in statement of cash flows, cash and cash equivalents includes cash in hand, balance with 2.14.1 Defined contribution plans
banks, other short-term highly liquid investments with original maturities of three months or less that are readily convertible to
known amounts of cash and which are subject to insignificant risk of changes in value, and bank overdrafts, if any. A defined contribution plan is a post-employment benefit plan under which an entity pays fixed contribution into a separate entity
and will have no legal or constructive obligation to pay further amounts. Obligations for contributions to defined contribution
2.10 Share capital plans are recognized as an employee benefit expense in profit or loss when they are due. Prepaid contributions are recognized
as an asset to the extent that a cash refund or a reduction in future payments is available.
Ordinary shares are classified as equity and recognized at their face value. Incremental costs directly attributable to the issue
of new shares or options are shown in equity as a deduction, net of tax, from the proceeds. The Company operates:

2.11 Borrowings - a defined contribution provident fund for its permanent employees and permanent employees of its subsidiaries, associates
and joint ventures (here-in-after referred to as Group companies). Monthly contributions are made both by the Company,
Borrowings are initially recognized at fair value, net of transaction costs incurred. Borrowings are subsequently carried at other Group companies and employees to the fund at the rate of 10% of basic salary;
amortized cost. Any difference between the proceeds (net of transaction costs) and the redemption amount is recognized in
profit or loss over the period of the borrowings using the effective interest method.
- a defined contribution pension fund for the benefit of its management employees and management employees of its Group
Borrowings are removed from the statement of financial position when the obligation specified in the contract is discharged, companies. Monthly contributions are made by the Company and other Group companies to the fund at rates ranging from
cancelled or expired. The difference between the carrying amount of a financial liability that has been extinguished or transferred 12.5% to 13.75% of basic salary; and
to another party and the consideration paid, including any non-cash assets transferred or liabilities assumed, is recognised in
profit or loss as other income or finance costs. - a defined contribution gratuity fund for the benefit of management employees and management employees of its Group
companies. Monthly contributions are made by the Company and other Group companies to the fund at the rate of 8.33%
Borrowings are classified as current liabilities unless the Company has an unconditional right to defer settlement of the liability of basic salary.
for at least 12 months after the reporting date.
2.14.2 Defined benefit plans
2.12 Trade and other payables
A defined benefit plan is a post-employment benefit plan other than the defined contribution plan. The Company’s net obligation
Trade and other payables are recognized initially at fair value and subsequently measured at amortized cost using the effective in respect of defined benefit plans is calculated by estimating the amount of future benefit that employees have earned in return
interest method. for their service in current and prior years; that benefit is discounted to determine its present value. The calculation is performed
annually by an independent actuary using the projected unit credit method. Remeasurement gains and losses are recognized in
These are classified as current liabilities if payment is due within one year or less or in the normal operating cycle of the
other comprehensive income.
business, if longer. If not, they are presented as non-current liabilities.

2.13 Income tax The Company operates a defined benefit funded gratuity scheme for its management employees.

The tax expense for the year comprises current and deferred tax. Tax expense is recognized in the profit or loss, except to the Annual provision is also made under a service incentive plan for certain categories of experienced employees to continue in the
extent that it relates to items recognized in other comprehensive income or directly in equity, in which case tax expense is also Company’s employment.
recognized in other comprehensive income or directly in equity, respectively.

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2.14.3 Employees’ compensated absences 3. CHANGES IN ACCOUNTING POLICIES

The Company accounts for compensated absences on the basis of unavailed leave balance of each employee at the end of The Company has applied the following standards for the first time for its annual reporting period commencing January 1, 2019:
the year.
3.1 IFRS 9 “Financial Instruments” (effective for annual periods ending on or after June 30, 2019)
2.15 Provisions This standard replaces the provisions of IAS 39 “Financial Instruments: Recognition and Measurement” that relate to the
recognition, classification and measurement of financial assets and financial liabilities, derecognition of financial instruments,
Provisions are recognized when the Company has a legal or constructive obligation as a result of past events, it is probable that impairment of financial assets and hedge accounting. The adoption of IFRS 9 from January 1, 2019 by the Company
an outflow of resources will be required to settle the obligation and the amount can be reliably estimated. However, provisions has resulted in change in accounting policies. The Company has applied IFRS 9 retrospectively in accordance with IAS
are reviewed at each reporting date and adjusted to reflect current best estimate. 8 “Accounting Policies, Changes in Accounting Estimates and Errors”, however, it has elected not to restate comparative
information as permitted under the transitional provisions of the standard. The reclassifications and the adjustments arising
2.16 Foreign currency transactions and translation from the new impairment rules are, therefore, not reflected in the statement of financial position as at December 31, 2018 and
furthermore have not been recognised in the opening statement of financial position as on January 1, 2019 as the effects were
These financial statements are presented in Pakistan Rupees, which is Company’s functional currency. Foreign currency not material.
transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions.
Foreign exchange gains and losses resulting from the settlement of such transactions, and from the translation of monetary Furthermore, on January 1, 2019, the management has assessed which business models apply to the financial assets held by
assets and liabilities denominated in foreign currencies at year-end exchange rates are recognized in profit or loss, except the Company and has classified its financial instruments into the appropriate IFRS 9 categories as follows:
where such gains and losses are directly attributable to the acquisition, construction or production of a qualifying asset, in
which case, such gains and losses are capitalized as part of the cost of that asset. As at January 1, 2019
Particulars
Original (Under IAS 39) New (Under IFRS 9)
2.17 Revenue recognition
Non-Current financial assets
Revenue is recognized to the extent it is probable that the economic benefits will flow to the Company and the amount of Long term loans and advances Loans and Receivables Amortized Cost
revenue can be measured reliably. Revenue is measured at the fair value of the consideration received or receivable. Revenue
is recognized on the following basis: Current financial assets
Loans and advances Loans and Receivables Amortized Cost
-
Dividend income from investments is recognized when the Company’s right to receive the payment has been Receivables Loans and Receivables Amortized Cost
established.
Short term investments

- Treasury bills Fair value through profit or loss Fair value through other comprehensive income
- Mark-up on deposits and other financial assets is recognized on a time proportion basis on the principal amount
- Pakistan Investment Bonds Fair value through profit or loss Fair value through other comprehensive income
outstanding and at the rate applicable.
- Fixed income placement Held to maturity Amortized Cost

- Term Finance Certificates Available for sale Amortized Cost
- Royalty income from subsidiary and associated companies is recognized on an accrual basis in accordance with the Cash and bank balances Loans and Receivables Amortized Cost
agreements entered therewith.
Current financial liabilities
- Gains and losses arising on sale of investments are included in profit or loss in the year in which they arise. Trade and other payables Amortized Cost Amortized Cost
Borrowings Amortized Cost Amortized Cost
2.18 Borrowing costs Accrued interest / mark-up Amortized Cost Amortized Cost

Borrowing costs are recognized as an expense in the period in which they are incurred except where such costs are directly Moreover, no material differences were noted in prior year figures as a result of applying the new expected credit loss model on
attributable to the acquisition, construction or production of a qualifying asset in which case such costs are capitalized as part the adoption of IFRS 9. The reclassifications of the financial instruments also did not result in any significant changes except
of the cost of that asset. Borrowing costs include exchange differences arising on foreign currency borrowings to the extent that certain short-term investments which were previously classified as fair value through profit or loss are now classified as fair
these are regarded as an adjustment to borrowing costs. value through other comprehensive income. Hence, there was no restatement of opening balances and reserves. Furthermore,
there is no material impact on the statement of profit or loss and other comprehensive income, statement of changes in equity
2.19 Earnings per share and statement of cash flows.

The Company presents basic and diluted earnings per share (EPS) in respect of its ordinary shares. Basic EPS is calculated 3.2 IFRS 16 ‘Leases’ (effective from accounting period beginning on or after January 1, 2019)
by dividing the profit or loss attributable to ordinary shareholders of the Company by the weighted average number of ordinary
Effective January 1, 2019, the Company has adopted IFRS 16, “Leases” which replaces existing guidance on accounting for
shares outstanding during the year. Diluted EPS is determined by adjusting the profit or loss attributable to ordinary shareholders
leases, including IAS 17 “Leases”, IFRIC 4 “Determining whether an Arrangement contains a Lease”, SIC-15 “Operating Leases
and the weighted average number of ordinary shares outstanding for the effects of all dilutive potential ordinary shares.
- Incentive” and SIC-27 “Evaluating the substance of transactions involving the legal form of a Lease”. IFRS 16 introduces a
single, on-balance sheet lease accounting model for lessees. A lessee recognizes a right-of-use asset representing its right-of-
2.20 Dividend and appropriation to reserves use of the underlying asset and a lease liability representing its obligations to make lease payments. Lessor accounting remains
similar to the current standard i.e. lessors continue to classify leases as finance or operating leases. The accounting polices
Dividend and appropriation to reserves are recognized in the financial statements in the period in which these are approved. relating to Company’s right-of-use assets and lease liabilities are as follows:

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(Amounts in thousand) (Amounts in thousand)

Lease liabilities and right-of-use assets Impact on Statement of Financial Position

December 31, January 1,
At the inception of a contract, the Company assesses whether a contract is, or contains, a lease based on whether the 2019 2019
contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. Rupees
Lease terms are negotiated on an individual basis and contain a wide range of different terms and conditions. Right of use assets - increased by 919,857 1,222,538

From January 1, 2019, leases are recognised as right-of-use assets and corresponding liabilities at the date at which Lease liabilities - increased by 1,028,853 1,222,538
the leased assets are available for use by the Company. Current portion of lease liability (275,227) (208,847)

The lease liabilities are initially measured at the present value of the remaining lease payments at the commencement Long term portion of lease liability 753,626 1,013,691
date, discounted using the interest rate implicit in the lease, or if that rate cannot be readily determined, the
Company’s incremental borrowing rate.
Impact on Statement of Profit or loss and other comprehensive income

Lease payments include fixed payments, variable lease payments that are based on an index or a rate, amounts
Year ended
expected to be payable by the lessee under residual value guarantees, the exercise price of a purchase option if
December 31,
the lessee is reasonably certain to exercise that option, payments of penalties for terminating the lease, if the lease
2019
term reflects the lessee exercising that option, less any lease incentives receivable. The extension and termination
options are incorporated in determination of lease term only when the Company is reasonably certain to exercise Rupees
these options.
Increase in finance cost (126,527)
The lease liabilities are subsequently measured at amortised cost using the effective interest method. They are (Increase) / decrease in administrative expenses:
remeasured when there is a change in future lease payments arising from a change in fixed lease payments or - Depreciation on right-of-use assets (302,681)
an index or rate, change in the Company’s estimate of the amount expected to be payable under a residual value - Rent expense 320,212
guarantee, or if the Company changes its assessment of whether it will exercise a purchase, extension or termination Decrease in profit before tax (108,996)
option. The corresponding adjustment is made to the carrying amount of the respective right-of-use asset, or is Decrease in tax 31,609
recorded in profit or loss if the carrying amount of that right-of-use asset has been reduced to zero. Decrease in profit after tax (77,387)

Right-of-use assets are initially measured based on the initial amount of the lease liabilities adjusted for any lease Earnings per share for the year ended December 31, 2019 are Rs. 0.13 per share lower as a result of the adoption of IFRS 16.
payments made at or before the commencement date, plus any initial direct costs incurred and an estimate of costs
to dismantle and remove the underlying asset or to restore the underlying asset or the site on which it is located, less The company has used six months KIBOR plus 2% spread as incremental borrowing rate.
any lease incentive received. The right-of-use assets are depreciated on a straight line method over the lease term
as this method most closely reflects the expected pattern of consumption of future economic benefits. The carrying Practical expedients applied
amount of the right-of-use asset is reduced by impairment losses, if any, and adjusted for certain remeasurements
of the corresponding lease liability. In applying IFRS 16 for the first time, the Company has used the following practical expedients permitted by the standard:

The Company has adopted IFRS 16 retrospectively from January 1, 2019, but has not restated comparatives for the
- the use of a single discount rate to a portfolio of leases with reasonably similar characteristics;
2018 reporting period, as permitted under the specific transitional provisions in the standard.
- the exclusion of operating leases with a remaining lease term of less than 12 months as at January 1, 2019;
On adoption of IFRS 16, the Company recognised lease liabilities which had previously been classified as ‘operating
leases’ under the principles of IAS 17 “Leases”. These liabilities were measured at the present value of the remaining
4. CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS
lease payments, discounted using the lessee’s incremental borrowing rate as of January 1, 2019. The lessee’s
incremental borrowing rate applied to the lease liabilities on January 1, 2019 was 11.8%.
The preparation of these financial statements in conformity with the above requirements requires the use of certain critical
The right-of use assets were measured at the amount equal to the lease liability, adjusted by the amount of prepaid accounting estimates The accounting estimates will by definition, seldom equal the related actual results. It also requires
lease payments recognised in the statement of financial position immediately before the date of initial application, management to exercise its judgment in the process of applying the Company’s accounting policies. Estimates and judgments
accordingly, there is no impact on the opening balances of unappropriated profit as on January 1, 2019. The are continually evaluated and are based on historical experience and other factors, including expectations of future events that
recognised right-of-use assets relates to the office space acquired on rental basis. are believed to be reasonable under the circumstances. Revision to accounting estimates are recognised in the period in which
the estimate is revised and in any future periods affected. The areas involving a higher degree of judgment or complexity, or
The right-of use assets were measured at the amount equal to the lease liability, adjusted by the amount of any areas where assumptions and estimates are significant to the financial statements or that have a significant risk of causing a
prepaid or accrued lease payments relating to that lease recognised in the statement of financial position as at 31 material adjustment to the carrying amounts of assets and liabilities within the next financial year are as follows:
December 2018.

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(Amounts in thousand) (Amounts in thousand)

4.1 Impairment of investments in subsidiaries, associates and joint venture 5.1 Operating assets
Furniture, Vehicles Total
In making estimates of future cash flows from investments in subsidiaries, associates and joint ventures, the management fixture and
considers future dividend stream and an estimate of the terminal value of these investments, which are subject to change. equipment
Rupees
As at January 1, 2018
4.2 Income taxes
Cost 244,398 105,520 349,918
Accumulated depreciation (137,305) (45,871) (183,176)
In making the estimates for current income taxes payable by the Company, the management considers the applicable
Net book value 107,093 59,649 166,742
laws and the decisions / judgments of appellate authorities on certain issues in the past. Accordingly, the recognition
of deferred tax is also made taking into account these judgments and the best estimates of future results of
Year ended December 31, 2018
operations of the Company.
Opening net book value 107,093 59,649 166,742
Additions - transfers from capital
4.3 Provision for retirement and other service benefits obligations
work-in-progress (note 5.2) 219,940 4,550 224,490
Disposals
The present value of these obligations depend on a number of factors that are determined on actuarial basis using a
Cost (874) - (874)
number of assumptions. Further, contributions determination requires assumptions to be made for future outcomes
Accumulated depreciation 564 - 564
which mainly include increase in remuneration, expected long-term return on plan assets and the discount rate used
(310) - (310)
to convert future cash flows to current values. Any changes in these assumptions will impact the carrying amount of
Depreciation charge (note 22) (32,936) (20,485) (53,421)
these obligations. The underlying assumptions are disclosed in note 29.
Net book value 293,787 43,714 337,501
2019 2018
Rupees As at December 31, 2018
5. PROPERTY, PLANT AND EQUIPMENT Cost 463,464 110,070 573,534
Accumulated depreciation (169,677) (66,356) (236,033)
Operating assets (note 5.1) 375,824 337,501 Net book value 293,787 43,714 337,501
Capital work-in-progress (note 5.2) 23,900 177,336
399,724 514,837 Year ended December 31, 2019
Opening net book value 293,787 43,714 337,501
Additions - transfers from capital
work-in-progress (note 5.2) 65,938 67,204 133,142
Adjustments / reclassifications (note 5.4)
Cost (17,566) (106) (17,672)
Accumulated depreciation 973 14,470 15,443
(16,593) 14,364 (2,229)
Disposals / Write-offs (note 5.3)
Cost (11,977) - (11,977)
Accumulated depreciation 9,476 - 9,476
(2,501) - (2,501)

Depreciation charge (note 22) (58,014) (32,075) (90,089)

Net book value 282,617 93,207 375,824

As at December 31, 2019

Cost 499,859 177,168 677,027
Accumulated depreciation (217,242) (83,961) (301,203)
Net book value 282,617 93,207 375,824

Annual rate of depreciation (%) 15 to 20 20 to 25

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(Amounts in thousand) (Amounts in thousand)

5.2 Capital work-in-progress 7. INTANGIBLE ASSETS

Furniture, Advances to Internally Total
fixture suppliers generated Represent various computer softwares which are amortized on straight line basis over a period ranging from 4 to 8 years.
and intangible Movement during the year is as follows:
equipment asset
Rupees
Rupees
Year ended December 31, 2018
As at January 1, 2018
Balance as at January 1, 2018 11,613 108,499 177,274 297,386
Cost 16,460
Additions during the year 11,510 207,813 - 219,323
Accumulated amortization (7,946)
Net book value 8,514
Transferred to:
- operating assets (note 5.1) (23,061) (201,429) - (224,490)
Year ended December 31, 2018
- associated companies - (50,649) - (50,649)
Opening net book value 8,514
- intangible assets (note 7) - (64,234) - (64,234)
Additions - Transfers from capital work-in-progress (note 5.2) 64,234
Balance as at December 31, 2018 62 - 177,274 177,336
Amortization charge (note 22) (14,500)
Net book value 58,248
Year ended December 31, 2019
Balance as at January 1, 2019 62 - 177,274 177,336
As at January 1, 2019
Additions during the year 89,776 138,851 - 228,627
Cost 80,694
Accumulated amortization (22,446)
Transferred to:
Net book value 58,248
- operating assets (note 5.1) (65,938) (67,204) - (133,142)
- intangible assets (note 7) - (71,647) - (71,647)
Year ended December 31, 2019
Opening net book value 58,248
Written-off during the year (note 5.5) - - (177,274) (177,274)
Additions - Transfers from capital work-in-progress (notes 5.2 and 7.1) 71,647
Balance as at December 31, 2019 23,900 - - 23,900
Adjustments / reclassifications (note 5.4)
Cost 17,672
Accumulated depreciation (15,443)
5.3 Disposal / write-offs do not include any asset with book value exceeding Rs. 500.
2,229

Amortization charge (note 22) (21,959)
5.4 Adjustment / reclassification represents transfer to intangible assets at net book value (note 7).
Net book value 110,165

5.5 The Company had recognised an internally generated intangible asset of Rs. 177,274 in prior years in respect of cost incurred
As at December 31, 2019
in development of digital software and other solutions. This amount has been written-off during the year as the management
Cost 170,013
does not foresee that this asset will result in inflow of future economic benefits to the Company.
Accumulated amortization (59,848)
Net book value 110,165
6. RIGHT-OF-USE ASSETS

Year ended December 31, 2019

As at January 1, 2019 - 7.1 This represents Company’s share of cost incurred in respect of One SAP project which is being amortized over a period of
Additions during the year (note 6.1) 1,222,538 8 years.
Depreciation charge (note 6.2 ) (302,681)

As at January 31, 2019 919,857

6.1 This represent right-of-use assets recognized in relation to the office space acquired on rental basis as explained in
note 3.2.

6.2 Depreciation charged on right-of-use assets has been allocated to administrative expenses (note 22) and capital-work-in-
progress (note 5.2) amounting to Rs. 109,182 and Rs. 23,632 respectively.

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(Amounts in thousand) (Amounts in thousand)

8. LONG TERM INVESTMENTS 8.1 Subsidiary companies

2019 2018

2019 2018
Rupees Equity Investment Equity Investment
% held at cost % held at cost
Rupees Rupees
Quoted
Subsidiary companies - at cost (note 8.1) 26,563,727 24,406,622
Engro Fertilizers Limited
Less: Provision for impairment (note 8.1.3) (3,642,407) (3,270,092)
751,312,057 (2018: 751,312,057)
22,921,320 21,136,530
Ordinary shares of Rs. 10 each 56.27 7,519,968 56.27 7,519,968
Joint venture company - at cost
Engro Vopak Terminal Limited
Engro Polymer and Chemicals Limited
45,000,000 (2018: 45,000,000) Ordinary shares
510,733,461 (2018: 510,733,461)
of Rs. 10 each, equity held 50% (2018: 50%) 450,000 450,000
Ordinary shares of Rs. 10 each 56.19 6,685,616 56.19 6,685,616
Associated company - at cost
Unquoted
FrieslandCampina Engro Pakistan Limited (previously Engro Foods Limited)
Engro Energy Limited
306,075,948 (2018: 306,075,948)
36,476,000 (2018: 36,476,000)
Ordinary shares of Rs. 10 each,
Ordinary shares of Rs. 10 each 100 3,106,700 100 3,106,700
equity held 39.9% (2018 39.9%) 3,060,759 3,060,759

Engro Eximp Agriproducts (Private) Limited

Others - at cost
- 190,860,900 (2018: 190,860,900)
Arabian Sea Country Club Limited
Ordinary shares of Rs. 10 each 100 4,927,000 100 4,927,000
500,000 (2018: 500,000) Ordinary shares,
- 10,000,000 (2018: 10,000,000) Redeemable
of Rs. 10 each, equity held 6% (2018: 6%) 5,000 5,000
Preference shares of Rs.10 each 100 100,000 100 100,000
26,437,079 24,652,289
5,027,000 5,027,000
Elengy Terminal Pakistan Limited
113,493,731 (2018: 113,493,731)
Ordinary shares of Rs. 10 each 56 1,134,938 56 1,134,938

Engro Infiniti (Private) Limited

- 58,613,140 (2018: 153,140) Ordinary shares of
Rs. 10 each (note 8.1.1) 100 1,117,000 100 532,400
- Advance against issue of share capital - 400,000
1,117,000 932,400
Engro Eximp FZE
- 1 (2018: nil) Ordinary shares of
AED 1,000,000 each (note 8.1.2) 100 1,972,505 -
26,563,727 24,406,622

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(Amounts in thousand) (Amounts in thousand)

8.1.1 During the year, the Company has made investment in Engro Infiniti (Private) Limited, a wholly owned subsidiary, 10. DEFERRED TAXATION
through subscription of 18,460,000 ordinary shares of Rs. 10 each at par. Further, during the year, Engro Infiniti
2019 2018
(Private) Limited has issued 40,000,000 shares of Rs. 10 each in respect of the advance against subscription of Rupees
shares paid by the Company for investments made during the year ended December 31, 2018. Debit / (Credit) balances arising on account of:
- accelerated depreciation allowance 251 (165)
8.1.2 During the year, the shareholders of the Company in its Extraordinary General Meeting held on May 28, 2019, - right of use of asset (51,893) -
authorised the Company to acquire 100% of the issued and paid-up share capital of Engro Eximp FZE (UAE) from - lease liability 58,043 -
Engro Fertilizers Limited, a subsidiary Company, against an amount of Rs. 1,757,280 (subject to adjustments at the - provision for retirement benefits 7,943 26
date of closing of the transaction). On July 17, 2019, the Company acquired Engro Eximp FZE for a consideration - amortization of transaction costs incurred on borrowings - (110)
of Rs. 1,972,505.
14,344 (249)

8.1.3 Provision for the year amounting to Rs. 372,175 represents impairment recognised in Company’s investment in
11. LOANS, ADVANCES AND PREPAYMENTS
Engro Infiniti (Private) Limited (EInfiniti). This is primarily due to loss recognised by EInfiniti’s subsidiary company
Engro Digital Limited (EDigital) on its internally generated intangible relating to development of digital and other
Loans and advances, considered good
related solution / products for various industries resulting in decline in net assets value of EDigital.

- Current portion of long term loans and advances to

9. LONG TERM LOANS AND ADVANCES executives and other employees (note 9) 38,082 43,792
- Considered good - Loan to subsidiary company (note 11.1) 3,780,435 -
2019 2018
Rupees - Loan to joint venture (note 11.2) 200,153 -
4,018,670 43,792
Long term loans and advances to executives
Prepayments 448,031 306,329
and other employees (note 9.1) 111,172 93,588
4,466,701 350,121
Less: Current portion shown under current assets (note 11) 38,082 43,792
73,090 49,796
Subordinated loan to subsidiary (note 9.2) 339,163 -
412,253 49,796 11.1 Represents subordinated loan availed during the year by Engro Infiniti (Private) Limited, a subsidiary company, pursuant to
agreement entered into on June 26, 2019.The loan carries mark-up at the rate of 6 months KIBOR plus 2.00% per annum
9.1 Reconciliation of the carrying amount of loans payable on monthly basis. The loan is repayable on May 17, 2020.
and advances to executives and other employees
11.2 Represents subordinated loan extended during the year to Engro Vopak Terminal Limited, a joint venture, pursuant to agreement
Balance as at January 1 93,588 63,714 entered into on December 30, 2019.The loan carries mark-up at the rate of 6 months KIBOR plus 0.50% per annum payable
Add: Disbursements 123,602 89,028 in one lump sump payment at the time of repayment of loan. The loan is repayable on June 30, 2020.
Less: Repayments / Amortization (106,018) (59,154)
Balance as at December 31 111,172 93,588 11.3 The carrying values of the loans and advances are neither past due nor impaired.

9.2 Represents subordinated loan availed during the year by Engro Energy Limited, a subsidiary company, pursuant to agreement
entered into on December 28, 2018. The total facility available under this agreement amounts to USD 21,400 (PKR equivalent).
The loan carries mark-up at the rate of 6 months KIBOR plus 2.00% per annum payable on quarterly basis. The loan is
repayable on December 28, 2023.

9.3 The maximum amount outstanding at the end of any month during the year ended December 31, 2019 from executives
aggregated to Rs. 111,172 (2018: Rs. 93,588).

9.4 Loans given to employees and executives are in accordance with the Company policy, return free and are repayable within
a period of 1 to 5 years. Further, as at year-end, these include loans given to key management personnel aggregating to Rs.
1,085 (2018: Rs. 7,036)

9.5 The carrying values of the loans and advances are neither past due nor impaired.

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(Amounts in thousand) (Amounts in thousand)

12. RECEIVABLES 12.3 As at December 31, 2019, receivables from related parties aggregating to Rs. 111,184 (2018:Rs. 73,831) were past due but
2019 2018 not impaired. The ageing analysis of these receivables is as follows:
Rupees 2019 2018
Considered good Rupees
Due from:
- Parent Company - Dawood Hercules Corporation Limited - 798 Upto 3 months 11,340 34,318
- Direct / Indirect subsidiary companies 3 to 6 months 52,198 12,412
- Engro Elengy Terminal (Private) Limited 25,022 11,592 More than 6 months 47,646 27,101
- Engro Energy Limited 24,914 34,341 111,184 73,831
- Enfrashare (Private) Limited 3,955 -
- Engro Energy Services Limited 414 - 12.4 During the year, financial advisor, Evercore Partner International LLP paid an amount of Rs. 108,172, accordingly, the provision
- Engro Eximp FZE - 29,026 there against has been reversed (note 23).
- Engro Eximp Agriproducts (Private) Limited - 22,043
- Engro Fertilizers Limited (note 12.1) 272,424 138,237 12.5 As at December 31, 2019 receivables aggregating to Rs. 190,318 and Rs. 543,613 were ‘past due and impaired’ and ‘neither
past due nor impaired’ respectively.
- Engro Infiniti (Private) Limited 7,525 32,857
- Engro Polymer and Chemicals Limited 52,573 17,029
13. SHORT TERM INVESTMENTS
- Engro Powergen Qadirpur Limited 20,143 14,578
- Engro Powergen Thar (Private) Limited 14,839 15,746 Fair value through other comprehensive income
- Engro Power Investments International B.V. 47,646 51,846 - Treasury bills (note 13.1) 22,609,639 52,896,953
- Engro Power Services Limited 30 - - Pakistan Investment Bonds (note 13.2) 95,859 7,699,778
- Engro Thar Foundation Limited 2,762 - 22,705,498 60,596,731
- Elengy Terminal Pakistan Limited - 726 Fair value through profit or loss
- Mutual fund units (note 13.3) 27,372,021 -
- Joint venture
- Engro Vopak Terminal Limited 24,510 6,253 Amortised cost
- Fixed income placements (note 13.4) 2,607,685 33,418
- Associated companies - Term Finance Certificates (note 13.5) 4,581,351 4,211,910
- FrieslandCampina Engro Pakistan Limited 7,189,036 4,245,328
(previously Engro Foods Limited) - 7,764 57,266,555 64,842,059
- Sindh Engro Coal Mining Company Limited 6,192 16,498
13.1 Investment in Treasury bills carries interest at rates ranging from 12.60% to 13.91% are due to mature by November
- Thar Power Company Limited 1,576 2,428
5, 2020.
504,525 401,762
- Engro Foundation 779 -
13.2 Pakistan Investment Bonds carry mark-up at the rate of 9% (2018: 6.2%) per annum and will mature by September
- Retirement benefit funds 30,625 15,688 19, 2022.
- FrieslandCampina Pakistan Holdings B.V. - 41,460
- Others 118,868 40,552 13.3 The details of investment in mutual funds are as follows:
Considered doubtful
Due from: Number of units Amount in
- FrieslandCampina Pakistan Holdings B.V. 143,366 143,366 Rupees
- Financial advisors 46,952 155,124 NBP Money Market Fund 169,802,899 1,678,960
Less: Provision against doubtful receivables (note 12.4) (190,318) (298,490) UBL Liquidity Plus Fund 1,978,915 200,000
- - UBL Special Savings Plan - V 62,548,162 6,514,698
654,797 499,462 NIT Money Market Fund 107,881,849 1,054,912
ABL Special Savings Plan - II 341,605,685 3,547,336
ABL Special Savings Plan - III 400,000,000 4,113,840
12.1 This primarily includes receivable in respect of royalty fee amounting to Rs.315,445 (2018: 138,237) and is net off miscellaneous
MCB Cash Management Optimizer 73,471,959 3,922,514
amounts payable to Engro Fertilizers Limited. Meezan Rozana Amdani Fund 4,103,658 205,183
Alfalah GHP Cash Fund 11,540,685 6,134,578
12.2 The maximum amount due from related parties at the end of any month during the year aggregated to Rs. 535,929 (2018: 1,172,933,812 27,372,021
Rs. 468,622).
13.4 These represent placements with banks and carry interest ranging from 6% to 17% per annum and will mature by May 3, 2020.

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(Amounts in thousand) (Amounts in thousand)

13.5 In 2017, the Company subscribed to privately placed, unsecured and non-convertible zero-coupon Term Finance 15.5 As at December 31, 2019, Dawood Hercules Corporation Limited and associated companies held 214,469,810 and
Certificates (TFCs) issued by Engro Energy Limited, a wholly owned subsidiary company. These TFCs were issued at 39,438,015 (2018: 194,972,555 and 33,825,286) ordinary shares in the Company, respectively.
a discounted value of Rs. 3,560,000 and have a tenure of one year, extendable annually upon mutual consent upto a
maximum of 48 months. Under the terms of TFCs, the Company is entitled to redeem these TFC’s at any time during 16. TRADE AND OTHER PAYABLES
the term at a price to be computed using an effective interest rate of 8.77% per annum. 2019 2018
Rupees
14. CASH AND BANK BALANCES
Creditors 71,647 90,684
2019 2018 Accrued liabilities 1,312,410 870,836
Rupees
Withholding tax payable 122,953 1,046
Cash at banks:
Zakat payable - 117
- in saving accounts
Payable to :
conventional (note 14.1) 3,383,355 1,600,385 - Dawood Hercules Corporation Limited 50,869 -
islamic (note 14.2) 12,660 275 - Engro Digital Limited 135,874 53,251
- in current accounts 87,596 8,110 - Engro Eximp FZE 64,457 -
3,483,611 1,608,770 - Engro Eximp Agriproducts (Private) Limited 27,745 -
Cash in hand 700 390 - Engro Fertilizers Limited - 327,306
3,484,311 1,609,160 - FrieslandCampina Pakistan Holdings B.V. (note 16.2) 173,308 -
- Defined contribution gratuity fund 5,493 45
14.1 These carry return ranging from 8.0% to 11.25% (2018: 5.0% to 8.0%) per annum. - Defined benefit gratuity fund - non-management employees 64 80
Current portion of retirement and other
14.2 These are shariah compliant bank balances and carry profit at rates ranging from 6.0% to 8.5% (2018: 4.5% to 6.0%) service benefit obligations (note 16.1) 68,544 38,386
per annum. Others 42,056 4,942
2,075,420 1,386,693

15. SHARE CAPITAL

16.1 Includes liability towards defined benefit gratuity fund amounting to Rs. 43,406 (2018: Rs. 22,952).
15.1 Authorized capital

2019
2018 2019 2018 16.2 Includes an amount recognised in respect of sales tax receivables of FrieslandCampina Engro Pakistan Limited, matter as more
(Number of shares) Rupees fully explained in note 24.2.
700,000,000 550,000,000 Ordinary shares of Rs. 10 each (note 15.3) 7,000,000 5,500,000
17. BORROWINGS - Secured
15.2 Issued, subscribed and paid-up capital 2019 2018
Rupees
2019 2018 2019 2018
(Number of shares) Rupees
Engro Islamic Rupiya Certificate II (notes 17.1) - 998,164
197,869,803 197,869,803 Ordinary shares of Rs. 10 each
fully paid in cash 1,978,699 1,978,699
17.1 During the year, the Company has repaid the entire principal balance of Engro Islamic Rupiya Certificates - II to the certificate
378,293,427 325,914,951 Ordinary shares of Rs. 10 each
holders, along with profit thereon upon completion of the tenure of five years.
issued as fully paid bonus shares (note 15.4) 3,782,934 3,259,149
576,163,230 523,784,754 5,761,633 5,237,848
17.2 The facilities for short term running finance arranged from various banks, which represents the aggregate sale price of the
mark-up arrangements, amount to Rs. 2,000,000 (2018: Rs. 1,500,000). The facilities are primarily secured against ranking
15.3 During the year, the Company increased its authorized share capital from Rs. 5,500,000 to Rs. 7,000,000.
floating charge over all present and future loans, advances, receivables and other current assets (excluding investments)
of the Company. Additionally, the facilities are also secured through a pledge over shares of Engro Fertilizers Limited and
15.4 During the year, the Company issued bonus shares in the ratio of 1 share for every 10 shares held. Accordingly, 52,378,476
FrieslandCampina Engro Pakistan Limited. The rate of mark-up on these finances are based on one month KIBOR plus 1% per
shares were issued.
annum (2018: one month KIBOR plus 1% per annum). The corresponding purchase prices are payable on various dates by
December 2020. During the year, the Company has not utilized these facilities.

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(Amounts in thousand) (Amounts in thousand)

18. UNCLAIMED DIVIDENDS 19.1.4 Engro Elengy Terminal (Private) Limited has issued Corporate guarantees, Performance guarantees and SBLCs
amounting to US Dollars 20,700 (2018: US Dollars 20,700) , US Dollars 10,000 (2018: US Dollars 10,000) and
Includes unclaimed dividend amounting to Rs. 215,179 (2018: Rs. 157,589) outstanding for more than 3 years from US Dollars 5,000 (2018: US Dollars 5,000) respectively. These guarantees have been secured by the Company by
the date of declaration. Such unclaimed dividend is payable to the Federal Government as per the Act, subject to pledging Treasury Bills amounting to Rs. 5,650,000. During the year, Treasury Bills amounting to Rs. 1,970,000
fulfilment / clarification on certain pre-conditions specified in the Act. were partially released against Corporate guarantees and were transferred to assets of Engro Elengy Terminal
(Private) Limited.
19. CONTINGENCIES AND COMMITMENTS

2019 2018
Rupees 19.1.5 The Company, as Sponsor Support, has permitted a bank to create ranking charge over receivables of the Company
19.1 Contingencies against the Stand By Letter of Credit (SBLC) facility amounting to US Dollars 4,673 and Rs. 411,949 granted to
Engro Elengy Terminal (Private) Limited.
Corporate guarantees issued in favour
of subsidiary companies: 19.1.6 In the year 2017, FrieslandCampina Engro Pakistan Limited (previously Engro Foods Limited) (FCEPL), an associated
company, received an order from the Competition Commission of Pakistan, imposing a penalty of Rs. 62,293 in
- Engro Powergen Qadirpur Limited (note 19.1.1) 1,553,500 1,391,000 respect of FCEPL’s marketing activities relating to one of its products. FCEPL has filed an appeal against the
aforementioned order. As per the terms of the Share Purchase Agreement with FrieslandCampina Pakistan Holding
Bank guarantees (note 19.1.2) - 1,535,000 B.V. (FCP), the Company is required to reimburse 51% of the amount together with all reasonable cost and expenses
1,553,500 2,926,000 to FCP in case any such penalty materializes. The Company, based on the opinion of the legal advisor, is confident of

a favourable outcome of the appeal, and accordingly, no provision has been recognized in these financial statements
19.1.1 Represents Corporate guarantee amounting to US Dollars 10,000 issued to a bank to open Debt Service Reserve
in this respect.
Account (DSRA) letter of credit in favour of the subsidiary company’s senior long term lenders.

19.1.2 In the years 2014 and 2016, the Company divested some of its shareholding in Engro Fertilizers Limited (EFert). The 19.1.7 During 2016, the Company entered into a Share Purchase Agreement (SPA) with FrieslandCampina Pakistan Holding
Company had held such shareholding in EFert since 2010 and is of the view that capital gain on the sale of such B.V. (FCP) for the sale of 47.1% of the total issued shares of FrieslandCampina Engro Pakistan Limited (previously
securities do not attract any income tax. However, the Company was informed by the National Clearing Company of Engro Foods Limited) (FCEPL). In accordance with the terms of the SPA, the Company is required to pay to FCP, an
Pakistan Limited (NCCPL) that their clearing system shall deduct capital gain tax on such disposal and NCCPL shall amount equivalent to 47.1% of any tax liability (as defined in the SPA) together will all reasonable costs and expenses
deposit the same with the tax authorities. The Company had obtained stays there against from High Court of Sindh incurred, in case any tax contingency materializes. The Company, based on the opinion of FCEPL’s tax and legal
and had also provided bank guarantees amounting to Rs. 1,535,000 in this respect in favour of Nazir of High Court advisors, is confident of favourable outcomes in respect of various tax matters being contested by FCEPL, and
of Sindh. During the year, the matter was decided in favour of the Company by the High Court of Sindh, ordering the accordingly no provision has been recognized in these financial statements in this respect.
release of the aforementioned bank guarantees.
19.1.8 Pursuant to the Finance Act, 2017 and the Finance Act, 2018, section 5A ‘Tax on undistributed reserves’ of the
19.1.3 Following are the details of treasury bills pledged by the Company in favour of Engro Energy Limited (EEL):
Income Tax Ordinance, 2001 was substituted by ‘Tax on undistributed profits’ whereby for tax year 2017 to 2019, a

tax has been imposed at the rate of 5% of accounting profit-before-tax, on every public company, that derives profit
- The Company has pledged Treasury Bills amounting to Rs. 2,700,000, against the Standby Letters of Credit (Equity
for a tax year but does not distribute at least 20% of its after-tax-profits within six months of the end of the tax year,
SBLCs) provided by EEL, a subsidiary company, through National Bank of Pakistan amounting to US Dollars 12,598
(2018: US Dollars 12,598) and US Dollars 138 (2018: US Dollars 17,827) for its equity commitments related to the Sindh through cash.
Engro Coal Mining Company Limited (SECMC), its associated company, and Engro Powergen Thar (Private) Limited
(EPTL), its subsidiary company, in favour of the Intercreditor Agent (Habib Bank Limited) and the Project Companies (i.e. The Company has obtained a stay on the levy of aforesaid tax from the Sindh High Court, based on the grounds
SECMC and EPTL). Equity SBLCs expire on earlier of (i) June 30, 2023; and (ii) fulfilment of sponsor obligations under that this tax is applicable on the accounting profit-before-tax, that does not represent real income which can be
Sponsor Support Agreements. taxed under the law and that the requirement to distribute profits or pay tax, amounts to an interference in corporate
actions and implies amendment to the relevant company laws, which give shareholders the discretion to approve
- The Company has pledged Treasury Bills amounting to Rs 4,250,000, against a Standby Letter of Credit (Put Option dividends. Furthermore, it is the contention of the Company that such an amendment to company laws could not
SBLC) provided by EEL, a subsidiary company, through Allied Bank Limited amounting to US Dollars 21,070 (2018: have been made through a money bill.
Dollars 21,070) in favour of the Put Option Fronting Bank (Habib Bank Limited). The Put Option SBLC has been furnished
to meet sponsor obligations under Sponsor Support Agreement (Put Option SSA) and expires on earlier of (i) January 31,
2029; and (ii) fulfilment of sponsor obligations pursuant to Put Option SSA.

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(Amounts in thousand) (Amounts in thousand)

The Company, based on the opinion of its legal advisor is confident that it has a reasonable case in favour of 22.2 Includes Rs.158,010 (2018: Rs. 93,346) in respect of staff retirement benefits.
the Company.
22.3 Depreciation on right-of-use assets is net-off recoveries from subsidiaries amounting to Rs. 109,182 in respect of their share
For other tax related matters refer note 26. in rent of office premises.

19.2 Commitments 23. OTHER INCOME

2019 2018
Rupees 2019 2018
Rupees
19.2.1 Commitments in respect of capital expenditure 405,491 230,687 Financial assets
Income on deposits / other financial assets (note 23.1) 7,607,516 4,489,499

20. DIVIDEND INCOME Non financial assets

Service charges (note 23.2) 14,855 12,413
Subsidiary companies: Gain on disposal of property, plant and equipment (note 5.3) 20 174
- Engro Fertilizers Limited 10,518,369 8,264,433 Capital gain on disposal of investment in
- Engro Polymer and Chemicals Limited 459,660 706,835 subsidiary company - 3,849,369
- Elengy Terminal Pakistan Limited 700,256 - Reversal of provision for WWF - 204,229
Reversal of provision for doubtful receivables (note 12.4) 108,173 -
Joint venture: Others 8,734 41,519
- Engro Vopak Terminal Limited 1,305,000 1,170,000 7,739,298 8,597,203

Associated company: 23.1 Includes Rs. 694,448 (2018: Rs. 356,984) in respect of profit earned on Term Finance Certificates and subordinated loans to
- FrieslandCampina Engro Pakistan Limited - 122,430 subsidiary companies.
12,983,285 10,263,698
23.2 Represent service charges recovered against corporate guarantees extended by the Company on behalf of subsidiary
21. ROYALTY INCOME company.

The Company has granted Engro Fertilizers Limited, a subsidiary company, the right to use trade marks and copy rights of the 24. OTHER OPERATING EXPENSES
Company for marketing of fertilizer products under a licensing agreement effective January 1, 2010. 2019 2018
Rupees
Auditors’ remuneration (note 24.1) 15,433 3,373
22. ADMINISTRATIVE EXPENSES Write-off of property, plant and equipment 179,697 -
2019 2018 Legal and professional charges 422,211 127,601
Rupees
Donations (note 37) 35,400 80,250
Salaries, wages and staff welfare (notes 22.1 and 22.2) 1,079,933 556,738 Human resource development (note 24.3) 814,624 658,883
Staff recruitment, training and safety 71,178 20,630 Research and business development 272,883 129,954
Purchased services 48,041 52,882 Charge against indemnity to subsidiary company - 338,837
Repairs and maintenance 12,361 4,079 Provision for impairment on long term investments (note 8.1.3) 372,315 -
Advertising, promotion and corporate branding 562,461 152,017 Others (note 24.2) 181,981 52,000
Rent, rates and taxes 160,142 179,384 2,294,544 1,390,898
Communication, stationery and other office expenses 115,309 57,949
Travelling 72,920 34,330 24.1 Auditors’ remuneration
Depreciation (note 5.1) 90,089 53,421
Fee for:
Depreciation on right-of-use assets (notes 6 and 22.3) 169,867 -
- audit of annual financial statements 610 550
Amortization (note 7) 21,959 14,500
- review of half yearly financial statements 486 230
Directors’ fee, remuneration and travelling 262,767 479,594
- review of statement of compliance with Code of Corporate Governance 50 45
Other expenses 6,712 8,683 Certifications and other advisory / assurance services 8,978 1,160
2,673,739 1,614,207 Taxation services 5,000 721
Reimbursement of expenses 309 667
22.1 Salaries, wages and other staff welfare is net-off recoveries from subsidiaries amounting to Rs. 703,465 (2018: Rs. 552,252) 15,433 3,373
in accordance with the expense sharing agreements.

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(Amounts in thousand) (Amounts in thousand)

24.2 Under the Share Purchase Agreement (SPA) with FrieslandCampina Pakistan Holding B.V. (FCP), the Company is required 26.2 In 2016, an amendment was introduced in the Income Tax Ordinance 2001 (the Ordinance) via the Finance Act 2016 imposing
to pay FCP an amount equal to 51% of the sales tax receivable of FrieslandCampina Engro Pakistan Limited (FCEPL), an tax on inter-corporate dividends which were previously exempt to companies designated as a Group under section 59B of the
associated company, recognized in the financial years 2012 to 2016, if it is not recovered by FCEPL within six years after it is Ordinance. Subsequently, the exemption on inter-corporate dividend was restored through amendment in the Ordinance vide
recognized. Accordingly, on prudence basis, the Company has recognized its liability under the SPA equivalent to 51% of the Tax Laws (Second Amendment) Ordinance, 2019. However, in respect of the dividends received before the said amendment,
sales tax receivable pertaining to FCEPL being sales tax short recovered till December 31, 2019. the Company had challenged the imposition of tax on inter-corporate dividends in the High Court of Sindh and has been
granted a stay in this respect.
24.3 Represents professional consultancy charges incurred under an agreement, for the development of human resource strategies
and the Engro Leadership Academy. 26.3 Following is the position of the Company’s open tax assessments:

26.3.1 In 2013, the income tax department, in respect of the tax year 2011, determined additional income tax liability of Rs. 218,790
25. FINANCE COST
and raised a demand of Rs. 139,575 whereby the Deputy Commissioner Inland Revenue (DCIR) - Audit disallowed allocation
2019 2018
Rupees of expenses against interest income and apportioned expenses against dividend income and capital gains. The Company filed
an appeal with the Commissioner Inland Revenue (CIR) - Appeals who maintained the apportionment of expenses against
Interest / mark-up on borrowings - Shariah compliant mode 70,644 135,000 dividend income and capital gains but allowed the allocation of administrative expenses against interest income, thereby
Interest expense on lease liability (note 25.1) 70,627 - reducing the income tax liability to Rs. 184,191 and revised the demand to Rs. 104,976. The Company paid Rs. 53,250
Amortization of transaction costs 1,836 3,323 there against and simultaneously filed an appeal against the CIR - Appeals decision with Appellate Tribunal Inland Revenue
Others 12,552 10,521 (ATIR) which granted a stay to the Company. During 2014, the ATIR issued an order whereby the aforementioned appeal was
155,659 148,844 remanded back to the assessing officers for denovo proceedings, thereby accepting the Company’s contention. The income
tax department, in response there against, had filed an appeal with ATIR, which was dismissed during 2016.
25.1 Interest expense is net-off recoveries from subsidiaries amounting to Rs. 45,395 (2018: Nil) in respect of their share in rent of
26.3.2 In 2014, the income tax department in respect of tax year 2012, amended the assessment and raised an additional demand of
office premises. Rs. 250,773 on similar grounds as above. The Company filed an appeal against the said order with CIR - Appeals, who based
on ATIR’s order for tax year 2011, has remanded back the order to assessing officers for denovo proceedings.
26. TAXATION
2019 2018
Rupees 26.3.3 During 2015, in respect of pending tax assessments for tax year 2011 and tax year 2012, the Company received notices of
Current demand amounting to Rs. 105,955 and Rs. 250,773, respectively, whereby the Deputy / Additional Commissioner Inland
- for the year: Revenue - Audit again disallowed allocation of expenses against interest income and apportioned expenses against dividend
- current charge 2,475,542 3,119,580 income and capital gains. The Company filed appeals there against with the CIR - Appeals and also obtained stays from
- provision for super tax (note 26.1) - 375,636
the High Court of Sindh from initiating any recovery proceedings in respect of both tax years. During 2016, in respect of tax
2,475,542 3,495,216
year 2011 and tax year 2012, the CIR - Appeals accepted the Company’s plea and annulled the order passed by the DCIR.
In response, the DCIR filed appeals before the ATIR for rectification of the orders passed by the CIR - Appeals for both tax
- for prior years:
years, which were subsequently dismissed. In 2017, the Company has reversed excess provision of Rs. 168,896 in respect
- provision for super tax (note 26.1) - 512,857
of tax years 2011 and 2012 consequent to denovo proceedings after which the amended orders were passed in respect
- others - (62,191)
of the aforementioned tax years, wherein, the Commissioner has maintained the classification of income from interest on
- 450,666
bank deposits and from subordinated loans as “income from other sources”. In response, the Company has filed an appeal
2,475,542 3,945,882
Deferred (10,339) 10,154 challenging this contention and the Company is confident of favourable decision based on earlier ATIR judgment. During the
2,465,203 3,956,036 year, the CIR - Appeals has passed the orders dated January 10, 2019 for both the years in relation to company’s appeal and
has again remanded the matter to the assessing officer for denovo proceedings.
26.1 Represents provision for ‘Super Tax for rehabilitation of temporarily displaced persons’, levied through Finance Act, 2018
retrospectively on the income for the financial year ended December 31, 2017 and 2018. The Company had challenged the 26.3.4 During 2017, the income tax department in respect of the tax year 2015, determined an additional income tax liability of Rs.
levy in the High Court of Sindh and has been granted a stay in this respect. The Company, based on the opinion of its legal 128,400, whereby, the Additional Commissioner Inland Revenue (ACIR) - Audit has levied tax on inter-corporate dividends,
advisor, believes that there is a reasonable case in Company’s favour. However, based on prudence, the Company had made super tax including on exempt income, the effects of classification of ‘Interest Income’ as “Income from Business” as well as
provision for Super Tax for the tax year 2018 and 2019. During the year, through Finance Supplementary Act, 2019, the levy not allowing the adjustment of the minimum tax paid under section 113(1)(c) of the Ordinance.
of Super Tax has been abolished from financial year ended December 31, 2019 onwards for companies other than banking
companies. During the year, the CIR(A) vide order dated May 6, 2019 has maintained the matter relating to taxation of intercorporate
dividend, super tax under section 4B, the classification of the interest income and carry forward of minimum tax for adjustment
In addition, to above the company had also recognised provision for super tax relating to year ended December 31, 2014 to whereas the rectificatory matters including the levy of super tax on exempt income was remanded back. The Company has
December 31, 2016 amounting to Rs. 2,354,637 (2018: Rs. 2,354,637). preferred appeal before ATIR on all issues adjudicated against it. The Company, based on advice of its tax consultant, is
confident that these matters will be decided in favour of the Company. However, on prudence, the Company has recorded
provision against super tax.

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(Amounts in thousand) (Amounts in thousand)

26.3.5 In 2017, the ACIR through order dated June 23,2017 amended the return for the tax year 2016 creating tax demand of Rs 28. REMUNERATION OF CHIEF EXECUTIVE, DIRECTORS AND EXECUTIVES
1,484,903 mainly on account of tax levied on inter-corporate dividend, super tax including on exempt income and disallowance
on account of allocation of expenses to dividend and capital gains including minimum tax paid under section 113 of the The aggregate amounts for remuneration, including all benefits, to chief executive, directors and executives of the Company
Ordinance. The CIR(A) while disposing off the Company’s appeal maintained the order of ACIR with respect to certain issues are given below:
which were further contested before the ATIR. During the year, the ATIR in its order dated July 31, 2019 has annulled the order 2019 2018
of ACIR and validated the exemption on intercorporate dividend as well as the non-applicability of super tax on such exempt Directors Executives Directors Executives
income whereas the issues relating to the levy of super tax under section 4B and the carry forward of minimum have been Chief Others Chief Others
linked to the pending decisions of the Sindh High Court (where the matter is separately being contested by the company) and Executive Executive
the carry forward under section 113(1)(c) has been linked to the decision of the Supreme Court in the case of another taxpayer. Rupees

Against the order dated June 23, 2017, the Company had filed an application for rectification. The ACIR through rectified order Managerial remuneration 95,771 - 1,052,126 86,672 - 867,880
dated August 29, 2017 reduced the demand to Rs 1,084,733. Through the said order, the ACIR accepted the Company’s Retirement benefits funds - - 99,037 - - 71,327
contention relating to various matters except the issue of allocation of expenses to capital gains. The Company contested this Fees - 86,907 - - 80,893 -
matter in appeal before the CIR(A) who has maintained the order of ACIR through order dated December 18, 2018. During the Directors emoluments - - - - 310,500 -
year, the Company filed an appeal before the ATIR against the CIR(A) order. Other benefits 26 - 8,897 70 - 9,601
Total 95,797 86,907 1,160,060 86,742 391,393 948,808
26.4 Relationship between tax expense and accounting profit Number of persons
including those who
The tax on the Company’s profit before tax differs from the theoretical amount that would arise using the Company’s applicable worked part of the year 1 9 133 1 12 103
tax rate as follows:
28.1 The Company also provides certain household items for use of some employees and Chief Executive. Cars are also provided

2019 2018
Rupees for use of certain employees and directors. In addition, certain directors of the Company are also entitled for travelling benefits
in respect of which Rs. 139,697 (2018: Rs. 40,729) have been incurred.
Profit before tax 16,768,521 16,675,911
28.2 Premium charged during the year in respect of directors indemnity insurance policy, purchased by the Company, amounts to
Tax calculated at the rate of 29% (2018: 29%) 4,862,871 4,836,014
Rs. 676 (2018: Rs. 570).
Effect of Super tax of current year - 375,636
Effect of applicability of different tax rate on: 28.3 The above remuneration of executives is stated before accounting for the impact of recoveries from subsidiaries in accordance
- Dividend (2,541,048) (1,436,918) with the expense sharing agreements.
- Capital gain 111,718 (279,079)
Prior year tax charge - 450,666 29. RETIREMENT BENEFITS
Others 31,662 9,717
Tax charge for the year 2,465,203 3,956,036 29.1 Defined benefit gratuity plan

The Company faces the following risks on account of its gratuity plan:
27. EARNINGS PER SHARE
Final salary risk - The risk that the final salary at the time of cessation of service is greater than what the Company has assumed.
As at December 31, 2019, there is no dilutive effect on the basic earnings per share of the Company. Earnings per share is Since the benefit is calculated on the final salary, the benefit amount would also increase proportionately.
based on following:
2019 2018 Asset volatility - Most assets are invested in risk free investments of 3, 5 or 10 year Special Savings Certificates, Regular Income
Rupees Certificates, Defence Savings Certificates or Government Bonds. However, investments in equity instruments is subject to
Profit for the year 14,303,318 12,719,875 adverse fluctuations as a result of change in the market price.

(Number of shares) Discount rate fluctuation -  The plan liabilities are calculated using a discount rate set with reference to corporate bond yields.
(Restated) A decrease in corporate bond yields will increase plan liabilities, although this will be partially offset by an increase in the value
Weighted average number of
of the current plans’ bond holdings.
ordinary shares (in thousand) 576,163 576,163
Investment risks - The risk of the investment underperforming and not being sufficient to meet the liabilities. This risk is
Earning per share - Basic and Diluted 24.83 22.08 mitigated by closely monitoring the performance of investment.

Risk of insufficiency of assets - This is managed by making regular contribution to the Fund as advised by the actuary.

In addition to above, the gratuity plan exposes the Company to longevity risk i.e. the members survive longer than the
expectation used in determining the obligation.

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(Amounts in thousand) (Amounts in thousand)

Defined Benefit
29.2 Valuation results 29.2.7 Principal actuarial assumptions used in the actuarial valuation Gratuity Plan
2019 2018
________________%________________
The latest actuarial valuation of the defined benefit gratuity plan was carried out as at December 31, 2019, using the Projected
Unit Credit Method. Details of the defined benefit plan are as follows: Discount rate 11.25 12.75
Expected per annum rate of return on plan assets 11.25 12.75
29.2.1 Statement of financial position reconciliation
Expected per annum rate of increase in future salaries 11.25 12.75
Defined Benefit
Gratuity Plan 29.2.8 Plan assets comprise of the following

2019 2018 2019 2018
Rupees
Rupees % Rupees %

Present value of defined benefit obligation 58,898 73,787

Fixed income instruments 12,418 78 33,763 66
Fair value of plan assets (15,866) (51,209)
Equity instruments 3,520 22 15,902 31
Deficit 43,032 22,578
Others (including cash) (72) 0 1,544 3
Payable to defined contribution fund 374 374 15,866 100 51,209 100
Net liability recognized in the statement of financial position 43,406 22,952
29.2.9 The expected return on plan assets was determined by considering the expected returns available on the assets underlying
the current investment policy. Expected yields on fixed interest investments are based on gross redemption yields as at the
29.2.2 Movement in net liability recognized reporting date.

Net liability at beginning of the year 22,952 18,345 29.2.10 Historical information
Charge for the year 5,784 4,516 2019 2018 2017 2016 2015
Remeasurement loss recognized in Rupees
Other comprehensive income 14,670 91
Net liability at end of the year 43,406 22,952 Present value of defined
benefit obligation (58,898) (73,787) (77,464) (72,738) (71,486)
29.2.3 Movement in present value of defined Fair value of plan assets 15,866 51,209 59,493 72,781 54,889
benefit obligation Payable to Defined contribution
gratuity fund (374) (374) (374) (374) (374)
As at beginning of the year 73,787 77,464 Deficit (43,406) (22,952) (18,345) (331) (16,971)
Current service cost 3,072 3,174
Interest cost 8,807 5,578
Remeasurement loss / (gain) recognized in 29.2.11 Expected future cost for the year ending December 31, 2020 is Rs. 7,320.
Other comprehensive income 12,611 (1,404)
Benefits paid during the year (39,379) (11,025) 29.2.12 Remeasurement recognized in Other
As at end of the year 58,898 73,787 Comprehensive Income
Defined Benefit
29.2.4 Movement in fair value of plan assets Gratuity Plan
2019 2018
Rupees
As at beginning of the year 51,209 59,493
Expected return on plan assets 6,095 4,237
Loss / (Gain) from change in experience adjustments 12,611 (1,404)
Benefits paid during the year (39,379) (11,026)
Remeasurement of obligation 12,611 (1,404)
Remeasurement loss recognized in Other comprehensive income (2,059) (1,495)
As at end of the year 15,866 51,209
Actual return on plan assets (4,061) (3,085)
29.2.5 Charge for the year Expected return on plan assets 6,095 4,237
Difference in opening fair value of plan assets 25 343
Current service cost 3,072 3,174 Remeasurement of plan assets 2,059 1,495
Net interest cost 2,712 1,342 14,670 (91)
5,784 4,516 Tax impact at 29% (2018: 29%) (4,254) 26
Remeasurement of retirement benefit obligation - net of tax 10,416 (65)

29.2.6 Actual return on plan assets 4,061 3,085

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(Amounts in thousand) (Amounts in thousand)

29.2.13 Demographic assumptions Defined Benefit 30.1 Working capital changes

Gratuity Plan 2019 2018
Rupees
2019 2018
Rupees
Mortality rate SLIC (2001-05)-1 SLIC (2001-05)-1 (Increase) / Decrease in current assets
Rate of employee turnover Heavy Heavy - Loans, advances, deposits and prepayments (416,580) (11,804)
- Other receivables (net) 210,586 (147,006)
29.2.14 Sensitivity analysis
(205,994) (158,810)
The impact of 1% change in following variables on defined benefit obligation is as follows: Increase in current liabilities
Increase in Decrease in - Trade and other payables including other service benefits (net) 658,569 267,411
Assumption Assumption 452,575 108,601
Rupees
Discount rate 56,597 61,339 31. CASH AND CASH EQUIVALENTS
Long term salary increases 61,316 56,337
Short term investments (note 13) 2,565,962 52,576,868
29.2.15 Maturity profile
Defined Benefit Cash and bank balances (note 14) 3,484,311 1,609,160
Gratuity Plan 6,050,273 54,186,028
Time in years
(Rupees)
32. FINANCIAL INSTRUMENTS BY CATEGORY
1 3,177 2019 2018
2 6,529 Rupees
3 1,855
4 37,122 - Financial assets measured at amortized cost
5-10 67,525 Long term loans 412,253 49,796
11-15 9,054
Loans and advances 4,018,670 43,792
16-20 -
Receivables 624,172 483,774
Weighted average duration (years) 3.9 Short term investments 7,189,036 4,245,328
Cash and bank balances 3,484,311 1,609,160
29.3 Defined contribution plans
15,728,442 6,431,850
An amount of Rs. 111,766 (2018: Rs. 88,830) has been charged during the year in respect of defined contribution plans - Financial assets measured at fair value
maintained by the Company. through other comprehensive income
Treasury bills 22,609,639 52,896,953
30. CASH UTILIZED IN OPERATIONS
2019 2018 Pakistan Investment Bonds 95,859 7,699,778
Rupees
22,705,498 60,596,731
Profit before taxation 16,768,521 16,675,911 - Financial assets measured at fair value through profit or loss

Adjustment for non-cash charges and other items:

Depreciation (note 22) 90,089 53,421 Mutual fund units 27,372,021 -
Amortization (note 22) 21,959 14,500
Depreciation on right-of-use assets (note 22) 169,867 - Financial liabilities
(Gain) / Loss on disposal of property, plant and equipment (note 23) (20) (174)
- Financial liabilities measured at amortized cost
Write-off of property, plant and equipment (note 24) 179,697 -
Provision for retirement and other service benefits 106,159 107,468
Reversal of provision against WWF (note 23) - (204,229) Lease liabilities 1,028,853 -
Income on deposits / other assets (note 23) (7,607,516) (4,543,431) Trade and other payables 1,878,366 1,347,142
Capital gain on disposal of investments in subsidiaries (note 23) - (3,849,369)
Accrued interest / mark-up - 64,357
Dividend income (12,983,285) (10,263,698)
Royalty income (1,169,880) (968,959) Borrowings - 998,164
Financial charges 155,659 148,844 2,907,219 2,409,663
Provision for impairment on long term investments (note 8.1.3) 372,315 -
Working capital changes (note 30.1) 452,575 108,601
(3,443,860) (2,721,115)

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(Amounts in thousand) (Amounts in thousand)

33. FINANCIAL RISK MANAGEMENT

2019 2018
Rupees
33.1 Financial risk factors
Long term loans 412,253 49,796
The Company’s activities expose it to a variety of financial risks: market risk (including currency risk, interest rate risk and other Loans and advances 4,018,670 43,792
price risk), credit risk and liquidity risk. The Company’s overall risk management programme focuses on having cost efficient Receivables 512,988 409,943
funding as well as to manage financial risk to minimize earnings volatility and provide maximum return to shareholders. Short term investments 57,266,555 64,842,059
Bank balances 3,483,611 1,608,770
Risk management is carried out by the Company’s Finance and Planning department under policies approved by the 65,694,077 66,954,360
Senior Management.
The credit quality of receivables can be assessed with reference to their historical performance with no or negligible defaults in
a)
Market risk
recent history, however, no losses incurred. The credit quality of Company’s bank balances and short term investments can be
i)
Currency risk
assessed with reference to external credit ratings as follows:
Currency risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in
foreign exchange rates.
Bank Rating agency Rating
The Company has given guarantees in favour of its subsidiary companies amounting to US Dollars 10,000 (2018: US Long Term Short Term
Dollars 177,078). The devaluation / revaluation of currency will only impact contingent liabilities and the impact on post
tax profit for the year is Nil. Allied Bank Limited PACRA AAA A1+
Askari Bank Limited JCR-VIS AA+ A-1+
ii) Interest rate risk Bank Al-Falah Limited PACRA AA+ A1+
Bank Al-Habib Limited PACRA AA+ A1+
Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes
Faysal Bank Limited JCR-VIS AA A-1+
in market interest rates. The Company is exposed to interest rate risk on balances maintained with banks and loans given
Habib Bank Limited JCR-VIS AAA A-1+
to subsidiary companies. Habib Metropolitan Bank Limited PACRA AA+ A1+
JS Bank Limited PACRA AA- A1+
As at December 31, 2019, if interest rate on bank accounts / loans given to subsidiary companies had been 1% higher MCB Bank Limited PACRA AAA A1+
/ lower with other variables held constant, post tax profit for the year would have been higher / lower by Rs. 21,688. Meezan Bank Limited JCR-VIS AA + A-1+
National Bank of Pakistan Limited JCR-VIS AAA A-1+
As at December 31, 2019, if interest rate on Treasury Bills / Pakistan Investment Bonds had been 1% higher / lower Soneri Bank Limited PACRA AA- A1+
with other variables held constant, post tax profit for the year would have been higher / lower by Rs. 394,341. Standard Chartered Bank (Pakistan) Limited PACRA AAA A1+
United Bank Limited JCR-VIS AAA A-1+
iii) Other price risk Citi Bank N.A Moody Aa3 P-1
Other price risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes
in market prices (other than those arising from currency risk or interest rate risk), whether those changes are caused by c) Liquidity risk
factors specific to the individual financial instrument or its issuer, or factors effecting all similar financial instruments traded Liquidity risk represents the risk that the Company will encounter difficulties in meeting obligations associated with financial
in the market. The Company is exposed to price risk on its mutual fund investments. liabilities.

b) Credit risk The Company’s liquidity management involves projecting cash flows and considering the level of liquid assets necessary to
Credit risk represents the risk of financial loss being caused if counter party fails to discharge an obligation. meet these, monitoring statement of financial position liquidity ratios against internal and external regulatory requirements
and maintaining debt financing plans.
Credit risk arises from deposits with banks and financial institutions, loans and advances, deposits, bank guarantees and
other receivables. The credit risk on liquid funds and mutual fund securities is limited because counter parties are financial These objectives are achieved by maintaining sufficient cash and marketable securities.
institutions with a reasonably high credit rating. The Company maintains an internal policy to place funds with commercial
banks / mutual funds having a minimum short term credit rating of A1 / AM3. Investment in Treasury bills and Pakistan The table below analyses the Company’s financial liabilities into relevant maturity groupings based on the remaining year
Investment Bonds is government guaranteed. at the reporting date to contractual maturity dates. The amounts disclosed in the table are the contractual undiscounted
cash flows.
The Company monitors the credit quality of its financial assets with reference to historical performance of such assets
and available external credit ratings. The carrying values of financial assets which are neither past due nor impaired are
as under:

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(Amounts in thousand) (Amounts in thousand)

2019 2018 - Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (i.e. as
prices) or indirectly (i.e. derived from prices) (level 2); and
Maturity Maturity Maturity Maturity
upto after Total upto after Total
one year one year one year one year - Inputs for the asset or liability that are not based on observable market data (level 3).
Rupees
Level 1 Level 2 Level 3 Total
Financial liabilities Rupees
Lease Liabilities 275,227 753,626 1,028,853 - - - As at December 31, 2019
Trade and other payables 1,878,366 - 1,878,366 1,347,142 - 1,347,142 Fair value through other comprehensive income
Accrued interest / mark-up - - - 64,357 - 64,357 - Treasury Bills - 22,609,639 - 22,609,639
Borrowings - - - 998,164 - 998,164 - Pakistan Investment Bonds (PIBs) - 95,859 - 95,859
2,153,593 753,626 2,907,219 2,409,663 - 2,409,663 - 22,705,498 - 22,705,498
Fair value through profit or loss
33.2 Capital risk management - Mutual fund units - 27,372,021 - 27,372,021

The Company’s objectives when managing capital are to safeguard the Company’s ability to continue as a going concern in As at December 31, 2018
order to provide returns for share holders and benefit for other stake holders and to maintain an optimal capital structure to
Fair value through profit or loss
reduce the cost of capital.
- Treasury Bills - 52,544,368 - 52,544,368
- Pakistan Investment Bonds (PIBs) - 7,699,778 - 7,699,778
The Company manages its capital structure and makes adjustments to it in the light of changes in economic conditions. To
maintain or adjust the capital structure, the Company may adjust the dividend payment to shareholders or issue new shares. - 60,244,146 - 60,244,146

The management seeks to maintain a balance between higher returns that might be possible with higher levels of borrowings Level 2 fair values have been determined on the basis of PKRV rates and closing Net Asset Values for government securities
and the advantages and security afforded by a sound capital position. and Mutual Fund Units respectively.


2019 2018 There were no transfers amongst the levels during the year. Further, there were no changes in the valuation techniques during
Rupees the year.

The proportion of borrowings to equity at the year end was: 34. CONTRIBUTORY RETIREMENT FUNDS

Total Borrowings 1,028,853 998,164 The investments out of the contributory retirement funds have been made in accordance with the provisions of Section 218 of
Total Equity 85,096,741 85,103,164 the Companies Act, 2017 and the conditions specified there under.
86,125,594 86,101,328
35. NUMBER OF EMPLOYEES
Gearing ratio 1.19% 1.16% Number of employees as at Average number of employees
December 31, December 31, December 31, December 31,
2019 2018 2019 2018
The Company finances its operations through equity, borrowings and management of working capital with a view to maintaining
an appropriate mix between various sources of finance to minimize risk.
Management employees 224 129 177 125
33.3 Fair value estimation

The carrying value of all financial assets and liabilities reflected in the financial statements approximate their fair values.

The table below analyses financial instruments carried at fair value by valuation method. The different level have been defined
as follows:

- Quoted prices (unadjusted) in active markets for identical assets or liabilities (level1);

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(Amounts in thousand) (Amounts in thousand)

36. RELATED PARTIES 36.2 Transactions with related parties

36.1 Following are the details of associated, undertakings and other related parties with whom the Company has arrangement / Details of transactions with related parties during the year, other than those which have been disclosed elsewhere in these
agreement or have during the year: financial statements, are as follows:

S.No Name of Related Party Direct Shareholding % Relationship

2019 2018
Rupees
1 Dawood Hercules Corporation Limited 37.22% Holding Company
Parent Company
2 Engro Eximp Agriproducts (Private) Limited 100.00% Subsidiary
Dividend paid 5,322,751 4,094,424
3 Engro Energy Limited 100.00% Subsidiary
4 Engro Infiniti (Private) Limited 100.00% Subsidiary Bonus share issued 194,973 -
5 Engro Fertilizers Limited 56.27% Subsidiary Reimbursements 138,422 12,214
6 Engro Polymer and Chemicals Limited 56.19% Subsidiary
7 Elengy Terminal Pakistan Limited 56.00% Subsidiary Subsidiary companies
8 Engro Eximp FZE 100.00% Subsidiary Purchases and services 1,323,017 1,068,787
9 Engro Digital Limited N/A Indirect subsidiary Mark-up from subsidiaries 329,252 17,334
10 Engro Elengy Terminal (Private) Limited N/A Indirect subsidiary Disbursement of loan to subsidiaries 3,834,676 -
11 Engro Power Investments International B.V - Netherlands N/A Indirect subsidiary Repayment of loan by subsidiaries - 896,542
12 Engro Powergen Qadirpur Limited N/A Indirect subsidiary Dividend received 11,678,285 8,971,267
13 Engro Powergen Thar (Private) Limited N/A Indirect subsidiary Unwinding of discount on TFCs 369,442 339,650
14 Engro Vopak Terminal Limited 50.00% Joint Venture Royalty income 1,169,880 968,959
15 Friesland Campina Engro Pakistan Limited (previously Engro Food Limited) 39.90% Associated Company Reimbursements 546,099 772,480
16 Engro Foundation N/A Associated Entity Investments made 2,157,105 3,480,310
17 Sindh Engro Coal Mining Company Limited N/A Associated Company
18 Mr. Ghias Khan N/A Key Management Personnel/Director Associated companies
19 Mr. Hasnain Moochhala N/A Key Management Personnel
Purchases and services 337,075 428,243
20 Mr. Faiz Chapra N/A Key Management Personnel
Dividend received - 122,430
21 Mr. Hussain Dawood 0.69% Director
Donations 35,400 30,000
22 Mrs. Kulsum Dawood 0.52% Spouse of Director
Interest on deposit - 18
23 Mr. Mohammad Abdul Aleem N/A Director
24 Mrs. Humera Aleem N/A Spouse of Director Reimbursements 20,996 53,845
25 Mr. Abdul Samad Dawood N/A Director Dividend paid 987,826 759,137
26 Mrs. Ayesha Dawood N/A Spouse of Director Bonus share issued 36,132 -
27 Mr. Shahzada Dawood 0.43% Director
28 Mr. Khawaja Iqbal Hassan N/A Director Joint venture
29 Mr. Waqar Ahmed Malik N/A Director Services rendered 68,832 51,905
30 Ms. Henna Inam N/A Director Dividend received 1,305,000 1,170,000
31 Mr. Rizwan Diwan N/A Director Reimbursements 6,003 13,778
32 Mr. Raihan Merchant N/A Director Mark-up on loan 153 -
33 Dawood Industries (Private) Limited N/A Common Directorship Disbursement of loan 200,000 -
34 Patek (Private) Limited 6.24% Common Directorship
35 Overseas Investors Chamber of Commerce and Industry N/A Common Directorship Others
36 Inbox Business Technologies Private Limited N/A Common Directorship Remuneration of key management personnel 520,839 338,281
37 Karachi School for Business & Leadership N/A Common Directorship Reimbursements to key management personnel 35,835 20,871
38 The Dawood Foundation N/A Common Directorship Profit on Engro Islamic Rupiya Certificate 19,504 18,118
39 The Pakistan Business Council N/A Common Directorship
Dividend paid 264,262 178,991
40 Meezan Bank Limited N/A Common Directorship
Contribution to staff retirement benefit funds 113,545 82,650
41 Dawood Corporation (Private) Limited 0.60% Common Directorship
Bonus share issued 6,076 -
42 Engro Corporation Provident Fund N/A Post Employement Benefits
Directors’ Fee 86,907 80,893
43 Engro Corporation Limited DC Gratuity Fund N/A Post Employement Benefits
44 Engro Corporation Limited DC Pension Fund N/A Post Employement Benefits Directors’ Emoluments - 310,500
45 Engro Corporation Limited DB Gratuity Fund N/A Post Employement Benefits

127 128
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(Amounts in thousand) (Amounts in thousand)

36.3 Details of subsidiary companies incorporated outside Pakistan with whom the Company had transaction or arrangements in 38.3 The Board of Directors of Engro Fertilizers Limited, a subsidiary company, in its meeting held on February 7, 2020 has proposed
place are as follows: a final cash dividend of Rs. 2 per share for the year ended December 31, 2019, amounting to Rs. 2,670,599 of which the
proportionate share of the Company amounts to Rs. 1,502,624.
Engro Power International Holding B.V. (EPIH) Engro Eximp FZE (EEF)
These financial statements do not include the effects of the aforementioned dividend income, which will be accounted for in the
Registered address Blaak 40, 3011 TA Rotterdam, Netherlands BCW JAFZA 18 & 19, Office No 110, UAE
financial statements for the year ending December 31, 2020 once the proposed dividends are approved in the Annual General
Meetings of respective companies.
Country of incorporation Netherlands UAE
38.4 The Board of Directors of the Company in its meeting held on February 21, 2020 has proposed a final cash dividend of Rs.1
Chief Executive Officer Robert - Jan - Vgrut Nadir Salar Qureshi
per share for the year ended December 31, 2019 amounting to Rs. 576,163 for approval of the members at the Annual General
Meeting to be held on April 7, 2020.
Percentage of holding of
the Company 100% 100%
These financial statements do not include the effect of the proposed dividends , which will be accounted for in the financial
(indirect) (Direct)
statements for the year ending December 31, 2020.
37. DONATIONS
39. CORRESPONDING FIGURES
37.1 Donations include the following in which directors are interested:
39.1 Corresponding figures and balances have been rearranged and reclassified, wherever necessary, for the purpose of comparison,

Name of Director Interest in Donee Name of Donee 2019 2018 the effects of which are not material.
Rupees
Ghias Khan Chairman, Board 40. DATE OF AUTHORIZATION FOR ISSUE
of Trustees Engro Foundation 35,400 30,000
These financial statements were authorized for issue on February 21, 2020 by the Board of Directors of the Company.
37.2 The name of donees to whom donation amount exceeds Rs. 500 are:

Name of Donees

Supreme Court of Pakistan Diamer Basha Dam Fund - 50,000

Engro Foundation 35,400 30,000
35,400 80,000

38. NON-ADJUSTING EVENT AFTER REPORTING DATE

38.1 The Board of Directors of Engro Polymer & Chemicals Limited, a subsidiary company, in its meeting held on February 4, 2020
has proposed a final cash dividend of Rs. 0.2 per share for the year ended December 31, 2019, amounting to Rs. 181,785 of
which the proportionate share of the Company amounts to Rs. 102,147.

38.2 The Board of Directors of Engro Vopak Terminal Limited, a joint venture company, in its meeting held on January 31, 2020 has
proposed a final cash dividend of Rs. 6 per share for the year ended December 31, 2019, amounting to Rs. 540,000 of which
the proportionate share of the Company amounts to Rs. 270,000.

Abdul Samad Dawood Hasnain Moochhala Ghias Khan

Vice Chairman Chief Financial Officer President and Chief Executive

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- Auditor’s Report to the Members
- Consolidated Financials
 independent auditor’s report
Annual Report 2019

To the members of Engro Corporation Limited

Report on the Audit of the Consolidated Financial Statements

Opinion

We have audited the annexed consolidated financial statements of Engro Corporation Limited and its subsidiaries (the Group), which S.No. Key audit matters How the matter was addressed in our audit
comprise the consolidated statement of financial position as at December 31, 2019, and the consolidated statement of profit or loss,
the consolidated statement of comprehensive income, the consolidated statement of changes in equity and the consolidated statement 2. Provision in respect of Gas Infrastructure
of cash flows for the year then ended, and notes to the consolidated financial statements, including a summary of significant accounting Development Cess
policies and other explanatory information.
(Refer note 26.1 to the consolidated financial statements) Our audit procedures included the following:
In our opinion, consolidated financial statements give a true and fair view of the consolidated financial position of the Group as
at December 31, 2019, and of its consolidated financial performance and its consolidated cash flows for the year then ended in As at December 31, 2019, the Group carries a provision - obtaining an understanding of the background facts
accordance with the accounting and reporting standards as applicable in Pakistan. of Rs. 18,944 million in respect of Gas Infrastructure pertaining to provision recorded in respect of GIDC
Development Cess (GIDC) relating to EFert. through meetings with the management and reviewing
Basis for Opinion of the minutes of the meetings of those charged with
EFert has obtained ad-interim stay orders against the governance;
We conducted our audit in accordance with International Standards on Auditing (ISAs) as applicable in Pakistan. Our responsibilities GIDC Act, 2015 from the Sindh High Court which has
under those standards are further described in the Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements restrained the gas supplying companies from charging - reading correspondence of EFert with the regulatory
section of our report. We are independent of the Group in accordance with the International Ethics Standards Board for Accountants’ and / or recovering the cess under the GIDC Act, 2015 authorities and EFert’s external legal counsel;
Code of Ethics for Professional Accountants as adopted by the Institute of Chartered Accountants of Pakistan (the Code), and we have till the final decision on this matter. In a separate case,
fulfilled our other ethical responsibilities in accordance with the Code. We believe that the audit evidence we have obtained is sufficient Peshawar High Court passed a judgment on May 31, - obtaining confirmation from external legal counsel in
and appropriate to provide a basis for our opinion. 2017 validating the new GIDC Act, against which EFert respect of the current developments in the case including
has filed a petition in the Supreme Court of Pakistan, their assessment of the potential outcome of the matter;
Key Audit Matters
which is pending to date along with petitions of various and
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the consolidated other companies raised on the grounds similar to those
financial statements of the current period. These matters were addressed in the context of our audit of the consolidated financial being contested by EFert. - assessing the adequacy of provisioning and the
statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. appropriateness of related disclosures made in the
EFert’s Management believes that the provision recorded consolidated financial statements in accordance with the
Following are the key audit matters: as at December 31, 2019 in respect of GIDC represents accounting and reporting standards.
the management’s current best estimate of the potential
S.No. Key audit matters How the matter was addressed in our audit liability. Due to significance of the amounts involved in
the aforementioned matter and the legal forum at which
1. Income tax and Sales tax provisions and
this matter is currently pending, the ultimate outcome
contingencies
and the resultant accounting in the consolidated financial
statements is subject to the exercise of significant
(Refer notes 30.2.1, 30.2.3, 30.2.7, 30.3.5 to 30.3.7, 39.1 Our audit procedures included the following:
judgement which may change over time as new facts
and 39.2 to the consolidated financial statements)
- obtaining and reviewing details of the pending tax matters emerge and the legal case progresses.
Engro Corporation Limited and its subsidiary company and discussing the same with the management;
Engro Fertilizers Limited (EFert) have recognized We have therefore considered this to be a key audit
provisions and has disclosed contingent liabilities in - circularizing confirmations to the external advisors for their matter.
respect of certain income tax and sales tax matters, which views on matters being handled by them;
3. Receivables from National Transmission and
are pending adjudication before various appellate and
legal forums. - involving internal tax professionals to assist us in assessing Despatch Company (NTDC)
management’s conclusions on contingent tax matters and
evaluating the consistency of such conclusions with the (Refer notes 14.1 and 16.3 to the consolidated financial Our audit procedures included the following:
Provisions and contingencies require management
views of management and external advisors engaged by statements)
to make judgements and estimates in relation to the
these companies; - assessing whether revenue and related receivables have
interpretation of laws, statutory rules, regulations, and Engro Powergen Qadirpur Limited (EPQL) has following been recognized in accordance with the applicable
the probability of outcome and financial impact, if any, balances receivable from National Transmission and
- reviewing correspondence of these companies with the accounting policies;
on these Companies in respect of such provisions and Despatch Company (NTDC) as at December 31, 2019:
contingencies. relevant tax authorities including judgments or orders
passed by the competent authorities in relation to the - testing whether invoices raised by EPQL during the year
• Trade debts amounting to Rs. 9,807 million which include
Due to significance of amounts involved, inherent issues involved or matters which have similarities with the were in accordance with the requirements of the Power
overdue debts of Rs. 7,698 million; and
uncertainties with respect to the outcome of these matters issues involved; Purchase Agreement (PPA);
and use of significant management judgement and • Delayed payment charges amounting to Rs. 2,485 million
estimates to assess the same including related financial - checking mathematical accuracy of the calculations which include overdue receivables of Rs. 1,463 million. - circularizing confirmation of receivables from the Central
impacts, we have considered provisions and contingent underlying the provisions, if any; and Power Purchasing Agency (CPPA-G);
liabilities relating to income tax and sales tax matters In view of the significant delay in settlement, materiality
- assessing whether the disclosures made in the of the amount involved and consequential impact of the - making inquiries from the management and reading
relating to these companies as a key audit matter. minutes of the meetings of the Board of Directors and
consolidated financial statements adequately discloses the delay in settlement on liquidity and operations of EPQL,
matters in accordance with the applicable accounting and we have considered this to be an area of higher risk and a Board Audit Committee to ascertain actions been taken
reporting standards. Key Audit Matter. by them for the recoverability of these amounts;

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S.No. Key audit matters How the matter was addressed in our audit S.No. Key audit matters How the matter was addressed in our audit
- reviewing Implementation Agreement and assessing These loan agreements are complex in nature and - testing the Polymer segment’s status of compliance with
whether receivables are secured against guarantee from involve the use of significant judgments in determination the covenants contained in the financing agreements and
the Government of Pakistan and whether any impairment of appropriate treatment in the consolidated financial ensuring that appropriate waivers had been obtained for
is required to be recognized there against; statements in line with the applicable accounting and any actual breaches;
reporting standards.
- assessing the availability of finance with the Company to - recomputing borrowing costs incurred during the year
fund its business operations through committed credit Due to the significance of the amounts involved and the as per the terms contained in the respective agreements
lines obtained from various financial institutions; and significant judgements exercised by the management with lenders and assessing whether these were eligible for
in arriving at appropriate conclusions on accounting capitalization;
- assessing adequacy of the related disclosures in the treatment with respect to complex terms of the
consolidated financial statements in accordance with the agreement, we have considered this to be a key audit - obtaining legal opinion from lawyer on terms of the
applicable accounting and reporting standards. matter. agreements which involved significant management’s
judgements;
4. Capitalisation of items in property, plant and
equipment and capital work-in-progress - circulating requests to lenders for confirmation of terms
of the outstanding agreement including but not limited
(Refer notes 4 and 48.2 to the consolidated financial Our audit procedures amongst others, included the to applicable mark-up rates, repayment terms, amounts
statements) following: outstanding under the facilities and any breaches of
covenants; and
During the year ended December 31, 2019, the Group’s - obtaining an understanding of the Group’s process with
Polymer and Power and Mining segments have incurred respect to capital expenditure incurred and testing controls - assessing the adequacy of the related disclosures made in
a significant amount of capital expenditure in respect of relevant to such process; the consolidated financial statements, in accordance with
its various expansion projects in order to enhance the the applicable accounting and reporting standards.
efficiency and production capacity. - testing the cost capitalized with the relevant underlying
documentation; 6. Application of IFRS 16
The incurrence of capital expenditure involves the
assessment of appropriateness of costs capitalised in this - testing, on a sample basis, the date of transferring capital Refer notes 2.1.4(iii) to the consolidated financial statements. Our audit procedures included the following:
respect, the determination of costs that meet the criteria work-in-progress to operating fixed assets by examining
for capitalisation under the accounting and reporting the completion certificates and/or project progress reports; The Group has adopted IFRS 16 “Leases” with effect - obtaining an understanding of the management’s process
standards and the determination of dates on which capital from January 1, 2019. IFRS 16 introduces a single on for identification of agreements which contain leasing
work-in-progress is transferred to operating fixed assets - assessing whether the nature of capitalized costs is in balance sheet lease accounting model for leases entered arrangements;
and the respective dates from which their depreciation accordance with the recognition criteria set out in IAS 16; into by lessees. A lessee recognizes a right-of-use asset
should commence. representing its right of using the underlying asset and a - evaluating the selection of accounting policies and
- assessing the useful lives assigned by the management corresponding lease liability representing its obligations to methodology followed by the management for
As the capital expenditure incurred during the year and tested the calculation of related depreciation; make lease payments. On adoption of IFRS 16, the Group determination and measurement of right-of-use assets,
constitutes a significant amount and involves significant has changed its accounting policy for operating leases corresponding lease liabilities and other related impacts;
judgemental areas such as the capitalization of elements - testing the existence of capitalized assets through physical which are now recognized on the statement of financial
of eligible cost components as per applicable accounting verification on a sample basis; and position. The Group has accordingly recognized right- - on a sample basis, testing the underlying data used by the
and reporting standards, we have considered this a key of-use assets, net investment in lease and lease liability management from the lease contracts for determination of
audit matter. - assessing the adequacy of the related disclosures made in amounting to Rs. 4,067.98 million, 45,002.47 million and the right-of-use assets and corresponding lease liabilities.
the consolidated financial statements in accordance with Rs. 51,771.53 million respectively as at January 1, 2019. Further, performed re-computations on a test basis to
the applicable accounting and reporting standards. The comparative figures for the 2018 reporting period assess the accuracy of computations performed by the
have not been restated, as permitted under the specific management; and
5. Long-term financing arrangements transitional provisions of the standard.
- assessing whether the presentation and disclosures
(Refer notes 23, 23.2.3, 23.2.4, 23.3.1 and 23.4.2 to the Our audit procedures included the following: The adoption of IFRS 16 involves estimation and relating to the adoption of IFRS 16 in the consolidated
consolidated financial statements) judgement. Because of the significance of the impact of financial statements are in compliance with the applicable
- obtaining and reviewing financing arrangements that the these judgements / estimates, we considered this a key financial reporting framework.
During the year ended December 31, 2019, the Group’s Polymer segment had in place during the year; audit matter.
Polymer segment has reprofiled its debt structure through
the issuance of sukuk bonds to various institutional - testing the drawdowns and repayments of loans as per
investors and has also entered into agreements with the contractual terms of the agreements;
various other local and foreign lenders to finance its
capital projects and other operations.

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Information Other than the Unconsolidated and Consolidated Financial Statements and Auditor’s Report Thereon • Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence
obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s ability
Management is responsible for the other information. The other information comprises the information included in the annual report, but to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s
does not include the unconsolidated and consolidated financial statements and our auditor’s report thereon. report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our
opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events
Our opinion on the consolidated financial statements does not cover the other information and we do not express any form of assurance or conditions may cause the Group to cease to continue as a going concern.
conclusion thereon.
• Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures,
In connection with our audit of the consolidated financial statements, our responsibility is to read the other information and, in doing so, and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves
consider whether the other information is materially inconsistent with the consolidated financial statements or our knowledge obtained fair presentation.
in the audit or otherwise appears to be materially misstated.
• Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group
If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance
to report that fact. We have nothing to report in this regard. of the group audit. We remain solely responsible for our audit opinion.

Responsibilities of Management and Board of Directors for the Consolidated Financial Statements We communicate with the Board of Directors regarding, among other matters, the planned scope and timing of the audit and significant
audit findings, including any significant deficiencies in internal control that we identify during our audit.
Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with
accounting and reporting standards as applicable in Pakistan and Companies Act, 2017 and for such internal control as management We also provide the Board of Directors with a statement that we have complied with relevant ethical requirements regarding
determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our
whether due to fraud or error. independence, and where applicable, related safeguards.

In preparing the consolidated financial statements, management is responsible for assessing the Group’s ability to continue as a From the matters communicated with the Board of Directors, we determine those matters that were of most significance in the audit
going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless of the consolidated financial statements of the current period and are therefore the key audit matters. We describe these matters in
management either intends to liquidate the Group or to cease operations, or has no realistic alternative but to do so. our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we
determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably
The Board of Directors is responsible for overseeing the Group’s financial reporting process. be expected to outweigh the public interest benefits of such communication.

Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements The engagement partner on the audit resulting in this independent auditor’s report is Salman Hussain.

Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from
material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance
is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs as applicable in Pakistan will always
detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually
or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these
consolidated financial statements.

As part of an audit in accordance with ISAs as applicable in Pakistan, we exercise professional judgement and maintain professional
A. F. Ferguson & Co.
skepticism throughout the audit. We also: Chartered Accountants
Karachi
• Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, Date: March 16, 2020
design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to
provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting
from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s internal control.

• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures
made by management.

137 138
 consolidated statement of financial position Annual Report 2019

as at december 31, 2019

(Amounts in thousand) Note 2019 2018 (Amounts in thousand) Note 2019 2018
Rupees Rupees

ASSETS EQUITY & LIABILITIES

Non-Current Assets Equity

Property, plant and equipment 4 253,374,314 204,408,878 Share capital 21 5,761,632 5,237,848
Share premium 13,068,232 13,068,232
Right-of-use asset 5 4,851,221 - Revaluation reserve on business combination 12,880 23,082
Maintenance reserve 22 156,301 156,301
Intangible assets 6 960,866 317,539 Exchange revaluation reserve 608,100 395,605
Hedging reserve (24,969) (24,969)
Long term investments 7 29,963,000 31,590,380 General reserve 4,429,240 4,429,240
Unappropriated profit 113,728,540 113,100,747
Deferred taxation 8 228,024 384,612 Remeasurement of post-employment benefits (94,020) (71,092)
131,884,304 131,077,146
Financial asset at amortized cost 9 5,921,150 - 137,645,936 136,314,994
Non-Controlling Interest 57,603,440 49,272,245
Net investment in lease 10 45,563,942 - Total Equity 195,249,376 185,587,239

Long term loans, advances and other receivables 11 3,305,027 4,092,566 Liabilities

344,167,544 240,793,975 Non-current liabilities

Borrowings 23 138,600,017 121,110,471
Current Assets Deferred taxation 8 13,399,390 8,428,363
Lease liability 24 50,941,216 -
Stores, spares and loose tools 12 7,637,331 7,687,869 Deferred liabilities 25 2,339,209 259,786
205,279,832 129,798,620
Stock-in-trade 13 19,913,340 17,228,278 Current Liabilities
Trade and other payables 26 102,806,720 50,371,278
Trade debts 14 51,816,893 18,629,468 Accrued interest / mark-up 27 3,315,762 2,242,686
Current portion of:
Loans, advances, deposits and prepayments 15 4,868,381 3,170,670 - borrowings 23 19,856,424 10,315,924
- current maturity of lease liability 24 4,406,997 -
Other receivables 16 17,277,678 11,447,568 - deferred liabilities 25 430,358 113,852
Taxes payable 2,831,004 7,642,916
Accrued income 484,224 524,809 Short term borrowings 28 15,511,348 6,641,207
Derivative financial instruments 154 -
Contract asset 17 5,313,283 - Dividend payable 151,125 25,683
Unclaimed dividends 29 405,974 415,363
Current portion of net investment in lease 10 2,543,927 - 149,715,866 77,768,909
Total Liabilities 354,995,698 207,567,529
Short term investments 18 74,004,144 81,791,320 Contingencies and Commitments 30
TOTAL EQUITY & LIABILITIES 550,245,074 393,154,768
Cash and bank balances 19 20,892,734 11,880,811

204,751,935 152,360,793 The annexed notes from 1 to 58 form an integral part of these consolidated financial statements.

Assets classified as held for sale 20 1,325,595 -

TOTAL ASSETS 550,245,074 393,154,768

Abdul Samad Dawood Hasnain Moochhala Ghias Khan

Vice Chairman Chief Financial Officer President and Chief Executive

139 140
 consolidated statement of profit or loss consolidated statement of comprehensive Annual Report 2019

for the year ended december 31, 2019 income for the year ended december 31, 2019
(Amounts in thousand except for earnings per share) Note 2019 2018 (Amounts in thousand) Note 2019 2018
Rupees Rupees

Revenue 31 225,919,576 171,568,238 Profit for the year 30,288,091 23,631,733

Cost of revenue 32 (157,233,488) (120,459,766) Other comprehensive income:
Gross profit 68,686,088 51,108,472 Items that may be reclassified subsequently to profit or loss
Hedging reserve - cash flow hedges
Selling and distribution expenses 33 (8,103,286) (8,488,256)
Profit arising during the year - 63,028
Administrative expenses 34 (6,156,325) (4,497,302)
Less: Reclassification adjustments for loss / (profit) included
Other income 35 13,663,434 9,147,368 in statement of profit or loss - (874)
Other operating expenses 36 (8,477,620) (5,518,656) - 62,154
Operating profit 59,612,291 41,751,626 Revaluation reserve on business combination (21,004) (21,004)
Finance cost 37 (14,750,272) (5,453,221) Exchange differences on translation of
foreign operations 212,495 456,596
Share of income from joint venture and associates 38 1,147,999 128,647
191,491 497,746
Profit before taxation 46,010,018 36,427,052
Less: Income tax relating to:
Taxation 39 (15,721,927) (12,795,319) Revaluation reserve on business combination 6,721 6,721
Profit for the year 30,288,091 23,631,733
Profit attributable to: Items that will not be reclassified to profit or loss
- Owners of the Holding Company 16,532,846 12,707,526 - Remeasurement of post employment
- Non Controlling Interest 13,755,245 10,924,207 benefits obligation - Actuarial (loss) / gain (27,190) 2,582
Less: Income tax relating to remeasurement
30,288,091 23,631,733
of post employment benefits obligation 3,990 (749)
(23,200) 1,833
Rupees Other comprehensive income for the year, net of tax 175,012 506,300
(Restated) Total comprehensive income for the year 30,463,103 24,138,033
Earnings per share - basic and diluted 40 28.69 22.06
Total comprehensive income attributable to:
- Owners of the Holding Company 16,712,211 13,056,362
- Non Controlling Interest 13,750,892 11,081,671
The annexed notes from 1 to 58 form an integral part of these consolidated financial statements.
30,463,103 24,138,033

The annexed notes from 1 to 58 form an integral part of these consolidated financial statements.

Abdul Samad Dawood Hasnain Moochhala Ghias Khan Abdul Samad Dawood Hasnain Moochhala Ghias Khan
Vice Chairman Chief Financial Officer President and Chief Executive Vice Chairman Chief Financial Officer President and Chief Executive

141 142
 consolidated statement of changes in equity consolidated statement of cash flows Annual Report 2019

for the year ended december 31, 2019 for the year ended december 31, 2019
(Amounts in thousand) Attributable to owners of the Holding Company Non Total (Amounts in thousand) Note 2019 2018
Capital reserves
Reserves
Revenue reserves
Controlling Rupees
Interest
Share Share Revaluation Maintenance Exchange Hedging General Unappro- Remeasurement Sub
capital premium reserve on reserve revaluation reserve reserve priated of Total
business (note 22) reserve Profit post
combination employment CASH FLOWS FROM OPERATING ACTIVITIES
benefits -
Actuarial
(loss) / income Cash generated from operations 43 62,471,638 47,679,811
Rupees Retirement and other service benefits paid (227,600) (259,468)
Balance as at January 1, 2018 5,237,848 13,068,232 33,284 156,301 82,112 (68,921) 4,429,240 108,586,694 (69,056) 131,455,734 39,618,743 171,074,477 Proceeds from net investment in lease 1,721,772 -
Total comprehensive income for Finance income received on net investment in lease 5,290,427 -
the year ended December 31, 2018
Profit for the year - - - - - - - 12,707,526 - 12,707,526 10,924,207 23,631,733
Deferred income 888,732 -
Other comprehensive income - - (10,202) - 313,493 43,952 - (928) 2,521 348,836 157,464 506,300 Financial charges paid (16,586,684) (8,588,225)
- - (10,202) - 313,493 43,952 - 12,706,598 2,521 13,056,362 11,081,671 24,138,033 Taxes paid (15,012,981) (9,793,153)
Transactions with owners Long term loans and advances - net 68,996 (99,207)
Issuance of rights shares
of subsidairy company - - - - - - - - - - 2,331,153 2,331,153
Net cash generated from operating activities 38,614,300 28,939,758
Share issuance cost - - - - - - - (13,174) - (13,174) - (13,174)
Advance against issue of share capital - - - - - - - - - - 1,997,646 1,997,646 CASH FLOWS FROM INVESTING ACTIVITIES
Reclassification of acturial gain on withdrawal of gratuity scheme - - - - - - - 4,557 - (4,557) - -
Disposal of subsidiary company - - - - - - 2,815,554 - 2,815,554 1,520,229 4,335,783
Dividend by subsidiaries allocable to
Purchases of property, plant & equipment and intangible assets (46,975,130) (36,579,545)
Non-Controlling interest - - - - - - - - - - (7,277,197) (7,277,197) Sale proceeds on disposal of property, plant & equipment 94,238 40,830
Final cash dividend for the year ended Investment in associated companies (788,726) (226,640)
December 31, 2017 @ Rs. 2.00 per share - - - - - - - (1,047,570) - (1,047,570) - (1,047,570) Investments made during the year - net (43,177,429) 15,027,077
1st Interim cash dividend @ Rs.5.00 per share
for the year ended December 31, 2018 - - - - - - - (2,618,924) - (2,618,924) - (2,618,924)
Income on deposits / other financial assets 9,874,606 9,271,865
2nd Interim cash dividend @ Rs.7.00 per share Deposit in respect of bank guarantees (418,470) (1,223,401)
for the year ended December 31, 2018 - - - - - - - (3,666,494) - (3,666,494) - (3,666,494) Dividends received 1,305,000 1,292,430
3rd Interim cash dividend @ Rs.7.00 per share Net cash utilized in investing activities (80,085,911) (12,397,384)
for the year ended December 31, 2018 - - - - - - - (3,666,494) - (3,666,494) - (3,666,494)
- - - - - - - (8,192,545) (4,557) (8,197,102) (1,428,169) (9,625,271)
Balance as at December 31, 2018 5,237,848 13,068,232 23,082 156,301 395,605 (24,969) 4,429,240 113,100,747 (71,092) 136,314,994 49,272,245 185,587,239 CASH FLOWS FROM FINANCING ACTIVITIES

Total comprehensive income for Proceeds / Repayments of borrowings - net 21,951,625 28,740,361
the year ended December 31, 2019
Profit for the year - - - - - - - 16,532,846 - 16,532,846 13,755,245 30,288,091
Subordinated Loan to Joint Venture Company (200,000) -
Other comprehensive income - - (10,202) - 212,495 - - - (22,928) 179,365 (4,353) 175,012 Issuance of right shares to Non-controlling interest, net of share issuance cost 4,783,073 4,315,625
- - (10,202) - 212,495 - - 16,532,846 (22,928) 16,712,211 13,750,892 30,463,103 Finance cost paid on lease liability (3,847,684) -
Transactions with owners Rentals paid during the year (3,675,098) -
Effect of change in accounting policy - net
of deferred tax - - - - - - (1,066,505) - (1,066,505) (831,528) (1,898,033)
Repayments of short term finance (1,000,000) -
Shares issued during the period - net of transaction cost - - - - - - - (15,437) - (15,437) 2,542,495 2,527,058 Dividends paid (23,615,075) (18,843,057)
Preference shares issued during the period Net cash generated from financing activities (5,603,159) 14,212,929
- net of transaction cost - - - - - - - - - - 2,256,015 2,256,015 Net (decrease) / increase in cash and cash equivalents (47,074,770) 30,755,303
Bonus shares issued during the period in the ratio of
1 share for every 10 shares held 523,784 - - - - - - (523,784) - - - -
Dividend by subsidiaries allocable to Cash and cash equivalents at beginning of the year 70,322,896 38,852,051
Non-Controlling interest - - - - - - - - - - (9,386,679) (9,386,679) Effects of exchange rate changes on cash and cash equivalents 935,765 715,542
Final cash dividend for the year ended
December 31, 2018 @ Rs. 2.00 per share - - - - - - - (1,047,570) - (1,047,570) - (1,047,570)
First Interim cash dividend for the year ended
Cash and cash equivalents at end of the year 44 24,183,891 70,322,896
December 31, 2019 @ Rs. 7.00 per share - - - - - - - (4,033,143) - (4,033,143) - (4,033,143)
Second Interim cash dividend for the year ended
December 31, 2019 @ Rs. 8.00 per share - - - - - - - (4,609,307) - (4,609,307) - (4,609,307) The annexed notes from 1 to 58 form an integral part of these consolidated financial statements.
Third Interim cash dividend for the year ended
December 31, 2019 @ Rs. 8.00 per share - - - - - - - (4,609,307) - (4,609,307) - (4,609,307)
523,784 - - - - - - (15,905,053) - (15,381,269) (5,419,697) (20,800,966)
Balance as at December 31, 2019 5,761,632 13,068,232 12,880 156,301 608,100 (24,969) 4,429,240 113,728,540 (94,020) 137,645,936 57,603,440 195,249,376

The annexed notes from 1 to 58 form an integral part of these consolidated financial statements.

Abdul Samad Dawood Hasnain Moochhala Ghias Khan Abdul Samad Dawood Hasnain Moochhala Ghias Khan
Vice Chairman Chief Financial Officer President and Chief Executive Vice Chairman Chief Financial Officer President and Chief Executive

143 144
 notes to the consolidated financial statements Annual Report 2019

for the year ended december 31, 2019

(Amounts in thousand) (Amounts in thousand)

1. LEGAL STATUS AND OPERATIONS 1.2 The “Group” consists of:

1.1 Engro Corporation Limited (the Holding Company), is a public listed company incorporated in Pakistan and its shares are quoted Holding Company: Engro Corporation Limited;
on Pakistan Stock Exchange Limited. The Holding Company is a subsidiary of Dawood Hercules Corporation Limited (the
Parent Company). The principal activity of the Holding Company, is to manage investments in subsidiary companies, associated Associated Companies: Associated companies are entities over which the Group has significant influence but not control.
companies and joint venture, engaged in fertilizers, PVC resin manufacturing and marketing, food, energy, LNG, maintaining and
operating telecommunication infrastructure and chemical terminal and storage businesses. Subsidiary Companies: Companies in which the Holding Company owns over 50% of voting rights, or companies directly
controlled by the Holding Company:
The business units of the Holding Company and its subsidiaries include the following: Percentage of direct
shareholding
Business Unit Geographical Location 2019 2018
Head / Registered offices
- Engro Energy Limited (note 1.3.1) 100 100
- The Holding Company 7th and 8th Floors, The Harbour Front Building, Plot Number HC-3, - Engro Eximp Agriproducts (Private) Limited (note 1.3.2) 100 100
Block 4, Scheme No. 5, Clifton, Karachi - Engro Infiniti (Private) Limited (note 1.3.3) 100 100
- Engro Eximp FZE (note 1.3.4) 100 -
- Engro Fertilizers Limited 7th and 8th Floors, The Harbour Front Building, Plot Number HC-3, - Elengy Terminal Pakistan Limited (note 1.3.5) 56 56
Block 4, Scheme No. 5, Clifton, Karachi - Engro Fertilizers Limited (note 1.3.6) 56.27 56.27
- Engro Polymer and Chemicals Limited (note 1.3.7) 56.19 56.19
- Engro Polymer and Chemicals Limited 12th Floor, Ocean Tower, G-3, Block 9, Clifton, Khayaban-e-Iqbal, Karachi
Joint Venture Company:
- Elengy Terminal Pakistan Limited 4th Floor, Corporate Offices Block, Dolmen City, Plot Number HC-3,
Block 4, Clifton, Karachi - Engro Vopak Terminal Limited (note 1.3.8) 50 50

- Engro Energy Limited 16th Floor, Harbour Front Building, Plot Number HC-3, Block 4, Associated Company:
Scheme No. 5, Clifton, Karachi
- FrieslandCampina Engro Pakistan Limited previously (Engro Foods Limited) (note 1.3.9) 39.9 39.9
- Engro Eximp Agriproducts (Private) Limited 8th Floor, The Harbour Front Building, Plot Number HC-3, Block 4,
Scheme No. 5, Clifton, Karachi. 1.3 Subsidiary companies
- Engro Eximp FZE BCW JAFZA 18 & 19, Office No 110 Dubai, United Arab Emirates 1.3.1 Engro Energy Limited
- Engro Infiniti (Private) Limited 8th Floor, The Harbour Front Building, Plot Number HC-3, Block 4,
Engro Energy Limited (EEL), a wholly owned subsidiary of the Holding Company, is a public unlisted company incorporated
Scheme No. 5, Clifton, Karachi
in Pakistan. It is established with the primary objective to analyze potential opportunities in the power sector and undertake
Regional offices supply and service related contracts and Independent Power Projects (IPPs) based on feasibilities of new ventures.

- The Holding Company 22 Floor, Ufone Tower Jinnah Avenue, Blue Area, Islamabad Following are the companies in which EEL owns 50% or more of the voting rights or are directly controlled by EEL:
Percentage of
- Engro Polymer and Chemicals Limited 1st Floor, 38 Z Block, Commercial Area, Phase III, DHA, Lahore shareholding
2019 2018
Manufacturing plants
- Kolachi Portgen (Private) Limited (note 1.3.1.1) 100 100
- Engro Fertilizers Limited - District Ghotki, Sindh. - Engro Power International Holding B.V. (note 1.3.1.2) 100 100
- EZ/ 1 / P – 1 – II Eastern Zone, Port Qasim, Karachi. - Engro Power Services Limited (note 1.3.1.3) 100 100
- Engro Energy Services Limited (note 1.3.1.4) 100 100
- Engro Polymer and Chemicals Limited EZ/I/P-II-I Eastern Zone, Port Bin Qasim Industrial Area, Karachi, Pakistan - Engro Powergen Qadirpur Limited (note 1.3.1.5) 68.89 68.89
- Engro Powergen Thar (Private) Limited (note 1.3.1.6) 50.10 50.10
- Engro Eximp Agriproducts (Private) Limited 13-Km Muridke Sheikhupura Road Muridke, Muridke, 54800, Pakistan
Following are associated companies of EEL in which it holds direct shareholding:
Power Plants Percentage of direct
holding
- Engro Powergen Thar (Private) Limited - Thar Block II, Islamkot District, Sindh
2019 2018
- Engro Powergen Qadirpur Limited - Deh Belo Sanghari, Ghotki, Sindh
- GEL Utility Limited (note 1.3.1.7) 45 45
Terminal - Elengy Terminal Pakistan Limited Plot # OZ-I-P-81, South Western Zone, Berth no. 13, - Sindh Engro Coal Mining Company Limited (note 1.3.1.8) 11.91 11.91
Port Qasim Karachi - Pakistan Energy Gateway Limited (note 1.3.1.9) 33.33 33.33
- Siddiqsons Energy Limited (note 1.3.1.10) 19 19

145 146
 Annual Report 2019

(Amounts in thousand) (Amounts in thousand)

1.3.1.1 Kolachi Portgen (Private) Limited has been established and incorporated in Pakistan with the objective to operate and own a 1.3.2 Engro Eximp Agriproducts (Private) Limited
Regasified Liquefied Natural Gas (RLNG) based power generation plant.
Engro Eximp Agriproducts (Private) Limited (EEAPL) is a private limited company, incorporated in Pakistan. The principal activity
1.3.1.2 Engro Power International Holding B.V. (EPIH), a private limited company, has been established in Rotterdam, Netherlands of EEAPL is to produce, manufacture and trade all kinds of raw, processed and prepared food products including agriculture,
with the objective to incorporate, participate, manage and supervise businesses and companies. EPIH has two wholly owned dairy and farming products. EEAPL has set up a rice processing plant in District Shaikhupura, which commenced commercial
subsidiaries namely Engro Power Services Holding B.V. (EPSH) and Engro Power Investments International B.V. (EPII) both production in 2011.
based in Netherlands.
1.3.3 Engro Infiniti (Private) Limited
1.3.1.3 Engro Power Services Limited (EPSL), a private limited company, has been established in Nigeria with the objective to carry on
business as power generating, transmission, distribution and servicing company. EPSL is currently providing Operations and Engro Infiniti (Private) Limited, (EInfiniti) was incorporated as a wholly owned subsidiary. The primary objective of EInfiniti is
Maintenance (O&M) services to a Captive Power Plant located in a refinery within Nigeria. The agreement of providing O&M to analyze potential opportunities inside and outside Pakistan and to make available digital assets and ventures related to
services was entered into by EEL. EPSL is acting as an agent of EEL to discharge its obligations under the agreement. intellectual capital, data collection and analytics of every kind and any activities relating to or ancillary thereto. During the year,
the Holding Company has made investment in Engro Infiniti (Private) Limited, a wholly owned subsidiary, through subscription of
1.3.1.4 Engro Energy Services Limited (EESL) was established as a wholly owned subsidiary of EEL on June 01, 2018 with the primary 18,460,000 ordinary shares of Rs. 10 each at par. Further, during the year, Engro Infiniti (Private) Limited has issued 40,000,000
objective of analyzing potential opportunities in the power sector and undertaking service related contracts for Independent shares of Rs. 10 each in respect of the advance against subscription of shares paid by the Holding Company for investments
Power Projects (IPPs) based on feasibility of new ventures and to provide operations and maintenance services to IPPs. made during the year ended December 31, 2018.

1.3.1.5 Engro Powergen Qadirpur Limited (EPQL) is a public listed company incorporated in Pakistan with the primary objective to Following are the subsidiaries of EInfiniti:
undertake the business of power generation, distribution, transmission and sale. EPQL completed construction and testing Percentage of direct
of its 217.3 MW combined cycle power plant and has commenced commercial operation on March 27, 2010. The electricity shareholding
generated is transmitted to the National Transmission and Dispatch Company (NTDC) under the Power Purchase Agreement 2019 2018
(PPA) dated October 26, 2007, valid for a period of 25 years. - Engro Digital Limited (note 1.3.3.1) 100 100
- Enfrashare (Private) Limited (note 1.3.3.2) 100 100
1.3.1.6 Engro Powergen Thar (Private) Limited (EPTL) was established on September 23, 2014 with the primary objective to develop
2 x 330 MW mine mouth power plants at Thar Block II, Sindh. During the year, additional 256,812,202 (2018: 219,589,305)
1.3.3.1 Engro Digital Limited (EDL) is a public unlisted company, incorporated in Pakistan on October 19, 2017 under the Companies
ordinary shares were acquired by the EEL in EPTL. As at December 31, 2019, EEL holds 50.10% (2018: 50.10%) of the issued
Act, 2017. EDL has its registered office at the 6th floor, Dawood Center, M.T Khan Road, Civil Lines, Karachi. EDL is established
capital of EPTL while the balance shares are held by CMEC Thar Power Investment Limited (35%), Habib Bank Limited (9.5%)
with primary objective of analyzing potential opportunities and making available digital and technology services and products
and Liberty Mills Limited (5.4%). EPTL has achieved its commercial operation date (CoD) on July 10, 2019.
inside and outside Pakistan.
1.3.1.7 GEL Utility Limited (GEL) is a private limited company in Nigeria with the objective of generation and distribution of energy,
1.3.3.2 Enfrashare (Private) Limited was incorporated in Pakistan as a private limited company under the Companies Act, 2017
power and other related services and has undertaken a project of 72 MW triple redundancy captive power plant, which
on November 13, 2018. The registered office of Enfrashare is situated at 15-E, Rehmat Centre, Jinnah Avenue, Blue area,
commenced commercial operations from November 21, 2014. EEL holds 12,272,727 ordinary shares of Naira 1 each in GEL
Islamabad. Enfrashare is principally engaged in buying, building, maintaining and operating telecommunication infrastructure
representing a 45% (2018: 45%) equity stake. During the year, EEL has classified this investment as held for sale.
and any products and by products and any activities relating to or ancillary thereto. During the year, Enfrashare became a
subsidiary of Engro Infiniti (Private) Limited upon issuance of 45,000,000 shares of Rs 10 each and has 100% holding in the
1.3.1.8 Sindh Engro Coal Mining Company Limited (SECMC) was formed under a Joint Venture Agreement (JVA), dated September
8, 2009, between the Government of Sindh (GoS), EEL and the Holding Company. The aforementioned JVA is consequent said Company.
to the selection of SECMC as GoS’s joint venture partner, through an International Competitive Bidding process, for the
development, construction and operations of an open cast lignite mine in Block-II of Thar Coal Field, Sindh (the Project). During 1.3.4 Engro Eximp FZE
the year, the EEL subscribed to an additional 48,348,460 (2018: 40,829,133) ordinary shares of SECMC, at a premium of Rs.
4.82 per share while maintaining its percentage shareholding as at 2019 at 11.91% (2018: 11.91%). SECMC has achieved its Engro Eximp FZE (EEF) was incorporated in the Jebel Ali Free Zone, Emirate of Dubai, on August 4, 2011 as a wholly owned
CoD on July 10, 2019. Subsidiary of Engro Eximp (Private) Limited (EEPL). It is engaged in the business of trading fertilizers.

1.3.1.9 Pakistan Energy Gateway Limited is a special purpose vehicle incorporated jointly with Shell Gas B.V. and Pakarab Fertilizers During the year, the shareholders of the Holding Company in its Extraordinary General Meeting held on May 28, 2019, authorised
Limited for the purpose of developing a private integrated LNG terminal, with each of the three subscribers/shareholders having the Holding Company to acquire 100% of the issued and paid-up share capital of Engro Eximp FZE (UAE) from Engro Fertilizers
a 33.3% shareholding. Limited, a Subsidiary company, against an amount of Rs. 1,757,280 (subject to adjustments at the date of closing of the
transaction). On July 17, 2019, the Holding Company acquired Engro Eximp FZE for a consideration of Rs. 1,972,505.
1.3.1.10 EEL entered into a Joint Venture Agreement (JVA), dated May 04, 2018 with Siddiqsons Limited (SL) and Arif Habib Equity
(Private) Limited (AHEPL) for the joint development of approximately 330 MW of coal-fired power generation facility in Block - II, 1.3.5 Elengy Terminal Pakistan Limited
District Tharparkar, Sindh through a joint venture company, namely Siddiqsons Energy Limited (SEL). The JVA became effective
from May 26, 2018 as per the terms of which EEL, AHEPL and SL, were initially required to have shareholding proportions Elengy Terminal Pakistan Limited (ETPL), is a public unlisted company, incorporated in Pakistan. The principal business of ETPL
equal to 19%, 19% and 62% respectively in their mutual capacity as the members of SEL. Accordingly, EEL advanced an is to establish and operate a terminal for handling, re-gasification, storage, treatment and processing, along with import, export
amount of Rs. 262,000 against the issuance of 26,267,639 ordinary shares constituting the required 19% of the share capital and trading, of Liquefied Natural Gas (LNG), Re-gasified Liquefied Natural Gas (RLNG), Liquid Petroleum Gas (LPG), Natural
of SEL to be subscribed into by EEL. During the year, EEL subscribed to an additional 7,220,000 (2018: 26,267,639) ordinary Gas Liquid (NGL) and all other related liquids, gases and chemical and petroleum products. Engro Elengy Terminal (Private)
shares of SEL while maintaining its percentage shareholding at 19% (2018: 19%). Limited (EETPL) is a wholly owned subsidiary of ETPL.

147 148
 Annual Report 2019

(Amounts in thousand) (Amounts in thousand)

1.3.6 Engro Fertilizers Limited 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Engro Fertilizers Limited (EFert), is a public listed company, incorporated in Pakistan. The principal activity of EFert is
The significant accounting policies applied in the preparation of these consolidated financial statements are set out below.
manufacturing, purchasing and marketing of fertilizers, seeds and pestisides and providing logistics services. These policies have been consistently applied to all the years presented, unless otherwise stated.
Following are the subsidiaries of EFert:
Percentage of 2.1 Basis of preparation
shareholding
2019 2018 2.1.1 These consolidated financial statements have been prepared under the historical cost convention as modified by remeasurement
- Engro Eximp FZE (note 1.3.4) - 100 of certain financial assets and financial liabilities, including derivative instruments, at fair value, and certain staff retirement and
- EFERT Agritrade (Private) Limited (note 1.3.6.1) 100 100 other service benefits at present value.

1.3.6.1 In 2017, EFert Agritrade (Private) Limited (EAPL) was incorporated as a wholly owned subsidiary of EFert to carry out trading 2.1.2 These consolidated financial statements have been prepared in accordance with the accounting and reporting standards as
and distribution of imported fertilizers as part of the business reorganization. EFert has transferred its business of trading and applicable in Pakistan. The accounting and reporting standards applicable in Pakistan comprise of:
distribution of imported fertilizers to EAPL, and holds 10,000 ordinary shares of Rs. 10 each in EAPL.
- International Financial Reporting Standards (IFRSs) issued by the International Accounting Standards Board (IASB) as
1.3.7 Engro Polymer and Chemicals Limited
notified under the Companies Act, 2017; and
Engro Polymer and Chemicals Limited (EPCL), is a public listed company, incorporated in Pakistan. The principal activity of
EPCL is to manufacture, market and sell Poly Vinyl Chloride (PVC), Vinyl Chloride Monomer (VCM), caustic soda and other - Provisions of and directives issued under the Companies Act, 2017.
related chemicals. It is also engaged in supply of surplus power generated from its power plants to EFert (NPK Plant).
Where provisions of and directives issued under the Companies Act, 2017 differ from the IFRSs, the provisions of and directives
Following are the subsidiaries of EPCL: issued under the Companies Act, 2017 have been followed.
Percentage of
shareholding 2.1.3 The preparation of consolidated financial statements in conformity with the above requirements requires the use of certain
2019 2018 critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Group’s
- Engro Polymer Trading (Private) Limited (note 1.3.7.1) 100 100 accounting policies. The areas involving high degree of judgement or complexity, or areas where assumptions and estimates
- Engro Peroxide (Private) Limited (note 1.3.7.2) 100 - are significant to the consolidated financial statements are disclosed in note 3.
- Engro Plasticizer (Private) Limited (note 1.3.7.3) 100 -
2.1.4 Initial application of standards, amendments or an interpretation to existing standards
1.3.7.1 Engro Polymer Trading (Private) Limited (EPTPL) was incorporated in Pakistan on November 6, 1999, as a wholly owned
subsidiary of the EPCL. EPTPL’s principal activity is to purchase, market and sell Poly Vinyl Chloride (PVC), PVC compounds, a) Standards, amendments to published standards and interpretations that became effective during the year and
Caustic soda and other related chemicals. During the year, EPTPL has taken steps to develop market for PVC downstream are relevant to the Group
products. Subsequent to the year end, the Securities and Exchange Commission of Pakistan (SECP) has approved the
application filed for change in its name to “Think PVC (Private) Limited”. The following new Standards and interpretations to the accounting and reporting standards as applicable in Pakistan are
1.3.7.2 Engro Peroxide (Private) Limited was incorporated in Pakistan on July 22, 2019 under the Companies Act, 2017 as a wholly effective for the first time for the year beginning on January 1, 2019 and are relevant to the Group:
owned subsidiary of EPCL. The main objective of Engro Peroxide (Private) Limited is to manufacture and market Hydrogen
Peroxide and related chemicals. i) IFRS 9 “Financial Instruments” addresses the classification, measurement and recognition of financial assets and financial
liabilities and replaces the related guidance in IAS 39 (Financial Instruments Recognition and Measurements) that relates
1.3.7.3 Engro Plasticizer (Private) Limited was incorporated in Pakistan on July 22, 2019 under the Companies Act, 2017 as a wholly to the recognition, classification and measurement of financial assets and financial liabilities, derecognition of financial
owned subsidiary of EPCL. The main objective of Engro Plasticizer (Private) Limited is to manufacture and market Chlorinated instruments, impairment of financial assets and hedge accounting. It retains but simplifies the mixed measurement model
Paraffin Wax and other related chemicals. and establishes three primary measurement categories for financial assets: amortised cost, Fair Value through Other
Comprehensive Income (FVOCI) and Fair Value through Profit or Loss (FVPL). The basis of classification depends on
1.3.8 Engro Vopak Terminal Limited
the entity’s business model and the contractual cash flow characteristics of the financial asset. Investments in equity
Engro Vopak Terminal Limited (EVTL), a 50% share joint venture of the Holding Company, is a public unlisted company instruments are required to be measured at fair value through profit or loss with the irrevocable option at inception to
incorporated in Pakistan. EVTL is a joint venture of the Holding Company and Royal Vopak Netherlands B.V. EVTL has been present changes in fair value in OCI, without subsequent recycling consolidated statement of profit or loss.
granted the exclusive concession, right and license to design, finance, insure, construct, test, commission, complete, operate,
manage and maintain an Integrated Liquid Chemical Terminal and Storage Farm at the south western zone of Port Qasim on The standard also includes an expected credit losses (ECL) model that replaces the current incurred loss impairment
Build, Operate and Transfer (BOT) basis. model. The ECL model involves a three-stage approach whereby financial assets move through the three stages as their
credit quality changes. The stage dictates how an entity measures impairment losses and applies the effective interest
1.3.9 FrieslandCampina Engro Pakistan Limited rate method. A simplified approach is permitted for financial assets that do not have a significant financing component
FrieslandCampina Engro Pakistan Limited (FCEPL) formerly (Engro Foods Limited), is a public listed company, incorporated (e.g. trade receivables). On initial recognition, entities will record a loss equal to the 12 month ECL (or lifetime ECL for trade
receivables), unless the assets are considered credit impaired.
in Pakistan. FCEPL is a subsidiary of FrieslandCampina Pakistan Holdings B.V., which is a subsidiary of Zuivelcoöperatie
FrieslandCampina UA (the Ultimate Parent Company).
For financial liabilities, there are no changes to classification and measurement except for the recognition of changes
The principal activity of FCEPL is to manufacture, process and sell dairy products, beverages, ice cream and frozen desserts. in own credit risk in consolidated statement of comprehensive income, for liabilities designated at fair value through
FCEPL also owns and operates a dairy farm. consolidated statement of profit or loss.

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IFRS 9 also relaxes the requirements for hedge effectiveness by replacing the bright line hedge effectiveness tests. It iii) IFRS 16, ‘Leases’
requires an economic relationship between the hedged item and hedging instrument and for the ‘hedged ratio’ to be the
IFRS 16 ‘Leases’ replaces the previous lease standard: IAS 17 Leases and other interpretations and related guidance. It
same as the one management actually use for risk management purposes.
results in almost all leases being recognised on the consolidated statement of financial position, as the distinction between
operating and finance leases is removed. Under the new standard, an asset (the right to use the leased item) and a
The adoption of IFRS 9 has resulted in change in accounting policies of the Group. The Group has applied IFRS 9 financial liability to pay rentals are recognised. The only exceptions are short-term and low value leases.
retrospectively, however, it has elected not to restate comparative information as permitted under the transitional provisions
of the standard. The reclassifications and the adjustments arising from the new impairment rules are, therefore, not The Group has adopted IFRS 16 retrospectively from January 1, 2019, but has not restated comparatives for the 2018
reflected in the consolidated statement of financial position as at December 31, 2018 and have not been recognised in the reporting period, as permitted under the specific transitional provisions in the standard.
opening consolidated statement of financial position as on January 1, 2019 as the effects were not material.
On adoption of IFRS 16, Group recognised lease liabilities which had previously been classified as ‘operating leases’ under
the principles of IAS 17 “Leases”. These liabilities were measured at the present value of the remaining lease payments,
On January 1, 2019, the management has assessed which business models apply to the financial instruments held by the discounted using the lessee’s incremental borrowing rate as of January 1, 2019. The lessee’s incremental borrowing rate
Group and has classified its financial instruments into the appropriate IFRS 9 categories as follows: applied to the lease liabilities on January 1, 2019 ranges from 5.76% to 13.8%.

Financial assets Original For all segments other than Polymer, the right-of use assets were measured at the amount equal to the lease liability,
Classification under New classification under IFRS 9 adjusted by the amount of prepaid lease payments recognised in the statement of financial position immediately before the
date of initial application. Accordingly, there is no impact on the opening balances of unappropriated profit as on January
IAS 39
1, 2019. However, the right of use assets for Group “Polymer segment” were measured on a retrospective basis as if
IFRS 16 had been applied since the commencement date of respective leases. These were discounted using the lessee’s
Loans advances and deposits Loans and receivables Amortised cost incremental borrowing rate at the date of initial application.
Trade debts Loans and receivables Amortised cost
Other receivables Loans and receivables Amortised cost The right of use assets of the group relates to:
Short term investments
- office space acquired on rental basis;
- Investment in units of mutual funds Fair value through profit or loss Fair value through profit or loss
- Treasury bills Fair value through profit or loss Fair value through other comprehensive income - storage tanks of EPCL operation
- Pakistan investment bonds Fair value through profit or loss Fair value through other comprehensive income
- Fixed income placement Held to maturity Amoritised Cost - Floating Storage and Regasification Unit (FSRU) arrangement under Time Charter Party (TCP) agreement entered by
EETPL; and
Cash and Bank balances Loans and receivables Amoritised cost - lease agreements entered into by the Group with landlords in respect of tenanted sites.

Financial liabilities Under IFRS 16, an intermediate lessor accounts for the head lease and the sublease as two separate contracts. The
Borrowings Amortised cost Amortised cost intermediate lessor is required to classify the sublease as a finance or operating lease by reference to the right-of-use
Trade and other payables Amortised cost Amortised cost asset arising from the head lease (and not by reference to the underlying asset as was the case under IAS 17).
Accrued interest / mark-up Amortised cost Amortised cost At the date of initial application, Group has reassessed its operating sublease on the basis of remaining contractual
Short term borrowings Amortised cost Amortised cost terms and conditions of the head lease and the sublease. Based on the assessment, the Group has reclassified its
operating sublease arrangement relating to FSRU as a finance lease and has accounted for the sublease as a new
Moreover, no material differences were noted in prior year figures as a result of applying the new expected credit loss finance lease entered into at the date of initial application as per requirements of the IFRS 16.
model on the adoption of IFRS 9. The reclassifications of the financial instruments also did not result in any material
The impact of adoption of this Standard can be summarised as follows.
changes to measurements. Hence, there was no restatement of opening balances and reserves. Furthermore, there is no
impact on the consolidated statement of profit or loss, consolidated statement of comprehensive income, consolidated Impact on Consolidated Statement of Financial Position
statement of changes in equity and consolidated statement of cash flows. January 1, 2019
----Rupees----
ii) IFRS 15, ‘Revenue from contracts with customers’
Right of use assets - increased by 49,070,451
Derecognition of right of use asset on account of sub-lease (45,002,470)
IFRS 15 ‘Revenue from Contracts with Customers’ supersedes IAS 11 ‘Construction Contracts’, IAS 18 ‘Revenue’ and
4,067,981
related interpretations and it applies to all revenue arising from contracts with customers, unless those contracts are in the
scope of other standards. The standard introduces a single five-step model for revenue recognition with a comprehensive Increase in net investment in lease 45,002,470
framework based on the core principle that an entity should recognise revenue representing the transfer of promised
goods or services under separate performance obligations under the contract to customer at an amount that reflects the Lease liabilities - increased by 51,711,532
Current portion of lease liability (2,743,061)
consideration to which the entity expects to be entitled in exchange for those goods or services. The standard requires
entities to exercise judgement, taking into consideration all of the relevant facts and circumstances when applying each Long term portion of lease liability 48,968,471
step of the model to contracts with their customers. The Holding Company has assessed that significant performance
obligation in its contracts with customers are discharged at a single point of time, and therefore, there is no significant Decrease in unappropriated profit (1,898,033)
financial impact of this standard on the consolidated financial statements of the Group. Increase in deferred tax asset 743,048

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Practical expedients applied Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are de-recognized
from the date the control ceases. These consolidated financial statements include Engro Corporation Limited (the Holding
In applying IFRS 16 for the first time, the Group has used the following practical expedients permitted by the standard: Company) and all companies in which it directly or indirectly controls, beneficially owns or holds more than 50% of the
voting securities or otherwise has power to elect and appoint more than 50% of its directors (the Subsidiaries).
- the use of a single discount rate to a portfolio of leases with reasonably similar characteristics;
The Group uses the acquisition method of accounting to account for business combinations. The consideration
- the exclusion of operating leases with a remaining lease term of less than 12 months as at January 1, 2019;
transferred for the acquisition of a subsidiary is the fair value of the assets transferred, the liabilities incurred and the equity
- the exclusion of initial direct costs for the measurement of the right-of-use assets at the date of initial application; and interests issued by the Group. The consideration transferred includes the fair value of any asset or liability resulting from
a contingent consideration arrangement. Acquisition-related costs are expensed as incurred. Identifiable assets acquired
- the use of hindsight in determining the lease term where the contract contains options to extend or terminate the lease. and liabilities (including contingent liabilities) assumed in a business combination are measured initially at their fair values
at the acquisition date. On an acquisition-by-acquisition basis, the Group recognizes any non-controlling interest in the
IFRIC 23, ‘Uncertainty over tax treatments acquiree either at fair value or at the non-controlling interest’s proportionate share of the acquiree’s identifiable net assets.

IFRIC 23 ‘Uncertainty over tax treatments’ - clarifies how the recognition and measurement requirements of IAS 12 ‘Income If the business combination is achieved in stages, the acquisition date carrying value of the acquirer’s previously held
taxes’, are applied where there is uncertainty over income tax treatments.The IFRS IC had clarified previously that IAS 12, not equity interest in the acquiree is re-measured to fair value at the acquisition date; any gains or losses arising from such
IAS 37 ‘Provisions, contingent liabilities and contingent assets’, applies to accounting for uncertain income tax treatments. IFRIC re-measurement are recognized in the consolidated profit or loss.
23 explains how to recognise and measure deferred and current income tax assets and liabilities where there is uncertainty over
a tax treatment. An uncertain tax treatment is any tax treatment applied by an entity where there is uncertainty over whether Goodwill is initially measured as the excess of the aggregate of the consideration transferred and the fair value of non-
that treatment will be accepted by the tax authority. For example, a decision to claim a deduction for a specific expense or controlling interest over the net identifiable assets acquired and liabilities assumed. If this is less than the fair value of
not to include a specific item of income in a tax return is an uncertain tax treatment if its acceptability is uncertain under tax the net assets of the subsidiary acquired in the case of a bargain purchase, the difference is recognized in consolidated
law. IFRIC 23 applies to all aspects of income tax accounting where there is an uncertainty regarding the treatment of an item, statement of profit or loss.
including taxable profit or loss, the tax bases of assets and liabilities, tax losses and credits and tax rates.The impact of the
above interpretation is not material on the consolidated financial statements of the Group. Inter-company transactions, balances, income and expenses on transactions between group companies are eliminated.
Profits and losses (unrealized) are also eliminated. Accounting policies of subsidiaries have been changed where necessary
The other new standards, amendments to published standards and interpretations that are applicable for the financial to ensure consistency with the policies adopted by the Group.
year beginning on January 1, 2019 are considered not to be relevant or do not have any significant effect on the Group’s
financial reporting and operations and therefore have not been disclosed in these consolidated financial statements. ii) Transactions and non-controlling interests
b) Standards, amendments to published standards and interpretations that are not yet effective and have not been
The Group treats transactions with non-controlling interests that do not result in loss of control as transactions with
early adopted by the Group
equity owners of the Group. The difference between fair value of any consideration paid / received and the relevant share
The following new standards, interpretations and amendments to published standards are not effective for the financial acquired / disposed off of the carrying value of net assets of the subsidiary is recorded in equity. Gains or losses to non-
year beginning on January 1, 2019 and have not been early adopted by the Group: controlling interests are also recorded in equity.

IAS 1, ‘Presentation of financial statements and IAS 8, ‘Accounting policies, changes in accounting estimates iii) Disposal of subsidiaries
and errors (effective for the accounting periods beginning on and after January 1, 2020).
When the Group ceases to have control or significant influence, any retained interest in the entity is remeasured to its
These amendments and consequential amendments to other IFRSs: (i) use a consistent definition of materiality throughout fair value, with the change in carrying amount recognized in consolidated statement of profit or loss. The fair value is
IFRSs and the Conceptual Framework for Financial Reporting; (ii) clarify the explanation of the definition of material; and the initial carrying amount for the purposes of subsequent accounting for the retained interest as an associate, joint
(iii) incorporate some of the guidance in IAS 1 about immaterial information. These amendments are not expected to have venture or financial asset depending on the level of influence retained. In addition, any amounts previously recognized in
a significant impact on the Group’s financial statements. statement of comprehensive income in respect of that entity are accounted for as if the Group had directly disposed off
the related assets or liabilities. This may mean that amounts previously recognized in statement of comprehensive income
There are certain other standards and amendments to the published accounting and reporting standards that are not yet
effective and are considered not to have any significant effect on the Group’s financial reporting and operations and, therefore, are reclassified to consolidated statement of profit or loss.
have not been disclosed in these consolidated financial statements.
2.1.6 The consolidated financial statements have been prepared on the basis of audited financial statements of the Holding Company
2.1.5 Basis of consolidation and the subsidiary companies.

i) Subsidiaries 2.2 Exploration and evaluation assets

Subsidiaries are all entities over which the Group has the power to govern the financial and operating policies generally
accompanying a shareholding of more than one half of the voting rights. The existence and effect of potential voting rights Exploration and evaluation assets in respect of area of interest includes license fee, detailed feasibility study and all other related
that are currently exercisable or convertible are considered when assessing whether the Group controls another entity. studies to ensure bankability of the project including ancillary (operating and administrative) cost related thereto.
Further, the Group also considers whether:
The aforementioned expenditure supporting the technical feasibility and economic / commercial viability, are capitalized as
- it has power to direct the relevant activities of the subsidiaries; exploration and evaluation assets, where:
- it is exposed to variable returns from the subsidiaries; and
- decision making power allows the Group to affect its variable returns from the subsidiaries.

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- such costs are expected to be recouped through successful development and exploration of the area of interest or 2.4.2 Dredging expenditure
alternatively, by its sale; or
Dredging expenditure is categorized into capital dredging and major maintenance dredging. Capital dredging is expenditure,
- exploration and/or evaluation activities in the area of interest have not yet reached a stage which permits a reasonable which creates new harbour and deepens or extends the basin in front of jetty in order to allow access to larger ships. This
assessment of the existence, or otherwise of economically recoverable reserves, and active and significant operations in,
expenditure is capitalized and is being depreciated over a period of 15 years.
or in relation to, the area are continuing.
Major maintenance dredging is expenditure incurred to restore the depth to its previous condition. The management estimates
Capitalized exploration and evaluation expenditure is recorded at cost less impairment charges. As asset is not available
that maintenance dredging has an average service potential of 5 years. Maintenance dredging is regarded as a separate
for use, it is not depreciated, however, an estimate of recoverable amount of asset is made for possible impairment on an
component and is capitalized and depreciated over a period of 5 years on straight line basis.
annual basis.

Cash flows associated with exploration and evaluation expenditure are classified as investing activities in the consolidated 2.5 Capital spares
statement of cash flows.
Spare parts and servicing equipment are classified as property, plant and equipment rather than stores, spares and loose tools
2.3 Development properties when they meet the definition of property, plant and equipment. These are valued at weighted average cost less impairment
except for items in transit which are stated at invoice value plus other charges paid thereon till the reporting date. For items
Development expenditure represents expenditure incurred in area in which economically recoverable resources have been which are slow moving and / or identified as surplus to the Group’s requirements, adequate provision is made for any excess
identified. Such expenditure comprises costs directly attributable to the construction of a mine and related infrastructure. book value over estimated realizable value. Upon utilization, the capital spares and servicing equipment are depreciated over
Once a development decision has been taken the carrying amount of the exploration and evaluation asset is transferred to their useful life, or the remaining life of principal asset, whichever is lower.
development expenditure and classified under non-current assets as ‘development properties’.
2.6 Intangible assets
Capitalized development properties expenditure is recorded at cost less impairment, if any. As asset is not available for use, it
is not depreciated; however, an estimate of recoverable amount of asset is made for possible impairment on an annual basis. a) Computer software and licenses
Cash flows associated with development properties are classified as investing activities in the consolidated statement of cash flows.
i) Acquired
2.4 Property, plant and equipment Costs associated with maintaining computer software programmes are recognized as an expense when incurred.
However, costs that are directly attributable to identifiable software and have probable economic benefits exceeding the
2.4.1 Owned assets cost beyond one year, are recognized as an intangible asset. Direct costs include the purchase cost of software (license
fee) and related overhead cost.
These are stated at historical cost less accumulated depreciation and impairment losses, if any, except free-hold land and capital
work in progress which are stated at cost. Historical cost includes expenditure that is directly attributable to the acquisition of Expenditure which enhances or extends the performance of computer software beyond its original specification and
the items including borrowing costs. The cost of self constructed assets includes the cost of materials and direct labour, any useful life is recognized as a capital improvement and added to the original cost of the software.
other costs directly attributable to bringing the asset to a working condition for its intended use, and the costs of dismantling
and removing the items and restoring the site on which they are located. Purchased software that is integral to the functionality Computer software cost treated as intangible assets are amortized from the date the software is put to use on a straight-
of the related equipment is capitalized as part of that equipment. line basis over their respective useful lives.

Where major components of an item of property, plant and equipment have different useful lives, they are accounted for as ii) Internally generated
separate items of property, plant and equipment. The cost of an internally generated intangible asset comprises all directly attributable costs necessary to create, produce
Subsequent costs are included in the asset’s carrying amount or recognized as a separate asset, as appropriate, only when and prepare the asset to be capable of operating in the manner intended by the management. After initial recognition,
it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be internally generated intangible assets are carried at cost less accumulated amortization and impairment losses. These are
measured reliably. The carrying amount of the replaced part is derecognized. All other repairs and maintenance are charged to amortized using straight-line basis over a period of 5 years. Amortization on additions is charged from the month following
the consolidated statement of profit or loss during the financial period in which they are incurred. the month in which the asset is available for use and on disposals upto the month preceding the month of disposal.

Disposal of asset is recognized when significant risk and rewards incidental to ownership have been transferred to buyers. Expenditure on research (or the research phase of an internal project) is recognized as an expense in the period in which
Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and are recognized within it is incurred.
‘Other operating expenses / income’ in the consolidated statement of profit or loss.
Development costs incurred on specific projects are capitalized when all the following conditions are satisfied:
Depreciation is charged to consolidated statement of profit or loss using the straight line method, except for catalyst whose
depreciation is charged on the basis of number of production days, whereby the cost of an operating asset less its estimated
- Completion of the intangible asset is technically feasible so that it will be available for use or sale;
residual value is written off over its estimated useful life. Depreciation on addition is charged from the month following the month
in which the asset is available for use and on disposals upto the preceding month of disposal.
- The Group intends to complete the intangible asset and use or sell it;
The Group reviews appropriateness of the rate of depreciation, useful life and residual value used in the calculation of
depreciation on a regular basis. - The Group has the ability to use or sell the intangible asset;

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- The intangible asset will generate probable future economic benefits. Among other things this requires that there is a 2.8 Leasing activities as a lessor
market for the output from the intangible asset or for the intangible asset itself, or if it is to be used internally, the asset
will be used in generating such benefits; The Group enters into lease arrangements with respect to its LNG infrastructure for receipt, storage and regasification of LNG.
- There are adequate technical, financial and other resources to complete the development and to use or sell the
intangible asset; and Leases for which the Group is a lessor are classified as finance or operating leases. Whenever the terms of the lease transfer
substantially all the risks and rewards of ownership to the lessee, the contract is classified as a finance lease. All other leases
- The expenditure attributable to the intangible asset during its development can be measured reliably. are classified as operating leases.
b) Rights for future gas utilization
When the Group is an intermediate lessor, it accounts for the head lease and the sublease as two separate contracts. The
Rights for future gas utilization represents premium paid to the Government of Pakistan for allocation of 100 MMCFD sublease is classified as a finance or operating lease by reference to the right-of-use asset arising from the head lease.
natural gas for a period of 20 years for EFert’s Enven plant network. The rights are being amortized from the date of
commercial production on a straight-line basis over the remaining allocation period. Rental income from operating leases is recognized on a straight-line basis over the term of the relevant lease. Initial direct costs
2.7 Leasing activities as a lessee incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased asset and recognized
on a straight-line basis over the lease term.
Lease liability and right-of-use assets:
Amounts due from lessees under finance leases are recognized as receivables at the amount of the Group’s net investment in
At inception of a contract, the Group assesses whether a contract is, or contains, a lease based on whether the contract
conveys the right to control the use of an identified asset for a period of time in exchange for consideration. Lease terms are the leases. Finance lease income is allocated to accounting periods so as to reflect a constant periodic rate of return on the
negotiated on an individual basis and contain a wide range of different terms and conditions. Group’s net investment outstanding in respect of the leases.

In determining the lease term, management considers all facts and circumstances that create an economic incentive to When a contract includes lease and non-lease components, the Group applies IFRS 15 to allocate the consideration under the
exercise an extension option or not exercise a termination option. Extension options (or periods after termination options) are contract to each component.
only included in the lease term if the lease is reasonably certain to be extended (or not terminated).

The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, 2.9 Impairment of non-financial assets
discounted using the interest rate implicit in the lease, or if that rate cannot be readily determined, the Group’s incremental
borrowing rate. Assets that are subject to depreciation/amortization are reviewed at each reporting date to identify circumstances indicating
occurrence of impairment loss or reversal of previous impairment losses. An impairment loss is recognized for the amount
Lease payments include fixed payments less any lease incentives received, variable lease payments that are based on an
by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair
index or a rate which are initially measured using the index or a rate as at the commencement date, amounts expected to
be payable by the Group under residual value guarantees, the exercise price of a purchase option, if any, and if the Group is value less cost to sale and value in use. Reversal of impairment loss is restricted to the original cost of the asset.
reasonably certain to exercise that option and payments of penalties for terminating the lease, if the lease term reflects the
lessee exercising that option, less any lease incentives receivable. The extension and termination options are incorporated in 2.10 Investments in Joint Ventures and Associates
determination of lease term only when the Group is reasonably certain to exercise these options.
Investment in Joint venture / associates are accounted for using the equity method of accounting. Under the equity method,
The lease liability is subsequently measured at amortized cost using the effective interest rate method. It is remeasured when the investment is initially recognized at cost and the carrying amount is increased or decreased to recognize the investors
there is a change in future lease payments arising from a change in fixed lease payments or an index or rate, change in
share of profit or loss of the investee after the date of acquisition. The Group’s investment in Joint venture / associates includes
the Group’s estimate of the amount expected to be payable under a residual value guarantee, or if the Group changes its
assessment of whether it will exercise a purchase, extension or termination option. The corresponding adjustment is made goodwill identified on acquisition. The Group determines at each reporting date whether there is any objective evidence that the
to the carrying amount of the right-to-use asset, and is recorded in the consolidated statement of profit or loss if the carrying investment in joint venture/ associate is impaired. If this is the case, the Group calculates the impairment loss as the difference
amount of right-to-use asset has been reduced to zero. between the recoverable amount of Joint venture / associates and its carrying value and recognizes it in the consolidated profit
or loss.
A change in scope of a lease, or the consideration for a lease, that was not part of the original terms and conditions of the lease
is accounted for as a lease modification. The lease modification is accounted for as a separate lease if modification increases
2.11 Non current assets (or disposal groups) held-for-sale
the scope of lease by adding the right to use one or more underlying assets and the consideration for lease increases by
an amount that is commensurate with the stand-alone price for the increase in scope adjusted to reflect the circumstances
of the particular contracts, if any. When the lease modification is not accounted for as a separate lease, the lease liability is “Non-current assets (or disposal groups) are classified as assets held-for-sale when their carrying amount is to be recovered
remeasured and corresponding adjustment is made to right-of-use asset. principally through a sale transaction rather than continuing use and a sale is considered highly probable. They are stated at
the lower of carrying amount and fair value less costs to sell. Impairment losses on initial classification as held for sale and
The right-of-use asset is initially measured based on the initial amount of initial measurement of the lease liability adjusted subsequent gains or losses on remeasurement are recognized in consolidated profit or loss.
for any lease payments made at or before the commencement date, plus any initial direct costs incurred and an estimate of
costs to be incurred to dismantle and remove the underlying asset or to restore the underlying asset or the site on which it is
Non-current assets classified as held for sale are presented separately from the other assets in the consolidated statement of
located, less any lease incentive received. The right-of-use asset is depreciated on a straight line method over the lease term
as this method most closely reflects the expected pattern of consumption of future economic benefits. The right-of-use asset financial position.
is reduced by impairment losses, if any, and adjusted for certain remeasurements of the lease liability.

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2.12 Financial assets 2.12.4 Financial liabilities

2.12.1 Classification, initial recognition and measurement
The Group recognises a financial liability in its consolidated statement of financial position when, and only when, it becomes
party to the contractual provisions of the instrument. At initial recognition, the Group measures a financial liability at its fair value
Consequent to applicability of IFRS 9, financial assets are classified into appropriate categories on initial recognition and are minus, in the case of a financial liability not at fair value through profit or loss, transaction costs that are directly attributable to
subsequently measured at amortised cost at fair value through other comprehensive income or at fair value through profit the acquisition or issue of the financial liability. Subsequently, financial liabilities are stated at amortised cost.
or loss. The management determines the classification of financial assets into appropriate categories based on the Group’s
business model for managing the financial assets and the contractual terms of the cash flows. A financial liability is derecognized when the obligation under the liability is discharged or cancelled or expired. Where an
existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing
A financial asset is measured at amortised cost if both of the following conditions are met:
liability are substantially modified, such an exchange or modification is treated as a derecognition of the original liability and the
recognition of a new liability, and the difference in respective carrying amounts is recognized in the consolidated statement of
a) the financial asset is held within a business model whose objective is to hold financial assets in order to collect
profit or loss.
contractual cash flows; and

b) the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of 2.12.5 Offsetting financial instruments
principal and interest on the principal amount outstanding.
Financial assets and liabilities are offset and the net amount is reported in the consolidated statement of financial position when
A financial asset is measured at fair value through other comprehensive income if both of the following conditions are met: there is a legally enforceable right to offset the recognized amounts and there is an intention to settle either on a net basis, or
realize the asset and settle the liability simultaneously. The legally enforceable right must not be contingent on future events
a) the financial asset is held within a business model whose objective is achieved by both collecting contractual cash and must be enforceable in the normal course of business and in the event of default, insolvency or bankruptcy of the Group
flows and selling financial assets; and or the counterparty.

b) the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of 2.13 Hedging relationships
principal and interest on the principal amount outstanding.
The Group currently accounts for two types of hedging relationships:
A financial asset is measured at fair value through profit or loss if it is not measured at amortised cost or at fair value through
other comprehensive income. Fair value hedge

All financial assets are recognised at the time when the Group becomes a party to the contractual provisions of the instrument. Fair value hedge is a hedge of the exposure to changes in fair value of a recognized asset or liability or an unrecognized firm
Financial assets at amortised cost are initially recognised at fair value and are subsequently measured at amortised cost using commitment, or a component of any such item, that is attributable to a particular risk and could affect profit or loss.
the effective interest method. The amortised cost is reduced by impairment losses, if any. Interest income and impairment
losses are recognised in consolidated statement of profit or loss. Financial assets carried at fair value through consolidated
The Group accounts for fair value hedging relationships as follows:
statement of comprehensive income are initially and subsequently measured at fair value, with gains and losses arising from
changes in fair value recognised in other comprehensive income. Financial assets carried at fair value through profit or loss are
(a) the gain or loss on the hedging instrument is recognized in the consolidated statement of profit or loss (or consolidated
initially recorded at fair value and transaction costs are expensed in the consolidated statement of profit or loss. Realised and
statement of other comprehensive income, if the hedging instrument hedges an equity instrument for which the Group
unrealised gains and losses arising from changes in the fair values of the financial assets and liabilities held at fair value through
profit or loss are included in the consolidated statement of profit or loss in the period in which they arise. has elected to present changes in fair value in the consolidated statement of comprehensive income).

2.12.2 Derecognition (b) the hedging gain or loss on the hedged item shall adjust the carrying amount of the hedged item (if applicable) and
be recognized in the consolidated statement of profit or loss. If the hedged item is a financial asset (or a component
Financial assets are derecognised when the rights to receive cash flows from the assets have expired or have been transferred thereof) that is measured at fair value through other comprehensive income, the hedging gain or loss on the hedged
and the Group has transferred substantially all the risks and rewards of ownership. On derecognition of a financial asset, in item is recognized in the consolidated statement of profit or loss. However, if the hedged item is an equity instrument
its entirety, the difference between the asset’s carrying amount and the sum of the consideration received and receivable is for which the Group has elected to present changes in fair value in consolidated statement of comprehensive income,
recognised in consolidated statement of profit or loss. those amounts remain in other comprehensive income. When a hedged item is an unrecognized firm commitment (or
a component thereof), the cumulative change in the fair value of the hedged item subsequent to its designation is
2.12.3 Impairment of financial assets recognized as an asset or a liability with a corresponding gain or loss recognized in the consolidated statement of profit or
loss.
The Group assesses on a forward looking basis the expected credit losses associated with its debt instruments carried at
amortised cost and at fair value through other comprehensive income. The impairment methodology applied depends on Cash flow hedge
whether there has been a significant increase in credit risk. For trade receivables, the Group applies the simplified approach
permitted by IFRS 9, which requires expected lifetime losses to be recognised from initial recognition of the receivables except Cash flow hedge is a hedge of the exposure to variability in cash flows that is attributable to a particular risk associated with
for debts due from the Government of Pakistan which have been exempted from the application of Expected Credit Loss all, or a component of, a recognized asset or liability (such as all or some future interest payments on variable-rate debt) or a
model under IFRS 9 for a limited period of three years upto June 30, 2021 by the Securities and Exchange Commission of highly probable forecast transaction, and could affect profit or loss.
Pakistan (SECP) through its S.R.O 985(I) / 2019 dated September 2, 2019.

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(Amounts in thousand) (Amounts in thousand)

The Group accounts for cash flow hedging relationships as follows: 2.16 Trade debts, contract assets and other receivables

(a) the separate component of equity associated with the hedged item (cash flow hedge reserve) is adjusted to the lower of Trade debts and other receivables are recognized initially at the amount of consideration that is unconditional unless they
the following (in absolute amounts): contain significant financing components, in which case they are recognized at fair value. The Group holds the trade debts and
other receivables with the objective to collect contractual cash flows and, therefore, measures them subsequently at amortized
(i) the cumulative gain or loss on the hedging instrument from inception of the hedge; and cost using effective interest method. A provision for impairment is established under the simplified model stipulated in IFRS 9.
Under this model expected credit losses are measured based on lifetime expected loss allowance for all trade debts and other
(ii) the cumulative change in fair value (present value) of the hedged item (i.e. the present value of the cumulative receivables. The Group measures expected credit losses on trade debts and other receivables in a way that reflects:
change in the hedged expected future cash flows) from inception of the hedge.
a) an unbiased and probability-weighted amount that is determined by evaluating a range of possible outcomes;
(b) the portion of the gain or loss on the hedging instrument that is determined to be an effective hedge [i.e. the portion
that is offset by the change in the cash flow hedge reserve calculated in accordance with (a)] is recognized in other b) the time value of money; and
comprehensive income.
c) reasonableness and supportable information that is available without undue cost or effort at the reporting date about past
(c) any remaining gain or loss on the hedging instrument [or any gain or loss required to balance the change in the cash flow events, current conditions and forecasts of future economic conditions.
hedge reserve calculated in accordance with (a)] is hedge ineffectiveness that is recognized in consolidated statement of
profit or loss. The amount of the provision is charged to the consolidated statement of profit or loss. Trade debts and other receivables
considered irrecoverable are written-off.
(d) the amount that has been accumulated in the cash flow hedge reserve in accordance with (a) is accounted for as follows:
A contract asset is recognized for the Group’s right to consideration in exchange for goods or services that it has transferred
(i) if a hedged forecast transaction subsequently results in the recognition of a non-financial asset or non-financial to a customer. If the Group performs its obligation by transferring goods or services to a customer before the customer pays
liability, or a hedged forecast transaction for a non-financial asset or a non-financial liability becomes a firm consideration or before payment is due, the Group presents the amount as a contract asset, excluding any amounts presented
commitment for which fair value hedge accounting is applied, the Group removes that amount from the cash flow as a receivable.
hedge reserve and includes it directly in the initial cost or other carrying amount of the asset or the liability.
2.17 Cash and cash equivalents
(ii) for cash flow hedges other than those covered by (i), that amount is reclassified from the cash flow hedge reserve
Cash and cash equivalents in the consolidated statement of cash flows includes cash in hand and in transit, cheques in hand,
to profit or loss as a reclassification adjustment in the same period or periods during which the hedged expected
balances with banks on current, deposit and saving account, other short term highly liquid investments with original maturities
future cash flows affect profit or loss.
of three months or less and short term borrowings other than term finance.
(iii) however, if that amount is a loss and the Group expects that all or a portion of that loss will not be recovered in 2.18 Share capital
one or more future periods, it immediately reclassifies the amount that is not expected to be recovered into the
consolidated statement of profit or loss as a reclassification adjustment. Ordinary shares are classified as equity and recognized at their face value. Incremental costs directly attributable to the issue
of new shares or options are shown in equity as a deduction, net of tax, from the proceeds.
2.14 Stores, spares and loose tools 2.19 Borrowings

These are valued at weighted average cost except for items in transit which are stated at invoice value plus other charges Borrowings are recognized initially at fair value, net of transaction costs incurred. Borrowings are subsequently carried at
paid thereon till the reporting date. For items which are slow moving and / or identified as surplus to the Group’s requirements, amortized cost; any difference between the proceeds (net of transaction costs) and the redemption value is recognized in the
adequate provision is made for any excess book value over estimated realizable value. The Group reviews the carrying amount consolidated profit or loss over the period of the borrowings using the effective interest method.
of stores and spares on a regular basis and provision is made for obsolescence, if any.
Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for
at least 12 months after the reporting date.
2.15 Stock-in-trade
Exchange gains and losses arising in respect of borrowings in foreign currency are added to the carrying amount of the borrowing.
These are valued at the lower of cost and net realizable value. Cost is determined using weighted average method except
for raw material and certain purchased products in transit which are stated at cost (invoice value) plus other charges incurred 2.20 Trade and other payables
thereon till the reporting date. Cost in relation to finished goods includes applicable purchase cost and manufacturing expenses.
The cost of work in process includes material and proportionate conversion costs. Trade and other payables are recognized initially at fair value and subsequently measured at amortized cost using the effective
interest method.
Net realizable value signifies the estimated selling price in the ordinary course of business less all estimated costs of completion
and costs necessarily to be incurred in order to make the sales. These are classified as current liabilities if payment is due within one year or less (or in the normal operating cycle of the
business if longer). If not, they are presented as non-current liability.

Exchange gains and losses arising in respect of liabilities in foreign currency are added to the carrying amount of the respective liabilities.

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(Amounts in thousand) (Amounts in thousand)

2.21 Deferred Income The Group operates:

Amount received on account of operating lease rental income for terminal is recognized as deferred income where not earned - defined contribution provident funds for its permanent employees. Monthly contributions are made both by the Group and
and credited to the consolidated statement of profit or loss in the relevant period of provision of services for recognition of employees to the fund at the rate of 10% of basic salary;
rentals on straight line basis.
- defined contribution pension funds for the benefit of management employees. Monthly contributions are made by the
2.22 Contract liability Group to the fund at the rate ranging from 12.5% to 13.75% of basic salary; and

A contract liability is recognized for the Group’s obligation to transfer goods or services to a customer for which the Group - defined contribution gratuity funds for the benefit of management employees. Monthly contributions are made by the
has received consideration (or an amount of consideration is due) from the customer. If a customer pays consideration, or the Group to the fund at the rate of 8.33% of basic salary.
Group has a right to an amount of consideration that is unconditional (i.e. a receivable), before the Group transfers a good or
service to the customer, the Group shall present the contract as a contract liability when the payment is made or the payment 2.25.2 Defined benefit plans
is due (whichever is earlier).
A defined benefit plan is a post-employment benefit plan other than the defined contribution plan. The Group’s net obligation
2.23 Provisions in respect of defined benefit plans is calculated by estimating the amount of future benefit that employees have earned in
return for their service in current and prior periods; that benefit is discounted to determine its present value. The calculation is
Provisions are recognized when the Group has a legal or constructive obligation as a result of past events and it is probable performed annually by a qualified actuary using the Projected Unit Credit method.
that outflow of economic benefits will be required to settle the obligation and a reliable estimate of the amount can be made.
Provisions are reviewed at each reporting date and adjusted to reflect current best estimate. Remeasurements (actuarial gains / losses) in respect of defined benefit plan are recognized directly in equity through other
comprehensive income.
2.24 Income tax
Contributions require assumptions to be made of future outcomes which mainly include increase in remuneration, expected
The tax expense for the year comprises current and deferred tax. Tax is recognized in the consolidated profit or loss, except to long-term return on plan assets and the discount rate used to convert future cash flows to current values. Calculations are
the extent that it relates to items recognized in other comprehensive income or directly in equity. In which case, the tax is also sensitive to changes in the underlying assumptions.
recognized in other comprehensive income or directly in equity.
The Group operates defined benefit funded gratuity schemes for its management employees and non-management employees
2.24.1 Current of Engro Fertilizers Limited (EFert).

Provision for current taxation is based on the taxable income for the year calculated on the basis of the tax laws enacted or The Group also operates defined benefit funded pension scheme for EFert’s management employees; the pension scheme
substantively enacted at the reporting date, and any adjustment to tax payable in respect of previous years. provides life time pension to retired employees or to their spouses. Contributions are made annually to these funds on
the basis of actuarial recommendations. The pension scheme has been curtailed and effective from July 1, 2005, no new
2.24.2 Deferred members are inducted in this scheme. Actuarial gains on curtailment are recognized immediately once the certainty of
recovery is established.
Deferred tax is recognized using the balance sheet liability method, providing for all temporary differences between the carrying
amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is Annual provision is also made under a service incentive plan for certain category of experienced employees to continue in the
measured at the tax rates that are expected to be applied to the temporary differences when they reverse, based on the laws Group’s employment.
that have been enacted or substantively enacted by the reporting date.
In June 2011, the Group gave a one time irrevocable option to selected members of MPT Employees’ Defined Benefit Gratuity
A deferred tax asset is recognized to the extent that it is probable that future taxable profits will be available against which Fund and Defined Contribution Pension Fund to join a new MPT Employee’s Defined Contribution Gratuity Fund (the Fund), a
temporary difference can be utilized. Deferred tax assets are reviewed at each reporting date and are reduced to the extent defined contribution plan. The present value, as at June 30, 2011, of the defined benefit obligation of those employees, who
that it is no longer probable that the related tax benefit will be realized. accepted this offer, were transferred to this Fund. Furthermore, from July 2011 onwards, the monthly contributions to Defined
Contribution Pension Fund of such employees were discontinued.
2.25 Retirement and other service benefits
2.25.3 Employees’ compensated absences
2.25.1 Defined contribution plans
The Group accounts for compensated absences on the basis of unavailed leave balance of each employee at the end of
A defined contribution plan is a post - employment benefit plan under which a Group pays fixed contribution into a separate the year.
entity and will have no legal or constructive obligation to pay further amounts. Obligations for contributions to defined
contribution plans are recognized as an employee benefit expense in the consolidated profit or loss when they are due. Prepaid 2.25.4 Other benefits - Service Incentive Plan
contributions are recognized as an asset to the extent that a cash refund or a reduction in future payments is available.
Provision is made under a service incentive plan for certain category of experienced employees to continue in the Group’s
employment. The provision is made on the basis of management’s estimates of incentives to be paid to employees on fulfillment
of criteria given in the incentive plan.

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(Amounts in thousand) (Amounts in thousand)

2.26 Foreign currency transactions and translation - Consultancy fee is recognized at the time the services are rendered.

2.26.1 These consolidated financial statements are presented in Pakistan Rupees, which is the Group’s functional currency. Foreign - Delayed payment charges on overdue trade receivables are recognized on an accrual basis.
currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the
transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at - Revenue from re-gasification and transportation of Liquefied Natural Gas (LNG) to Sui Southern Gas Company Limited
year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognized in the consolidated (SSGCL) under LNG operations and Services Agreement (LSA) is recognized on the following basis:
statement of profit or loss.
● Utilization revenue on the basis of Re-gasified LNG throughput to SSGCL over time.
2.26.2 The results and financial position of all the Group entities (none of which has the currency of a hyper-inflationary economy) that ● Operations and maintenance revenue over time.
have a functional currency different from the presentation currency are translated into the presentation currency as follows:
- Revenue from tower infrastructure provisioning is recognised on straight line basis over the non-cancellable agreement
- assets and liabilities for each consolidated statement of financial position presented are translated at the closing rate at period, regardless of whether the payments from customers are received, in equal monthly amounts during the contract
the date of that consolidated statement of financial position; term. The Group considers all fixed elements of the relevant contractual escalation provisions in calculating the straight-
line revenue. Whereas revenue for cancellable agreements are recorded at the amounts invoiced to the customers, as per
- income and expenses for each consolidated profit or loss item are translated at average exchange rates (unless this the agreement.
average is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in
which case income and expenses are translated at the rate on the dates of the transactions); and - Revenue from operations and maintenance services for telecommunication infrastructure is recognized when services are
rendered as the performance obligations are generally met over time as customer simultaneously receives and consumes
- all resulting exchange differences are recognized as a separate component of equity. benefits of services as and when the services are performed by the Group. The Group generally uses output method
to measure progress towards satisfying a performance obligation. The Group recognises revenue at the amount of the
2.27 Revenue / Income recognition Group’s right to invoice as per the agreements with the customers if the Group’s right to invoice the customers is based
on the value of services transferred and the amount invoiced represents the value transferred to the customers.
Revenue is recognized to the extent that it is probable that the economic benefits will flow to the Group and the amount of
revenue can be measured reliably. Revenue is measured at the fair value of the consideration received or receivable. Revenue
- Deferred incentive revenue is recognised based on the present value of discount provided by the Group in its bundled
is recognized on the following basis:
contracts with the customers. The unwinding of discount on deferred incentive revenue is recognised as finance cost
in the statement of profit or loss. Subsequent amortisation of deferred incentive revenue is credited to revenue on a
- The Group recognises revenue at a point in time when control of product is transferred to customer. Control, depending
systematic basis.
on contractual terms, is considered to be transferred either when the product is directly uplifted by customer from the
Group’s premises or when it is delivered by the Group at customer premises.
- Revenue from energy support services is recognised by the group through bills on a pass through basis as the Group
- Revenue from contracts and long term service agreements is recognized when or as performance obligations are satisfied does not consider it controls the specific services before their delivery to customers. Accordingly, the Group recognises
by transferring control of promised services to a customer, and control either transfers over time or at a point in time. revenue arising from pass through billings on net basis.
Where, revenue over the time is recognized based on the percentage of completion method, the stage of completion is
assessed by milestones which ascertain the completion of the proportion of contract work or the performance of services 2.28 Borrowing costs
provided in the agreement.
Borrowing costs are recognized as an expense in the period in which they are incurred except where such costs are directly
- Income on bank deposits and other financial assets is recognized on an accrual basis. attributable to the acquisition, construction or production of a qualifying asset in which such costs are capitalized as part of the
cost of that asset. Borrowing costs includes exchange differences arising from foreign currency borrowings to the extent these
- Dividend income from investments is recognized when the Group’s right to receive such payment has been established. are regarded as an adjustment to borrowing costs and net gain / loss on the settlement of derivatives hedging instruments.

- Operation and maintenance fee under various contracts is measured at fair value of the consideration received or 2.29 Research and development costs
receivable and is recognized on accrual basis when services are rendered i.e. performance obligations are fulfilled in
accordance with the terms of agreements.
Research and development costs are charged to income as and when incurred, except for certain development costs which
are recognized as intangible assets when it is probable that the developed project will be a success and certain criteria,
- Revenue from supply of electricity to National Transmission and Dispatch Company (NTDC), the sole customer of Engro
Powergen Qadirpur Limited (EPQL) and Engro Powergen Thar (Private) Limited (EPTL), is recognized when the following including commercial and technical feasibility have been met.
performance obligations are satisfied:
2.30 Government grant
- Capacity revenue is recognized based on the capacity made available to NTDC; and
Government grant that compensates the Group for expenses incurred is recognized in the consolidated profit or loss on a
- Energy revenue is recognized based on the Net Electrical Output (NEO) delivered to NTDC. systematic basis in the same period in which the expenses are recognized. Government grants are deducted in reporting the
related expenses.
Capacity and Energy revenue is recognized based on the rates determined under the mechanism laid down in the Power
Purchase Agreements (PPAs).

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(Amounts in thousand) (Amounts in thousand)

2.31 Earnings per share d) Stock-in-trade

The Group presents basic and diluted earnings per share (EPS) data for its ordinary shares. Basic EPS is calculated by The Group reviews the net realizable value of stock-in-trade to assess any diminution in the respective carrying values.
dividing the profit or loss attributable to ordinary shareholders of the Holding Company by the weighted average number Net realizable value is determined with reference to estimated selling price less estimated expenditures to make the sales.
of ordinary shares outstanding during the period. Diluted EPS is determined by adjusting the profit or loss attributable
to ordinary shareholders and the weighted average number of ordinary shares outstanding for the effects of all dilutive e) Income taxes
potential ordinary shares.
In making the estimates for current income taxes payable by the Group, the management considers the applicable laws
2.32 Dividend and appropriation to reserves and the decisions / judgments of appellate authorities on certain issues in the past. Accordingly, the recognition of deferred
tax is also made taking into account these judgments and the best estimates of future results of operations of the Group.
Dividends and appropriations to reserves are recognized in the period in which these are approved.
f) Provision for retirement and other service benefits obligations
2.33 Segment reporting
The present value of these obligations depend on a number of factors that are determined on actuarial basis using a
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision- number of assumptions. Any changes in these assumptions will impact the carrying amount of these obligations.
maker. The chief operating decision-maker, who is responsible for allocating resources and assessing performance of the
g) Impairment of financial assets
operating segments, has been identified as the Board of Directors of the Holding Company that makes strategic decisions.
In making an estimate of future cash flows from the Group’s financial assets including investment in joint ventures and
3. CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS
associates, the management considers future dividend stream and an estimate of the terminal value of these investments.
Estimates and judgments are continually evaluated and are based on historical experience and other factors, including
h) Trade debts
expectations of future events that are believed to be reasonable under the circumstances. The estimates and assumptions that
have a significant risk of carrying material adjustment to the carrying amounts of assets and liabilities within the next financial
An estimate of the collectible amount of trade debts is made when collection of the full amount is no longer probable. For
year are as follows: individually significant amounts, this estimation is performed on an individual basis. Any difference between the amounts
actually collected in future periods and the amounts expected is recognized in the consolidated statement of profit or loss.
a) Property, plant and equipment and intangibles
i) Stores and spares
The Group annually reviews appropriateness of the method of depreciation and amortisation, useful life and residual value
used in the calculation of depreciation and amortisation. Further, where applicable, an estimate of the recoverable amount The Group regularly reviews the provision for slow moving stores and spares to assess the consumption of stores and
of asset is made for possible impairment on an annual basis. These calculations require the use of estimates. Any change spares, thereby ensuring that slow moving items are provided for.
in these estimates in the future, might affect the carrying amount of the respective item of property and equipment and
intangible assets, with a corresponding effect on the depreciation, amortisation charge, and impairment. j) Un-billed revenue in respect of CoD tariff adjustment

In case of acquisition of group of assets and liabilities, the Group allocates the purchase consideration to individual assets As per the applicable tariff regime, EPTL has applied to NEPRA for COD tariff adjustment. EPTL is currently billing
and liabilities on basis of their relative fair value at the date of purchase. For determination of fair value, the Group takes its revenue based on the provisional tariff for Capacity Purchase Price, previously notified by NEPRA. Meanwhile, the
into account its principle ability to generate economic benefits by either using the asset in its highest and best use or differential un-billed revenue has been recognized based on management’s best estimate of final tariff to be approved by
by selling it to another customer. Estimation of highest and best use is made on basis of estimated net cash in flows NEPRA, which will be invoiced as and when notified by NEPRA.
associated with the assets or group of assets. The consideration for selling it to another customer is based on the fair
market value after adjusting the impacts of obsolescence. k) Contingencies and Provisions

b) Investments at fair value through profit or loss / other comprehensive income Significant estimates and judgements are being used by the management in accounting for contingencies and
provisions relating to legal and taxation matters being contested at various forums based on applicable laws and the
The Group determines fair value of certain investments by using quotations from active market and conditions and decisions / judgements.
information about the financial instruments. These estimates are subjective in nature and involve some uncertainties and
matters of judgment. l) Right of use asset and corresponding lease liability

c) Derivatives IFRS 16 requires the Group to assess the lease term as the non-cancelable lease term in line with the lease contract
together with the period for which the Company has extension options which the Group is reasonably certain to exercise
The Group reviews the changes in fair values of the derivative hedging financial instruments at each reporting date based and the periods for which the Group has termination options for which the Group is not reasonably certain to exercise
on the valuations received from the contracting banks. These valuations represent estimated fluctuations in the relevant those termination options.
currencies/interest rates over the reporting period and other relevant variables signifying currency and interest rate risks.
The rate used on transition to discount future lease payments represents Group’s incremental borrowing rate.

167 168
 Annual Report 2019

(58,024,723)

(30,093)

(102,833)

(18,183)
(7,556,552)

(65,515,729)
(3,457,224)

(34,006)

(3,034,604)
2,864,149 165,063,240

2,294,273 103,581,293

2,294,273 103,581,293

403,516
373,423

65,546

2,172,510 105,138,798

2,980,907 173,689,131

2,172,510 105,138,798
19,104
7,672,981
13,320

1,106,522

- - - - - - - - - - - - -
Total

(569,876)

(238,521)

(808,397)
-

-
-

-
-

-
-

-
116,758
-

-
Dredging
(Amounts in thousand)

-
(613,249)

(140,577)

(753,826)
5,304,592

4,691,343

4,691,343

-
-

4,556,899

5,310,725

4,556,899
-

-
6,133
-

-

With specific reference to Engro Elengy Terminal Private Limited’s arrangement under Time Charter Party and LNG

Jetty
operations and Services Agreement (LSA), significant estimates further included:

i) Evaluation and separation of lease and non-lease components

(425,342)

(52,561)

(6,981)
(106,832)

(486,594)
796,744

371,402

371,402

-
-

45,580

508,693

995,287

508,693
-

-
251,104
-

-
Vehicles

Owned
The LSA has been determined to have an operating lease component with respect to terminal, a sublease of right-
of-use asset [Floating Storage and Regasification Unit (FSRU)] and certain non-lease components including utilization
/ regassification and operations and maintenance services. The assessment required significant judgement and

(21,002)

(21,002)
interpretation of the requirements of IFRS 16 with respect to separation of lease components of terminal and the right-of-

21,723

721

721

-
-

-
-

-
-

721

21,723

721
-

-
-
-

-
Leased
use asset. Accordingly, the right-of-use asset and terminal were determined not to be highly dependent or interrelated to

Furniture fixture and

each other and the lessee having the ability to use the underlying asset on its own or together with other resources readily

equipments
available to it.

(1,362,671)

(26,402)

(7,168)
(230,196)

(1,576,905)
(87,300)

(83,406)
2,019,098

569,127

569,127

622
622

15,962

965,817

2,626,128

965,817
-

3,272
620,112
13,320

-
Owned
ii) Classification of lease

The classification of lease of terminal required use of estimates of cash flows during the contract period, margins, residual
values and allocation of amounts under daily capacity charges to lease and non-lease components and determine

(1,173,896)

(88,085)

(1,261,981)
1,397,152

223,256

223,256

-
-

-
-

349,071

1,611,052

349,071
-

-
213,900
-

-
Catalyst

Rupees
minimum lease payments at the inception of lease from terminal and sublease of right-of-use asset. As a result the lease
of terminal has been determined as an operating lease as significant risk and rewards relating to the same remain with
the EETPL at the end of the lease term, taking into account the useful life and fair value of terminal assets, minimum lease

(50,359,664)

(32,581)

(23,870)

(4,034)
(6,358,558)

(56,714,218)
(2,484,357)

(33,649)

(2,234,824)
payments, residual value and the assessment that customer is not likely to exercise purchase option.

3,024,105 141,425,409

88,581,388

88,581,388

233,701
201,120

4,004

89,777,077

3,027,460 148,726,119

89,777,077
15,832
6,284,288
-

1,106,522
Machinery
Plant and

Owned
iii) Non-lease components

The non-lease components include utilization / regassification and operations and maintenance services relating to

(1,038,461)

(147,202)

(1,185,663)
1,985,644

1,985,644

-
-

-
-

1,841,797

1,841,797
-

3,355

-
-
-

-
Pipelines
terminal and right-of-use asset, recovery of SSGC Branch pipeline and other recurring costs which have been determined
and excluded from daily capacity charges based on actual cost incurred and estimates of future costs. This recovery was
estimated with reference to cost plus estimated margin, where applicable, as standalone prices were not observable.

(598,389)

(37,183)

(635,572)
(750,646)

(1,140)

(594,757)
1,814,806

465,771

465,771

155,889
155,889

-
-

588,263

1,818,592

588,263
-
4,926
-

-
Leasehold
iv) Discount rate

The rate used on transition to discount future lease payments under TCP represent the EETPL’s incremental borrowing

Building
rate. The rate has been estimated using LIBOR rates available in the lease currency and adjusted to reflect the underlying

(1,727,892)

(194,757)

(1,922,649)
5,630,598

3,902,706

3,902,706

-
-

-
-

3,856,771

5,779,420

3,856,771
-

-
148,822
-

-
lease term based on observable inputs.

Freehold
m) Provision for decommissioning costs

(134,281)

(14,641)

(148,922)
(134,921)

(2,572)

(121,617)
452,610

183,408

183,408

13,304
13,304

-
-

179,499

450,038

179,499
-
-
-

-
The timing of recognition of provision for decommissioning requires the application of judgement of existing facts and

Leasehold
circumstances, which can be subject to change. In determining the present value of the provision for decommissioning,
assumptions and estimates are made in relation to discount rates, the expected cost to decommission and remove the

Land
equipment from the site and the expected timing of those costs.

312,254
-

312,254

312,254

2,488

-
2,488

-
-

-
-

341,680

341,680
-

341,680
-

-
26,938
-

-
Freehold
n) Revenue recognition

Revenue on long-term service agreements / construction contracts is recognized based on the percentage of completion
method. The Group reviews the appropriateness of the stage of completion through milestones / cost incurred which
ascertain the completion of a proportion of the contract work or the performance of services provided.

2019 2018

Accumulated depreciation
Rupees

Additions including transfers (note 4.6)

Accumulated Impairment - reversal

Amortization of revaluation surplus

Subsidiary Company (note 4.3)

Capitalization of exchange gain by
4. PROPERTY, PLANT AND EQUIPMENT

Year ended December 31, 2018

Disposals / Write offs (note 4.5 )

Depreciation charge (note 4.4)

Accumulated depreciation

Accumulated depreciation

Accumulated depreciation
Transfers to capital spares

As at December 31, 2018

Accumulated impairment

Accumulated impairment

Accumulated impairment
Opening net book value
Operating assets, at net book value (note 4.1) 233,475,521 105,138,798

As at January 1, 2018
4.1 Operating assets

Capital work in progress - Expansion and other projects (note 4.6) 17,508,521 98,326,481

Reclassifications
Net book value

Net book value

Capital spares and standby equipments 2,390,272 943,599
253,374,314 204,408,878
Cost

Cost

Cost

Cost

169 170
 Annual Report 2019

(986,415)
2,172,510 105,138,798
(34,006)

(298)
(26,353)

(32,322)

(1,102,783)
967,746

(74,313)
(10,427,928)
2,089,850 233,475,521

3,048,524 311,457,336
(75,002,264)

2,089,850 233,475,521
67,617 139,891,707

(5,671)

60,724

(2,979,551)
Total

-
-

-
-

-
(150,277)

(958,674)
-

-
-

6.67 to 20
Dredging

4,556,899 (Amounts in thousand)

-

-
-

(1,443)
173

(1,270)
(155,276)
4,400,353

5,309,282
(908,929)

4,400,353

6.67
-

-
-
4.2 The details of immovable fixed assets (i.e. land and buildings) are as follows:
Jetty

Description of assets Address Total Area of

508,693
-

17,589
(738)

16,851

(55,487)
46,229

(9,258)
(159,925)
1,761,293

2,362,321
(601,028)

1,761,293

5 to 25
1,404,932

-
-

land in Acres
Vehicles

Owned

Dharki Plant & Colony Dharki, Sindh 726.00

Zarkhez Plant Port Qasim, Karachi 112.50
721
-

-
-

-
-

-
-
721

21,723
(21,002)

721

20
-

-
-

Rice Plant 13-KM Sheikhupura Road, Lahore 62.95

Leased

LNG Terminal South Western Industrial Zone, Port Qasim, Karachi 13.18
Furniture fixture and
equipments

Power plant and associated buildings Deh Belo Sanghari, Ghotki, Sindh 41.50
Colony Land Colony Road, Dharki, Ghotki, Sindh 16.40
965,817
-

(31,977)
3,057

(31,605)

(339,483)
333,095

(6,388)
(408,089)
1,946,653

3,681,586
(1,648,842)

1,946,653

3 to 33
1,426,918

(2,685)

(86,091)
-

Leasehold land Thar Block II, Islamkot District, Sindh 215.00

Owned

Leasehold land EZ/I/P-II-I Eastern Zone, Bin Qasim, Karachi 121.92

Production facilities EZ/I/P-II-I Eastern Zone, Bin Qasim, Karachi 3.26

No. of production
Storage facilities EZ/I/P-II-I Eastern Zone, Bin Qasim, Karachi 2.21
349,071
-

-
-

-
-

-
(151,847)
568,419

1,982,247
(1,413,828)

568,419

days
371,195

-
-
Catalyst

Rupees

Administration facilities EZ/I/P-II-I Eastern Zone, Bin Qasim, Karachi 0.60

4.3 The SECP, through S.R.O. 986(1)/2019 dated September 2, 2019 partially modified its previously issued S.R.O. 24/(1)/2012
dated January 16, 2012 and granted exemption to all companies that have executed their power purchase agreements
89,777,077
(33,649)

22,915
(29,798)

(8,763)

(655,375)
568,275

(26,376)
(8,956,798)
1,804,628 214,189,658

3,118,253 281,498,177
(65,132,539)

1,804,628 214,189,658

2.5 to 25
98,288 134,424,582

(1,880)

60,724

(2,175,980)
(986,415)
Machinery
Plant and

Owned

before January 1, 2019, from the application of IAS 21 ‘The Effects of Changes in Foreign Exchange Rates’ to the extent of
capitalization of exchange differences. Accordingly, during the year, the Group has capitalized exchange gain of Rs. 986,415
(2018: exchange loss of Rs. 1,106,522) arising on foreign currency borrowings to the cost of the related property, plant and
1,841,797
3,355

(10,850)
-

(10,850)

-
-

-
(127,962)

(1,313,625)

5
-

-
-

equipment.
Pipelines

4.4 Depreciation charge for the year has been allocated as follows:
2019 2018
588,263
(1,140)

301
1,101

301

(3,379)
596

(2,783)
(57,945)
528,676

1,816,354
(691,820)

528,676

2.5 to 10
1,980

(1,101)

(595,858)
-

Rupees
Leasehold

Cost of goods sold (note 32.1) 9,623,651 6,905,789

Building

Capital work-in-progress 55,657 -

3,856,771
-

(764)
20

(744)

-
-

-
(220,067)
5,448,813

7,591,509
(2,142,696)

5,448,813

2.5 to 33
1,812,853

-
-

Cost of services rendered (note 32.2) 469,139 478,016

Freehold

Selling and distribution expenses (note 33) 116,222 71,384

Administrative expenses (note 34) 163,259 101,363
10,427,928 7,556,552
179,499
(2,572)

-
5

(47,616)
19,378

(28,238)
(39,742)
392,289

683,192
(169,281)

392,289

1 to 8
283,342

(5)

(121,622)
-
Leasehold

4.4.1 During the year, as required under the EPCLs accounting policy, EPCL engaged an independent expert / valuer to carry out
Land

a reassessment of scrap values of certain items of plant and machinery and pipelines. Based on the valuation report of the
341,680
-

2,488
-

2,488

-
-

-
-
344,168

344,168
-

344,168

-
-

-
-

expert, the scrap values of these assets have been increased from 0% - 5% to 5% - 17% of the cost of these assets with
Freehold

effect from January 1, 2019. This change in accounting estimate of scrap values has been accounted for prospectively in
accordance with the requirements of IAS 8 “Accounting Policies, Change in Accounting Estimates and Errors” and has resulted
in a decrease in depreciation charge for the year by Rs. 147,265. Further, based on the same report the useful lives of some
of the major items of plant and machinery have also been increased by 4 years with effect from January 1, 2019 , resulting in
a decrease in depreciation charge for the year by Rs. 61,841. This has also been accounted for prospectively as a change in
accounting estimate as required under IAS 8.
Additions including transfers (note 4.6)

by Subsidiary Company (note 4.3)

Accumulated Impairment - reversal

Amortization of revaluation surplus
Year ended December 31, 2019

Annual rate of depreciation (%)

Furthermore, during the year, EETPL re-estimated useful lives of capital dredging, leasehold land, jetty, plant and machinery
Disposals / Write offs (note 4.5)
Adjustments / Reclassifications
Capitalization of exchange loss

Depreciation charge (note 4.4)

which were revised. This change in accounting estimate has also been applied prospectively and the net effect of the change
Accumulated depreciation

Accumulated depreciation

Accumulated depreciation
As at December 31, 2019
Accumulated impairment

Accumulated impairment
Opening net book value

in current financial year was decrease in depreciation expense of Rs. 100,838 in capital dredging, Rs. 3,171 in leasehold land,
Rs. 30,800 in plant and machinery and increase in depreciation of Rs. 31,140 in jetty. Assuming the assets are held until the
Net book value

Net book value

end of their estimated useful lives, depreciation in future years in relation to these assets will be decreased by the same amount
each year as stated above.
Cost

Cost

Cost

171 172
 Annual Report 2019

(Amounts in thousand) (Amounts in thousand)

4.5 The details of operating assets (having net book values in excess of Rs. 500) disposed / written-off during the year are as 4.6 Capital work in progress
follows: 2019 2018
Rupees
Description and Sold to Relationship Cost Accumulated Net book Sale Gain \
method of disposal depreciation value proceeds (Loss)
& Leasehold land 32,000 153,769
impairment
Plant and machinery 14,617,340 97,041,079
Rupees
Plant and machinery Building and civil works including pipelines 217,917 388,289
By Group Policy Furniture, fixture and equipment 1,925,012 39,272
- Diesel Generator 500 KVA Power Control Sales & Services - 3,500 205 3,295 1,321 (1,974) Advances to suppliers 449,902 96,734
- Cooling Towers Muhammad Kamran - 97,375 78,268 19,107 15,000 (4,107) Internally generated intangible asset 62,530 428,949
- Distribution transformer 1000 KVA Muhammad Arshad - 5,065 4,032 1,033 700 (333) Dredging Maintenance - 10,093
Other ancillary cost 203,820 168,296
Items having net book value 17,508,521 98,326,481
more than Rs. 500 each N.R.S & Roshan Traders 4,230 3,262 968 791 (177)
110,170 85,767 24,403 17,812 (6,591)
Balance as at January 1 98,326,481 52,994,469
Additions during the year (notes 4.6.2 and 4.6.3) 58,596,637 53,072,911
Furniture, fixture and equipment
By Group policy to existing / Transferred to:
resigned / retired executives - operating assets (note 4.1) (138,134,214) (7,603,696)
1,441 7 1,434 4,314 2,880 - intangible assets (note 6) (829,259) (134,505)
Write-off - capital spares (1,062) (2,698)
Items having net book value Impairment (note 4.6.1) (450,062) -
more than Rs. 500 each 314,329 313,799 530 3,669 3,139 Balance as at December 31 17,508,521 98,326,481

315,770 313,806 1,964 7,983 6,019 4.6.1 During the year, EDigital incurred a loss after taxation of Rs. 299,787 which includes an impairment loss of Rs. 272,787 on
Vehicles its internally generated intangible assets relating to development of digital and other related solutions/products for various
industries. Further, the Holding Company has also recognized an impairment loss of Rs. 177,274 relating to the development
By Group policy to existing / M. Asif Sultan Tajik Ex Employee 15,061 9,712 5,349 9,325 3,976 of digital and other related solutions for various industries appearing in its books.
resigned / retired executives
15,061 9,712 5,349 9,325 3,976 4.6.2 Includes, additions in civil works, infrastructure and electrical equipments acquired by Enfrashare under the asset sale and
purchase agreements entered by it . The fair value of the assets acquired under the respective agreements amounted to
Year ended December 31, 2019 441,001 409,285 31,716 35,120 3,404
Rs. 1,779,800.

4.6.3 Additions also include cost incurred in respect of PVC-III and VCM debottlenecking and other efficiency and reliability projects.
Year ended December 31, 2018 102,833 84,650 18,183 40,830 22,647
Further, it includes payments made by Engro Peroxide (Private) Limited to Chematur Engineering AB amounting to Rs. 317,292
against import of equipment for hydrogen peroxide plant. The plant is intended for construction on the land to be sub-let by
Engro Peroxide (Private) Limited at Port Bin Qasim Industrial Area subject to the approval of Port Qasim Authority.

173 174
 Annual Report 2019

(Amounts in thousand) (Amounts in thousand)

5. RIGHT-OF-USE ASSET 6. INTANGIBLE ASSETS

Software Right for Total
and future gas
Office space / licenses utilization
rented Storage tanks Buildings FSRU Total Rupees
premises As at January 1, 2018
Cost 633,475 102,312 735,787
Accumulated amortization and impairment (447,925) (35,010) (482,935)
Year ended December 31, 2019
Net book value 185,550 67,302 252,852

Recognition of right-of-use asset due Year ended December 31, 2018

to application of IFRS 16 (note 2.1.4) Opening net book value 185,550 67,302 252,852
- Cost 1,222,538 2,778,739 66,704 45,002,470 49,070,451 Additions including transfers (notes 4.6 and 6.2) 134,505 - 134,505
- Accumulated depreciation - - - - - Amortization charge (note 6.1) (64,707) (5,111) (69,818)
1,222,538 2,778,739 66,704 45,002,470 49,070,451 Closing net book value 255,348 62,191 317,539

Additions - net 1,216,400 318,319 - - 1,534,719 As at January 1, 2019

Cost 767,980 102,312 870,292
Accumulated amortization and impairment (512,632) (40,121) (552,753)
Derecognition of right of use asset
Net book value 255,348 62,191 317,539
on account of sub-lease
- cost - - - (45,002,470) (45,002,470)
Year ended December 31, 2019
- accumulated depreciation - - - - - Opening net book value 255,348 62,191 317,539
- - - (45,002,470) (45,002,470) Additions including transfers (notes 4.6 & 6.2) 829,259 - 829,259

Depreciation charge for the Reclassification

year (note 5.1) (335,518) (399,190) (16,771) - (751,479) Cost 20,757 - 20,757
Closing net book value 2,103,420 2,697,868 49,933 - 4,851,221 Accumulated amortization (18,528) - (18,528)
2,229 - 2,229
As at December 31, 2019 Amortization charge (note 6.1) (183,050) (5,111) (188,161)
Closing net book value 903,786 57,080 960,866
Cost 2,438,938 3,097,058 66,704 - 5,602,700
As at December 31, 2019
Accumulated depreciation (335,518) (399,190) (16,771) - (751,479)
Cost 1,617,996 102,312 1,720,308
Net book value 2,103,420 2,697,868 49,933 - 4,851,221
Accumulated amortization and impairment (714,210) (45,232) (759,442)
Net book value 903,786 57,080 960,866
5.1 Depreciation charge for the year has been allocated as follows:

6.1 Amortization charge for the year has been
Rupees
allocated as follows:
Cost of goods sold (note 32.1) 399,190
2019 2018
Cost of services rendered (note 32.2) 32,837 Rupees
Administrative expenses (note 34) 295,820
727,847
Cost of goods sold (note 32.1) 79,236 24,248
Capital work-in-progress 4,634 -
Depreciation amounting Rs. 23,632 was capitalized duringing the year.
Selling and distribution expenses (note 33) 15,290 11,530
Administrative expenses (note 34) 89,001 34,040
188,161 69,818

6.2 This includes cost incurred in respect of One SAP project which is being amortised over a period of 8 years.

175 176
 Annual Report 2019

(Amounts in thousand) (Amounts in thousand)

7. LONG TERM INVESTMENTS 7.3

Cases for the tax year 2003 to tax year 2011 of EVTL to determine as to whether the income of EVTL is liable to be taxed under
2019 2018 the Normal Tax Regime (NTR) or the Final Tax Regime (FTR) are pending in the Honorable Supreme Court of Pakistan (SCP)
Rupees and the Sindh High Court (SHC). In this respect, EVTL has disclosed a contingent liability amounting to Rs. 4,921,167, in its
financial statements representing potential taxation liability that EVTL may have to recognise if the aforementioned cases are
Joint venture company - Engro Vopak Terminal decided against EVTL.
Limited (EVTL) - (notes 7.1 to 7.3) - -
On the basis of prudence, the Group has recognized its proportionate share of the aforementioned potential taxation liability
Investment in associates (notes 7.5 and 7.8):
amounting to Rs. 229,530 this year bringing the total provision to Rs. 2,460,584 (2018: 2,231,054). This potential tax liability
- FrieslandCampina Engro Pakistan Limited (FCEPL)
306,075,948 (2018: 306,075,948) ordinary shares of Rs. 10 each 27,793,485 28,174,476 has been adjusted against the carrying value of its investment in EVTL to the extent of it being ‘Nil’ and the balance amount
Less: provision for impairment (note 7.4) (1,224,304) - has been recognised as a provision (note 26) depicting the Group’s constructive obligation to bear the potential exposure.
26,569,181 28,174,476
- Sindh Engro Coal Mining Company (SECMC) 7.4 FrieslandCampina Engro Pakistan Limited (FCEPL), formerly Engro Foods Limited, is a public listed company, incorporated in
159,602,637 (2018: 111,254,177) ordinary shares of Rs.10 each 3,056,865 1,655,241 Pakistan. The Holding Company holds 39.9% shareholding in FCEPL. The principal activity of FCEPL is to manufacture,process
- Siddique Sons Energy Limited (SEL) and sell dairy products, beverages, ice cream and frozen desserts. Earlier in 2016, the Holding Company partially disposed-off
33,487,639 (2018: 26,267,639) ordinary shares of Rs. 10 each 331,854 258,981 its investment in FCEPL resulting in it being recognized as an associate and the retained interest in FCEPL valued at the fair
- Pakistan Energy Gateway Limited (PEGL) value on the date of disposal in accordance with the International Financial Reporting Standards (IFRS). As per the accounting
advance against 10,000 ordinary share of Rs. 10 each 100 100 policy of the Group, investment in associate is carried at cost in the consolidated financial statements which is adjusted for
29,958,000 30,088,798
post-acquisition change in net assets. Accordingly, as at December 31, 2019, the carrying value of the Holding Company’s
Others, at cost
investment in FCEPL was Rs. 90.81 per share, whereas the quoted price was Rs. 79.30 per share.
- Arabian Sea Country Club Limited
500,000 Ordinary shares of Rs. 10 each 5,000 5,000
- GEL Utility Limited (GEL) During the year, FCEPL incurred a loss after taxation of Rs. 954,865 against a profit after taxation of Rs. 63,783 for the financial
12,272,727 (2018: 12,272,727) ordinary shares of Naira 1 each 1,325,595 1,496,582 year ended December 31, 2018. The weak financial performance is primarily impacted by macro-economic instability, impact
Less: Asset classified as held-for-sale (note 20) (1,325,595) - of currency devaluations and high interest rates which resulted in significant reduction of margins. The Holding Company’s
- 1,496,582 management taking cognizance of the above as well as quoted price of FCEPL, as indicators of impairment, has conducted an
- Magboro Power Company impairment test for its long-term investment in FCEPL to determine the recoverable amount of the investment as required under
Fair value as at January 1 154,560 154,560 International Accounting Standard 36 “Impairment of Assets”. The recoverable amount has been determined by estimating the
Less: provision for impairment (154,560) (154,560) fair value of the shares and based on this estimation, provision for impairment of Rs. 1,224,304 has been recognized.
- -
29,963,000 31,590,380 Despite challenging macroeconomic environment, FCEPL has shown considerable improvement in its volumes and market
share during the year coupled with recent price increase of its products. Keeping this in view, the management is confident of
7.1 Details of investment in EVTL is as follows:
improvement in financial performance of FCEPL in future periods.

At beginning of the year - 1,337,772

Add: Share of profit for the year (note 38) 1,014,206 1,187,907
Add: Provision adjustment in respect of tax contingency (note 26.6) 290,794 -
Less: Dividend received during the year 1,305,000 1,170,000
Less: Provision against tax contingency - 1,355,679
- -

7.1.1 As a result of distribution of current year dividend by EVTL, the provision for tax contingency amounting to Rs. 1,355,679
previously set off against the carrying value of Group’s investment in EVTL has been reduced by Rs. 290,794 representing the
difference between the share of profit and dividend received by the Group. Accordingly, the net provision set off against the
carrying value of Group’s investment in EVTL now amounts to Rs. 1,064,885 (2018: Rs. 1,355,679).

7.2 As at December 31, 2019, the Holding Company held 45,000,000 ordinary shares (2018: 45,000,000 ordinary shares) of EVTL
representing 50% of issued, subscribed & paid-up capital of EVTL.

177 178
 Annual Report 2019

(Amounts in thousand) (Amounts in thousand)

7.5 The summary of financial information of EVTL as of December 31, 2019 is as follows: 7.7 The summary of financial information / reconciliation of Associated Companies in which the Group holds material investment
as of December 31, 2019 / 2018 is as follows:
Statement of financial position Statement of profit or loss and other comprehensive income
Particulars 2019 2018 Particulars 2019 2018 FCEPL GEL SECMC PEGL SEL
Rupees Rupees Rupees
2019 2018 2019 2018 2019 2018 2019 2018 2019 2018

Cash and cash equivalents 121,854 11,665 Revenue 3,991,594 3,277,133 Revenue 38,857,336 32,439,451 2,518,661 2,042,270 17,010,726 35,411 - - - -

Current financial liabilties (excluding Profit/(Loss) after tax (954,865) 63,783 (379,972) 617,542 5,681,404 (27,132) - - 3,525 (19,431)
trade and other payables) 200,000 - Depreciation and amortization 237,356 225,511 Other comprehensive income / (loss) 5,341 (57,183) - - - - - - - -
Total comprehensive income / (loss) (949,524) 6,600 (379,972) 617,542 5,681,404 (27,132) - - 3,525 (19,431)
Non-current financial liabilities
(excluding trade and Non-current assets 12,975,543 13,190,947 9,820,958 9,159,657 72,802,841 62,532,381 - - 1,508,895 1,051,082
other payables) - - Interest income 50,074 17,529 Current assets 10,590,554 9,577,519 5,207,386 3,392,106 30,180,490 2,257,014 300 300 40,294 336,061
Total assets 23,566,097 22,768,466 15,028,344 12,551,763 102,983,331 64,789,395 300 300 1,549,189 1,387,143
Non-current assets 2,650,315 2,485,147
Current assets 758,093 650,025 Less:
Non-current liabilities (507,045) (9,095) Income tax expense 1,199,79 313,594 Non-current liabilities 3,613,752 4,616,413 6,285,797 3,506,240 55,944,604 43,451,571 - - - -
Current liabilities (736,800) (558,485) Current liabilities 11,567,680 8,810,993 4,484,212 4,876,829 20,081,609 7,352,969 - - 63,237 311,518
2,164,563 2,567,592 Total liabilities 15,181,432 13,427,406 10,770,009 8,383,069 76,026,213 50,804,540 - - 63,237 311,518
Net assets 8,384,665 9,341,060 4,258,335 4,168,694 26,957,118 13,984,855 300 300 1,485,952 1,075,625
Group’s share at 50% (2018: 50%) 1,082,282 1,283,796 Total comprehensive income Group’s share in % 39.9% 39.9% 45% 45% 11.91% 11.91% 33.33% 33.33% 19.00% 19.00%
Provision against tax contingency (1,064,885) 1,355,679 for the year 2,206,971 2,197,255 Share of net assets 3,345,481 3,727,083 1,916,251 1,875,912 3,210,593 1,665,596 100 100 282,331 204,369
Reversal of WWF - 89,280 Recognition of investment at fair value 24,337,818 24,337,818 - - - - - - - -
Others (17,397) (17,397) Others 110,186 109,575 (590,656)* (379,330) (153,728) (10,355) - - 49,523 54,612
Carrying amount - - Provision for impairment (1,224,304) - - - - - - - - -
Carrying amount 26,569,181 28,174,476 1,325,595 1,496,582 3,056,865 1,655,241 100 100 331,854 258,984

7.6 Details of material investments in Associated Companies are as follows: * This primarily represents impact of exchange rate movement on net assets of foreign associate (GEL).
2019 2018
7.8 The comparison between quoted fair value and carrying amount of listed Associated Company is given below:
Particulars FCEPL GEL SECMC SEL FCEPL GEL SECMC SEL
Rupees Rupees
At beginning of the year 28,174,476 1,496,582 1,655,241 258,981 28,271,457 1,218,689 1,208,203 - Name of entity Place of business Measurement Quoted Fair value Carrying amount
method
Add: 2019 2018 2019 2018
- Investment in associates - - 716,523 72,203 - - 450,270 262,672 Rupees Rupees
- Share of profit / (loss) for 5th Floor, The Harbour
the year (note 38) (380,991) (170,987) 685,101 670 25,449 277,893 (3,232) (3,691) FrieslandCampina Front Building, Equity Method 24,042,266 24,400,375 26,569,181 28,174,476
- Dividend received during the year - - - - (122,430) - - - Engro Pakistan Limited Plot No. HC-3, Block-4,
- Provision for impairment (1,224,304) - - - - - - - Scheme No.5, Clifton, Karachi
26,569,181 1,325,595 3,056,865 331,854 28,174,476 1,496,582 1,655,241 258,981

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8. DEFERRED TAXATION 9.
FINANCIAL ASSETS AT AMORTIZED COST
2019 2018 2019 2018
Assets Liabilities Assets Liabilities Rupees
Rupees
Investment in Term Deposit Receipts - (note 9.1) 5,421,150 -
Engro Corporation Limited 14,344 - - 249
Investment in Term Finance Certificates - (note 9.2) 500,000 -
Engro Fertilizers Limited - 12,182,426 - 7,100,022
5,921,150 -
Engro Energy Limited 95,227 307,868 381,981 151,986
Engro Polymer and Chemicals Limited 115,822 - - 390,146
9.1 These denote term deposits aggregating to USD 35 million maintained with Dubai Islamic Bank Pakistan Limited by EPCL.
Engro Elengy Terminal (Private) Limited - 995,643 - 801,678
These carry profit at the rate of 2.79% per annum and are due to mature in six equal annual installments of USD 5.833 million
Engro Infiniti (Private) Limited - 1,476 - 1,424
starting from July 15, 2021 and ending on January 15, 2024.
Net effect of consolidation adjustments 2,631 (88,023) 2,631 (17,142)
228,024 13,399,390 384,612 8,428,363
9.2 Represents investment in Term Finance Certificates amounting to Rs. 500,000 carrying markup at the rate of 3 months KIBOR
8.1 Credit / (Debit) balances are on account of: with a margin of 1.6%.
2019 2018
Rupees
10. NET INVESTMENT IN LEASE

2019 2018
- Accelerated depreciation allowance 16,736,497 14,846,654 Rupees
- Recoupable carried forward tax losses (note 8.2) (1,267) (431,194) Undiscounted lease payments analysed as:
- Recoupable minimum turnover tax (note 8.3) (559,037) (537,505)
- Recoupable Alternative Corporate Tax (note 8.4) (369,179) (4,432,116) Recoverable after 12 months 72,653,572 -
- Provisions (1,451,279) (1,220,638) Recoverable within 12 months 7,697,045 -
- Net investment in lease 13,951,282 - 80,350,617 -
- Lease liability (14,634,143) - Less: unearned finance income (32,242,748) -
- Others (501,508) (181,450) Net investment in lease 48,107,869 -
13,171,366 8,043,751
Net investment in lease analysed as:
8.2 Relates to aggregate tax losses of EPCL available for carry forward amounting to 4,373 (2018: Rs. 1,539,979).
Recoverable after 12 months 45,563,942 -
8.3 EPCL has recognized net deferred tax asset on recoupable minimum turnover tax in respect of current year amounting to Rs. Recoverable within 12 months 2,543,927 -
21,486 (2018: Rs. 27,374) as EPCL, based on its financial projections, expects to recoup it in the ensuing years. In 2013, the 48,107,869 -
High Court of Sindh, in respect of another company, overturned the interpretation of the Appellate Tribunal on Section 113 (2)
(c) of the Income Tax Ordinance, 2001 and decided that minimum turnover tax cannot be carried forward where there is no Maturity analysis of net investment in lease:
tax paid on account of loss for the year or carried forward losses. EPCL’s management is however of the view, duly supported
by the legal advisor, that the above order would not be maintained by the Supreme Court, which EPCL intends to approach if within 1 year 2,543,927 -
required. Accordingly, EPCL has recognized deferred tax asset on recoupable minimum turnover tax. between 1 and 2 years 3,015,124
between 2 and 3 years 3,362,498 -
8.4 Relates to Alternative Corporate Tax (ACT) adjustable upto 10 years. between 3 and 4 years 3,749,894 -
between 4 and 5 years 4,205,503 -
later than 5 years 31,230,923 -
48,107,869 -

10.1 Net investment in lease relates to sublease under LSA, as more fully explained in (note 2.1.4). Group’s implicit rate of return on
net investment in lease is 11.52% per annum.

10.2 Lease rentals received during the year aggregate to Rs. 1,721,772 (2018: Nil).

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11. LONG TERM LOANS, ADVANCES AND OTHER RECEIVABLES 11.5 In 2014, Engro Elengy Terminal (Private) Limited (EETPL) entered into LNG Operation and Services Agreement (LSA) with
- Considered good SSGCL. As per the terms of the LSA, EETPL was required to construct a pipeline (SSGCL Branch Pipeline) and transfer it to
2019 2018 SSGCL upon commissioning of the LNG Project and recover the cost of construction through recovery of capacity charges to
Rupees be billed to SSGCL on a monthly basis. EETPL constructed and transferred the SSGCL Branch Pipeline to SSGCL on March

29, 2015, for which the Certificate of Acceptance has been received from SSGCL. The receivable represents construction

costs incurred in this respect net of recoveries.
Executives (notes 11.1 to 11.4) 571,757 593,082
Other employees (notes 11.2 and 11.4) 41,373 71,509 11.6 On June 19, 2015, EETPL received a notice from Model Customs Collectorate (the ‘Customs Authorities’) seeking information
613,130 664,591 on import of FSRU and contending that the import attracts all leviable duties and taxes i.e. customs duty and advance income
Less: Current portion shown under current assets (note 15) 224,818 260,476 tax. EETPL was of the view that the FSRU had been classified as plant, machinery and equipment vide SRO 337(I)/2015 dated
388,312 404,115 April 22, 2015 and accordingly, along with sales tax, custom duty is also exempt under SRO 678(I)/2004 dated August 7,
2004, read with condition (vii) relating to the clause 2(a), being of the nature of import-cum-export or temporary import of plant,
Receivable from Sui Southern Gas Company Limited (SSGCL) (note 11.5) 1,006,086 1,037,487
machinery and equipment.
Less: Current portion shown under current assets (note 15) 37,544 31,401
968,542 1,006,086 Further, since the EETPL’s profits and gains are exempt from income tax for 5 years from the date of commercial operations,
Direct cost of Floating Storage & Regasification Unit (FSRU) (note 11.6) 879,577 966,093 EETPL is also entitled to exemption from collection of advance income tax. The Customs Authorities were not in agreement
Prepaid insurance and loan arrangement fee (note 11.7) 9,042,789 9,042,789 with EETPL’s views on the same and to treat import of FSRU for 15 years as a temporary import. The EETPL in response
Less: Transaction cost netted off from related borrowings 7,996,840 7,335,346 filed a suit before the High Court of Sindh (the ‘Court’) which through its order dated June 29, 2015 had restrained Customs
1,045,949 1,707,443 Authorities from collection of customs duty and advance income tax.
Other receivables 22,647 8,829

The Court, in judgement passed on May 26, 2016, held EETPL liable to custom duty and remanded the matter related to
3,305,027 4,092,566
advance tax to Customs Authorities with directions. EETPL in response to the aforementioned judgement and demand raised
by Customs Authorities has paid an amount of Rs. 1,325,103 in respect of custom duty. This is being amortized over the term
11.1 Reconciliation of the carrying amount of loans of 15 years.
and advances to executives:
11.7 These primarily represent payments made to China Export and Credit Insurance Bank (Sinosure) by Engro Powergen Thar
(Private) Limited (EPTPL) amounting to Rs. 7,094,310, in connection with insurance cover obtained over financing arrangements
Balance as at January 1 593,082 480,566
relating to Chinese lenders, and payments to various financial institutions in respect of transaction and related cost for loan
Add: Disbursements 395,646 424,153
arrangements. The portion of the above costs, Rs. 7,996,840 (2018: Rs. 7,335,346), which relate to facilities actually utilized
Less: Repayments / Amortization (416,971) (311,637) has been adjusted against related borrowings and is being amortized over the term of the loan. The balance amount of Rs.
Balance as at December 31 571,757 593,082 1,045,949 (2018: Rs. 1,707,443), will be recognized as transaction cost over the term of financing upon draw down of facilities.

11.2 Long term loans include: 12. STORES, SPARES AND LOOSE TOOLS

2019 2018
- interest free services incentive loans to executives repayable in equal monthly installments over a four years period or in Rupees
one lump sum payment at the end of such period;
Consumable stores 7,931,345 2,539,343
Spares and loose tools including in-transit Rs. 9,422 (2018: Rs. 135,955) 744,115 5,995,597
- interest free loans given to workers pursuant to Collective Labour Agreement; and 8,675,460 8,534,940
Less:
- advances to employees for car earn out assistance, long term incentive and house rent advance. Provision for surplus and slow moving items (note 12.1) 1,038,129 847,071
7,637,331 7,687,869
11.3 The maximum amount outstanding at the end of any month from the executives of the Group aggregated to Rs. 630,340
12.1 Provision for surplus and slow moving items
(2018: Rs. 593,082).
Balance as at January 1 847,071 581,966
11.4 The carrying values of these financial assets are neither past due nor impaired. The credit quality of these financial assets can Charge for the year, net 191,058 265,105
be assessed with reference to no defaults in recent history. Balance as at December 31 1,038,129 847,071

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(Amounts in thousand) (Amounts in thousand)

13. STOCK-IN-TRADE 14.5 As at December 31, 2019, trade debts aggregating to Rs. 66,249 (2018: Rs. 56,269 ) were past due and impaired and have
2019 2018 been provided for.
Rupees
2019 2018
Rupees
Raw and packaging material (note 13.1) 3,972,227 4,145,072 14.6 The movement in provision during the year is as follows:
Unprocessed rice 1,417,114 1,110,699
Fuel stock 474,106 379,474 Balance as at January 1 56,269 39,039
Work-in-process 73,289 43,373 Add: Provision for impairment 39,009 17,230
Trade debts written off as uncollectible (29,029) -
Finished goods: Balance as at December 31 66,249 56,269
- own manufactured product (note 13.1) 4,900,819 2,596,777
- purchased product net of NRV (notes 13.1) 9,075,785 8,952,883
13,976,604 11,549,660
14.7 As at December 31, 2019, trade debts aggregating to Rs. 27,154,143 (2018: Rs. 5,092,614) were past due but not impaired.
19,913,340 17,228,278
These relate to various customers for which there is no recent history of default.
13.1 Includes:

- materials in transit amounting to Rs. 632,450 (2018: Rs. 1,406,643); - Upto 3 months 22,185,214 5,003,380
- 3 to 6 months 3,598,878 89,234
- provision in respect of net realizable value amounting to Rs. 28,785 (2018: Rs. 30,000); and - More than six months 1,370,051 -
27,154,143 5,092,614
- inventories held at storage facilities of third parties amounting to Rs. 1,444,124 (2018: Rs. 557,703).

14. TRADE DEBTS 14.8 Details of amounts due from associated undertakings / related parties are as follows:
2019 2018
Rupees
- FrieslandCampina Engro Pakistan Limited - 340
Considered good - GEL Utility Limited 187,045 154,172
- secured (note 14.1, 14.2 and 14.3) 50,475,120 18,374,458 - Tenaga Generasi Limited 160,555 57,534
- unsecured 1,341,773 255,010 - Siddiqsons Energy Limited - 7,931
51,816,893 18,629,468 347,600 219,977
Considered doubtful (note 14.6) 66,249 56,269
51,883,142 18,685,737
Less: provision for impairment (note 14.6) 66,249 56,269 14.9 The ageing analysis of past due receivables from associated undertakings / related parties are as follows:
51,816,893 18,629,468
- Upto 3 months 50,233 45,336
- 3 to 6 months 90,077 47,008
14.1 Includes trade debts of EPQL amounting to Rs. 9,806,697 (2018: Rs. 7,601,705) which alongwith delayed payment charges
- More than 6 months 20,391 35,444
are secured by a guarantee from the Government of Pakistan under the Implementation Agreement and as such are considered
160,701 127,788
good. This is inclusive of overdue debt of Rs. 7,698,404 (2018: Rs. 4,964,826).

14.10 The maximum amount due from related parties at the end of any month during the year amounts to Rs. 368,753 (2018:
14.2 Include an amount of Rs. 1,423,608 (2018: Rs.1,257,583) due from SSGCL, in respect of finance income on net investment
in lease, operating lease rentals, utilization / regassification services and operations and maintenance services. 427,938).

14.3 Includes Trade debts of EPTL amounting to Rs. 14,372,385 (2018: Nil) due from from Central Power Purchasing Authority
(CPPA). Trade debts, including delayed payment charges are secured by guarantee under Implementation Agreement and as
such are not considered impaired.

14.4 As at December 31, 2019, trade debts aggregating to Rs. 24,596,501 (2018: Rs. 13,536,854) were neither past due
nor impaired.

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(Amounts in thousand) (Amounts in thousand)

15. LOANS, ADVANCES, DEPOSITS AND PREPAYMENTS 16. OTHER RECEIVABLES

2019 2018
2019 2018
Rupees Rupees
Receivable from Government of Pakistan against:
Current portion of long term loans and advances to
- Sales tax refundable 4,246,249 2,731,011
executives and other employees (note 11) 224,818 260,476
- Subsidy (notes 16.1 and 16.2) 6,368,366 6,368,366
Advances to executives and other employees (notes 15.1) 15,592 21,806
10,614,615 9,099,377
Current portion of receivable from SSGCL (note 11) 37,544 31,401 - Others 54,730 54,730
Advances and deposits 1,815,567 1,335,879 Less: Provision for impairment (note 16.7) 54,730 54,730
Loan to Engro Vopak Terminal Limited (note 15.2) 200,153 - - -
Prepayments: 10,614,615 9,099,377
- insurance 429,067 308,323 Delayed payment charges (note 16.3) 2,873,966 1,353,411
- others 2,145,640 1,212,785 Reimburseable costs from NTDC in respect of:
- Workers’ profits participation fund 608,116 272,260
4,868,381 3,170,670
Receivable from:
- Engro Vopak Terminal Limited 26,393 7,140
15.1 Represents interest free advances to executives and employees for house rent, given in accordance with the Group’s policy. - GEL Utility Limited 39,087 34,992
- Engro Foundation 24,415 1,152
15.2 Represents subordinated loan extended during the year to Engro Vopak Terminal Limited, a joint venture, by the Holding - Thar Foundation 3,022 -
Company, pursuant to agreement entered into on December 30, 2019.The loan carries mark-up at the rate of 6 months - Sindh Engro Coal Mining Company Limited 31,593 45,128
KIBOR plus 0.50% per annum payable in one lump sump payment at the time of repayment of loan. The loan is repayable on - Thar Power Company Limited 643,461 2,428
June 30, 2020. - FrieslandCampina Engro Pakistan Limited 2,202 49,229
- Dawood Hercules Corporation Limited - 798
- China East Resources Import and Export Corporation (note 16.4) 1,908,181 12,354
15.3 The carrying values of the loan and advances are neither past due nor impaired. The credit quality of these financial assets can
be assessed with reference to no defaults ever. Insurance claim receivable 99,546 483,131
Others 403,081 86,168
15.4 The maximum amount due at the end of any month during the year amounts to Rs. 440,410 (2018: 282,282) 17,277,678 11,447,568

16.1 During 2015, the Government of Pakistan (GoP) had notified payment of subsidy on sold product at the rate of Rs. 500
per 50 kg bag of Di-Ammonia Phosphate (DAP), Rs. 217 per 50 kg bag of Nitrophos (N) and Nitrogen, Phosphorous and
Potassium (NPK) fertilizers (based on phosphorous content). This subsidy scheme was effective till May 27, 2016.

During 2016, another subsidy scheme was announced by the GoP effective June 25, 2016 whereby subsidy was payable on
sold product at the rate of Rs. 156 per 50 kg bag of Urea, Rs. 300 per 50 kg bag of DAP and for Nitrophos 22:20 & 18:18 grade
(based on phosphorus content) and Nitrogen, Phosphorus and Potassium (NPK) fertilizers (based on phosphorus content).

During 2017, another subsidy scheme was announced by the GoP, effective July 01, 2017. Under the new subsidy scheme,
aforementioned rates were replaced with Rs. 100 per 50kg bag for Urea only. This subsidy scheme was effective till June 30,
2018. In line with the notification issued for the said scheme, Ministry of National Food Security and Research has appointed
third party auditors for verification of subsidy claims which is underway.

16.2 As at December 31, 2019, the aggregate provision in respect of receivable from GoP amounts to Rs. 155,127 (2018:
Rs. 155,127).

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16.3 This includes mark-up on overdue trade debts of EPQL amounting to Rs. 2,485,061 (2018: 1,353,411) of which Rs. 1,463,031 18.1 The details of investment in mutual funds are as follows:
(2018: Rs. 1,078,469) is overdue.
Number of units Amount in
16.4 Includes receivable of Rs. 1,866,499 in respect of fuel cost incurred by EPTL during commissioning of its power plant. The Rupees
amount is net of Pre-COD sales amounting to Rs. 3,781,437.
NBP Money Market Fund 1,678,960,126 1,678,960
16.5 The ageing analysis of past due receivables from associated undertakings / related parties are as follows:
UBL Liquidity Plus Fund 200,000,000 200,000
2019 2018 UBL Special Savings Plan - V 6,514,697,526 6,514,698
Rupees NIT Money Market Fund 1,054,911,868 1,054,912
ABL Special Savings Plan - II 3,547,335,915 3,547,336
ABL Special Savings Plan - III 4,113,840,000 4,113,840
Upto 3 months 355,779 77,245 MCB Cash Management Optimizer 3,922,513,575 3,922,514
3 to 6 months 36,817 24,064 Meezan Rozana Amdani Fund 205,182,881 205,183
More than 6 months - 8,129 Alfalah GHP Cash Fund 6,137,663,043 6,134,578
392,596 109,438 27,375,104,934 27,372,021

16.6 The maximum amount due from related parties at the end of any month during the year amounts to Rs. 2,678,507 (2018: 18.2 These bonds carry interest at rates ranging upto 13.36% per annum.
153,221).
18.3 These represent treasury bills carrying interest at the rate ranging upto 13.91% per annum. These have maturity dates of upto
16.7 As at December 31, 2019, receivables aggregating to Rs. 54,730 (2018: Rs. 54,730) were deemed to be impaired being one year from the reporting date.
outstanding for more than six months and provided for.
18.4 These represent placements with banks and carry interest ranging upto 17% per annum.
17. CONTRACT ASSET
2019 2018 19. CASH AND BANK BALANCES
Rupees
2019 2018
Rupees
Capacity Purchase Price component of tariff - EPTL (note 17.1) 4,896,901 -
Monthly Energy Shortfall - EPQL (note17.2) 416,382 -
Balances with banks in:
- deposit accounts (notes 19.1 and 19.2) 18,381,052 8,364,887
5,313,283 -
- deposit accounts - islamic (notes 19.3) 546,843 948,160
- current accounts 1,960,477 2,533,128
Cheques / Demand drafts in hand 100 32,653
17.1 This includes unbilled revenue in respect of Capacity Purchase Price (CPP) component of tariff in the Power Purchase
Cash in hand 4,262 1,983
Agreement (PPA) for the period July 10, 2019 to December 31, 2019. EPTL expects to raise the invoice for billing and recovery
20,892,734 11,880,811
of the amount once the decision of NEPRA in the matter is received.
19.1 Local currency conventional deposits carry return up to the rate of 11.25% (2018: 9%) per annum.
17.2 This represents receivable on account of take-or-pay cost in accordance with section 3.3 of the Gas Supply Agreement,
associated with the “Monthly Energy Shortfall” for the months of November and December 2019.
19.2 Includes Rs. 3,776,536 (2018: Rs. 4,253,965) held in foreign currency bank accounts and carry return ranging upto of 1%
(2018: 1%) per annum.
18. SHORT TERM INVESTMENTS
2019 2018
Rupees 19.3 These are shariah compliant bank balances and carry profit at rates ranging from 6% to 8.5% (2018: 4.5% to 6.0% )
per annum.
At fair value through profit or loss
Investment in units of mutual fund (note 18.1) 27,372,021 200,000
20. ASSETS CLASSIFIED AS HELD FOR SALE
At fair value through other comprehensive income
As noted in note 7, carrying value of EEL’s investment in GEL Utility Limited (GEL) amounting to Rs. 1,325,595 (Cost as at
Pakistan Investments Bonds (note 18.2) 1,795,904 7,699,778
December 31, 2019: Rs. 536,400) has been classified as Held-for-Sale. The management is committed in its plan to dispose-
Treasury bills (note 18.3) 35,532,891 58,642,472
off this investment and expects the sale to be executed within 12 months from the reporting date.
37,328,795 66,342,250
At amortized Cost
Fixed income placements (note 18.4) 4,677,644 4,587,031
Treasury bills (note 18.3) 4,625,684 2,497,835
Pakistan Investment Bonds - 8,164,204
9,303,328 15,249,070
74,004,144 81,791,320

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21. SHARE CAPITAL 23. BORROWINGS

- Secured (Non-participatory) 2019 2018
21.1 Authorized capital Rupees

2019 2018 2019 2018 Engro Rupiya Certificates (note 23.1) - 998,164
(Number of shares) Rupees
Islamic Finances (note 23.2) 18,245,391 5,039,803
700,000,000 550,000,000 Ordinary shares of Rs. 10 each 7,000,000 5,500,000 Conventional Finances (note 23.3) 50,992,449 52,117,423
(note 21.5) Foreign currency borrowings and others (note 23.4) 89,218,601 73,271,005
158,456,441 131,426,395
21.2 Issued, subscribed and paid-up capital Less: Current portion shown under current liabilities 19,856,424 10,315,924
2019 2018 138,600,017 121,110,471
2019 2018
(Number of shares) Rupees
197,869,804 197,869,804 Ordinary shares of Rs. 10 each 23.1 Engro Rupiya Certificates
fully paid in cash 1,978,699 1,978,699 Installments 2019 2018
378,293,426 325,914,951 Ordinary shares of Rs. 10 each Note Mark-up Number Commenced/ Rupees

issued as fully paid bonus shares 3,782,933 3,259,149 Commencing
576,163,230 523,784,755 (note 21.6) 5,761,632 5,237,848 from
Engro Islamic Rupiya
Certificates II 23.1.1 13.5% Lump sum July 10, 2019 - 998,164
21.3 As at December 31, 2019, Dawood Hercules Corporation Limited (the Parent Company) and associated companies respectively
held 214,469,810 and 39,438,015 (2018: 194,972,555 and 33,825,286) ordinary shares in the Holding Company. 23.2 Islamic Finances

21.4 These fully paid ordinary shares carry one vote per share and right to dividend.
Dubai Islamic Bank Limited 6 months KIBOR + 0.4% 4 half yearly November 28, 2018 200,000 600,000
21.5 During the year, the Holding Company increased its authorised share capital from Rs. 5,500,000 to Rs. 7,000,000. Privately Placed Subordinated
Sukuk Certificates 23.2.1 6 months KIBOR + 1.75% 10 half yearly January 9, 2015 - 1,118,527
21.6 During the year, the Holding Company issued bonus shares in the ratio of 1 share for every 10 shares held. Accordingly, Standard Chartered Bank
52,378,476 shares were issued. (Pakistan) Limited 6 Months KIBOR + 0.8% 1 bullet payment March 18, 2018 - 199,687
Islamic Facility Agreements 23.2.2 3 months KIBOR + 3.5% 20 half yearly 4,000,000 3,121,589
22. MAINTENANCE RESERVE Sukuks 23.2.3 3 months KIBOR + 0.9% 5 half yearly July 10, 2024 8,623,541 -
Bilateral Loan 23.2.4 6 months KIBOR + 0% 6 half yearly July 15, 2021 5,421,850 -
18,245,391 5,039,803
In accordance with the Power Purchase Agreement (PPA), Engro Powergen Qadirpur Limited (EPQL) is required to establish
and maintain a separate reserve fund (the Fund) with a depository institution for payment of major maintenance expenses. Any
interest income resulting from the depository arrangements of the Fund is to remain in the Fund to the extent of any shortfall
from the contractual limit.

Under the PPA, 1/24th of the annual operating and maintenance budget of the Power Plant less fuel expenses is required to
be deposited into the Fund on each capacity payment date until such reserve equals to nine such deposits. After the second
agreement year and thereafter the Fund may be re-established at such other level that EPQL and NTDC mutually agree.

In 2012 EPQL, due to uncertain cash flows resulting from delayed payments by NTDC has, as per flexibility available under
the PPA, reduced the amount deposited in a schedule bank, which has been invested in Treasury Bills having a face value of
Rs. 56,200 (2018: Rs 50,004) as at December 31, 2019 (note 18). Till such time the amount is deposited again to the required
level, the Company has unutilized short term financing available to meet any unexpected maintenance requirement that may
arise in the foreseeable future.

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(Amounts in thousand) (Amounts in thousand)

23.3 Conventional Finances 23.2.2 EPTPL has entered into following loan agreements:
Installments 2019 2018 - Rupee Facility Agreement with an HBL-led consortium (comprising HBL, United Bank Limited, Bank Alfalah Limited, Askari
Note Mark-up Number Commenced/ Rupees
Bank Limited, Soneri Bank Limited, Sindh Bank Limited, Bank of Punjab, MCB Bank Limited, Faysal bank Limited, Pak
Commencing
Oman Investment Company Limited (pursuant to sell down of a portion of loan by United Bank Limited), Industrial and
from
Commercial Bank of China, National Bank of Pakistan and Pak Brunei Investment Company Limited for an aggregate
amount of Rs.17,016,000. As at December 31, 2019, EPTL has made a draw down of the entire amount (2018: Rs.
Bilateral - IV 23.3.1 6 months KIBOR + 0.8% 10 half yearly July 1, 2019 - 1,500,000 13,279,243) against this facility.
Bilateral - V 23.3.1 6 months KIBOR + 0.8% 10 half yearly July 1, 2019 - 1,500,000
Bilateral - VI 23.3.1 6 months KIBOR + 0.8% 10 half yearly June 28, 2019 - 750,000 - Bilateral Facility Agreement with National Bank of Pakistan for an aggregate amount of Rs. 3,134,000. As at December 31,
Bilateral - VIII 23.3.1 6 months KIBOR + 0.8% 6 half yearly June 1, 2019 - 1,000,000 2019, EPTL has made a draw down of the entire amount (2018: Rs. 2,445,765) against this facility.
Bilateral - IX 23.3.1 6 months KIBOR + 0.4% 6 half yearly June 30, 2020 - 750,000
Bilateral - X 23.3.1 6 months KIBOR + 0.4% 6 half yearly June 26, 2020 - 2,000,000 - Islamic Facility Agreements with three banks namely Meezan Bank Limited, Faysal Bank Limited and Habib Bank Limited for
Allied Bank Limited 6 months KIBOR + 0.15% 4 half yearly March 29, 2020 2,000,000 2,000,000 an aggregate amount of Rs. 4,000,000. As at December 31, 2019, EPTL has made draw down of the entire amount (2018:
National Bank of Pakistan 6 Months KIBOR + 0.2% 4 half yearly June 28, 2022 1,000,000 1,000,000 Rs. 3,121,589) against this facility.
Deutsche Investitions
und Entwicklungsgesellschaft 6 Months LIBOR + 3.75% 9 half yearly December 15, 2019 2,071,917 2,082,897 These loans are repayable in 20 semi-annual installments commencing from the earlier of (i) First fixed date falling after 48
Allied Bank Limited 6 Months KIBOR + 0.2% 4 half yearly June 28, 2022 2,100,000 2,100,000 months since facility effective date and (ii) Second fixed date falling after Commercial Operations Date; where fixed dates are
Samba Bank Limited 6 Months KIBOR + 1.2% 14 half yearly April 1, 2013 - 99,852 defined as First June or First December of any year and carries profit at the rate of 3 months KIBOR plus 3.5%. Further, the
Allied Bank Limited 23.3.2 3 months KIBOR + 0.35% 6 half yearly June 30, 2022 2,500,000 - Shareholders of EPTPL have committed to provide cost overrun support for 10% of entire debt and pledge shares in favor of
Syndicated finance 6 months KIBOR + 0.4% 6 half yearly June 26, 2019 6,080,532 9,109,666 the Security Trustee. Additionally, shareholders other than Habib Bank Limited (HBL) have also provided SBLCs as coverage
United Bank Limited 6 months KIBOR + 0.15% 4 half yearly March 29, 2020 4,000,000 4,000,000 for their equity commitments in the project.
MCB Bank Limited 6 months KIBOR + 0.15% 4 half yearly March 29, 2020 4,000,000 4,000,000
MCB Bank Limited 6 Months KIBOR + 0.05% 4 half yearly March 28, 2021 1,500,000 1,500,000 23.2.3 During the year, EPCL has issued sukuk bonds of Rs. 8,750,000 to eligible institutional and other investors by way of private
MCB Bank Limited 23.3.2 3 months KIBOR + 0.25% 12 quarterly June 30, 2022 2,500,000 - placement. These are repayable over a period of 7.5 years in five equal semi annual installments of Rs. 1,750,000 each with
MCB Bank Limited 6 Months KIBOR + 0.20% 4 half yearly December 29, 2021 3,000,000 3,000,000 the first repayment commencing in July 2024.
JS Bank Limited SBP Rate + 2% 20 Quarterly June 27,2019 90,000 -
National Bank of Pakistan 23.2.2 3 months KIBOR + 3.5% 20 half yearly 3,134,000 2,954,007 23.2.4 During the year, EPCL has entered into a musharaka agreement with Dubai Islamic Bank Pakistan Limited (DIBPL). Rental
HBL-led consortium 23.2.2 3 months KIBOR + 3.5% 20 half yearly 17,016,000 12,771,001 payments are to be made in nine semi-annual installments commencing from January 15, 2020 and ending on January
50,992,449 52,117,423 15, 2024 and are calculated at the rate of six months KIBOR plus 0% per annum. has made early repayment of the long-term
loans outstanding as at December 31, 2018.
23.4 Foreign Borrowings and Others
23.3.1 During the year, EPCL has made early repayment of the long-term loans outstanding as at December 31, 2018.
International Financial Institutions 6 months LIBOR + 3% 24 half yearly December 15, 2010 861,800 3,563,099
China Development Bank 23.3.2 During the year, EFert obtained long term finances from MCB Bank Limited and Allied Bank Limited of Rs. 2,500,000 each,
Corporation (CDBC), to finance the capital expenditure. These borrowings have the same charge as on the borrowings from other existing Senior
China Construction Bank Lenders.
Corporation (CCBC) and
Industiral and Commercial Bank 23.4.1 EPTPL entered into a USD Facility Agreement on December 21, 2015 with three commercial banks namely China Development
of China Limited (ICBCL) 23.4.1 6 months LIBOR + 4.2% 20 half yearly December 21, 2015 77,844,158 63,498,057 Bank Corporation, China Construction Bank Corporation and Industrial and Commercial Bank of China Limited for an aggregate
International Finance Corporation 6 month LIBOR + 5% 16 half yearly June 15, 2016 1,369,774 1,579,326 amount of USD 621,000 for a period of 14 years. The amount is repayable in 20 semi-annual installments commencing from the
International Finance Corporation 23.4.2 6 months LIBOR + 3.25% 6 half yearly July 15, 2021 5,343,489 - earlier of (i) First fixed date falling after 48 months since facility effective date and (ii) Second fixed date falling after Commercial
Asian Development Bank 6 month LIBOR + 5% 16 half yearly June 15, 2016 2,055,951 2,370,604 Operations Date; where fixed dates are defined as First June or First December of any year. This loan carries mark-up at the
Local Syndicate Loan 6 month KIBOR + 1.8% 16 half yearly June 15, 2016 1,743,429 2,259,919 rate of 6 month Libor plus 4.2%. The facility is secured primarily through First ranking hypothecation charge over the project
89,218,601 73,271,005 assets of the EPTPL. Further, the shareholders of EPTPL have committed to provide cost overrun support for 10% of entire
debt and pledge shares in favor of the Security Trustee. Additionally, shareholders other than Habib Bank Limited (HBL) have
23.1.1 During the year, the entire amount raised from general public against the issuance of Engro Islamic Rupiya (EIR) Certificates - II also provided Stand By Letter of Credits (SBLCs) as coverage for their equity commitments in the project. As at December 31,
was repaid to the certificate holders on maturity along with the markup thereon. 2019, EPTPL has made draw down of USD 545,462 (December 31, 2018: USD 504,731) against this facility.

23.2.1 Privately Placed Subordinated Sukuk (PPSS) has been completely paid off during the year by EFert.

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23.4.2 In 2018, EPCL had entered into an Ijarah Agreement with International Finance Corporation for a total of US Dollars 35,000 the 24. LEASE LIABILITY
draw down of which has been made in December 2019. The principal is repayable in six semi-annual instalments commencing
2019 2018
from July 2021 and carries markup at the rate of six months LIBOR plus 3.25% payable semi annually. has made early Rupees
repayment of the long-term loans outstanding as at December 31, 2018. Non-current portion 50,941,216 -
Current portion 4,406,997 -
23.5 These finances are secured primarily through first ranking hypothecation charge over all the present and future movable Total lease liability as at December 31 55,348,213 -
properties, including all types of investments of the Group except for present and future trademarks, copyrights and certain
investments. 24.1 Represents liability recognized upon recognition of right of use assets as explained in note 2.1.4.

23.6 In view of the substance of the transactions, the sale and repurchase of assets under long term finance have not been recorded
25. DEFERRED LIABILITIES
in these financial statements.

2019 2018
Rupees
23.7 Following are the changes in the long term borrowings for which cash flows have been classified as financing activities in the
Retirement and other service benefits obligations 363,680 373,638
statement of cash flows:
Deferred incentive revenue (note 25.1) 1,248,868 -
Deferred liability on FSRU (note 25.2) 901,439 -
2019 2018 Deferred income 57,654 -
Rupees Provision for dismantling & restoration cost (note 25.3) 197,926 -
2,769,567 373,638
Balance as at January 1 131,426,395 90,743,123
Less: Current portion shown under current liabilities 430,358 113,852

2,339,209 259,786

Add
25.1 Deferred incentive revenue has been recorded in respect of the following agreements entered into by Enfrashare during the
Borrowings availed during the year 36,301,402 42,063,523
year with its customers for construction, maintenance and operation of telecommunication infrastructure and allied equipment,
Exchange loss 8,989,721 14,155,523
provision of energy solutions and energy management services whereby Enfrashare provided a discount:
Amortization of transaction cost 81,501 562,358
Less:
Repayment of borrowings (18,325,942) (13,387,841) - in respect of service fee charged to it for an initial period of three years from the respective site commencement date. The
Transaction costs (16,636) (2,710,291) related discount was provided against the discounted cash consideration under the asset sale and purchase agreements.
158,456,441 131,426,395 Present value of the discount amounted to Rs 696,000. The said amount has been recognised as part of the total consideration
Less: current portion shown under current liablities (19,856,424) (10,315,924) against assets acquired under the asset sale and purchase agreements and a corresponding deferred incentive revenue has
Balance as at December 31 138,600,017 121,110,471 been recognised in this respect which is amortised over a three years period from the site commencement date on the basis
of monthly service fee accrued under the agreement.

- against total amount of consideration to be charged to the customers for provision of energy solutions and energy
management services. Present value of the discount amounted to Rs 475,000. The said amount has been recognised as
part of the total consideration against assets acquired under the asset sale and purchase agreements and a corresponding
deferred incentive revenue has been recognised in this respect which is amortised over a period of four and a half years from
the date after six months of the project completion date.

25.2 Represent excess of billing over operating lease income in respect of Elengy Terminal. Income is recognized over a straight
line basis.

25.3 Represents provision recognized for cost of dismantling of infrastructure and allied equipment for tenanted sites acquired from
PMCL and Deodar under sale and purchase agreement.

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26. TRADE AND OTHER PAYABLES

2019 2018
Rupees
2019 2018
Rupees China Machinery Engineering Corporation 10,656,411 -
Creditors 17,772,664 13,593,382 China East Resources Import
Accrued liabilities (notes 26.1 to 26.4) 57,734,571 27,608,976 and Export Corporation 645,134 -
Provision against tax contingency of EVTL (notes 7.3 and 26.6) 1,395,698 875,375 Sindh Engro Coal Mining Company Limited - 2,070
Advances from customers 2,047,196 4,833,749 Thar Power Company Limited 255,433 -
Contractors’/ suppliers’ deposits and retention money (note 26.7) 298,709 126,874 11,556,978 2,070
Workers’ welfare fund (note 26.5) 1,338,155 1,856,394
Workers’ profits participation fund 461,475 380,185 26.5 During the year, provision made for Workers Welfare Fund under the Sindh Workers Welfare Fund Act, 2014 for tax years 2013
Sales tax payable 135,432 139,882 to 2015 amounting to Rs. 999,423 has been reversed, based on a legal advice.
Payable to retirement benefit funds 278,551 22,668
Contract Liability 416,382 - 26.6 The movement in provision is as follows:
Withholding tax payable 531,622 220,298
2019 2018
Rupees
Payable to :
- Dawood Hercules Corporation Limited 50,869 -
- FrieslandCampina Engro Pakistan Ltd - 1,562 Balance at the beginning of the year 875,375 -
- FrieslandCampina Pakistan Holdings B.V. 173,308 - Provision recognized for the year (note 36) 229,529 875,375
- Sindh Engro Coal Mining Company 19,434,879 - 1,104,904 875,375
- Engro Vopak Terminal Limited 92,358 178,137 Provision adjustment in respect of tax contingency (note 7.1) 290,794 -
Others 644,851 533,796 1,395,698 875,375
102,806,720 50,371,278
26.7 This includes deposits amounting to Rs. 252,357 (2018: Rs. 98,188) which have been kept in a separate bank accounts. This
26.1 Includes accrual for Gas Infrastructure Development Cess (GIDC) relating to EFert amounting to Rs. 18,943,544 (2018: Rs. also includes deposits amounting to Rs 34,120 (2018: Rs. 24,710) which are fully utilised in business in accordance with the
12,576,404). The Federal Government challenged the decision of the Sindh High Court (SHC), which declared the GIDC as requirements of written agreements and in terms of section 217 of the Companies Act, 2017.
ultra vires and unconstitutional in case of another company, and obtained a direction from a Larger Bench of SHC suspending
the order. However, EFert obtained an injunction / stay order based on the fact that since EFert is not a party to the case, hence, 27. ACCRUED INTEREST / MARK-UP
the suspension is not applicable to the EFert’s case. The Government preferred an appeal before the SHC for suspension of 2019 2018
Rupees
the injunction / stay order, hearing of which is underway. In a separate case, Peshawar High Court passed a judgment on May
31, 2017 validating the new GIDC Act and the same has been challenged by the petitioners in the Supreme Court of Pakistan. Accrued interest / mark-up on:
- long term borrowings 2,672,374 2,145,752
During the current year, GIDC Amendment Ordinance 2019 was promulgated by the Federal Government which provided for - short term borrowings 643,388 96,934
50% waiver of outstanding liability as at December 31, 2018 and 50% reduction in prospective GIDC on feed and fuel gas. 3,315,762 2,242,686
Subsequently, the said Ordinance was withdrawn by the Federal Government and the matter is now pending decision of the
Supreme Court of Pakistan. 28. SHORT TERM BORROWINGS
2019 2018
Rupees
Subsequent to year end, the government through notification dated January 28, 2020, has reduced GIDC on gas consumed
by fertilizer manufactures to Rs. 5/MMBTU with effect from January 28, 2020. Running finances utilized under mark-up
arrangements (note 28.1) 10,574,339 5,973,142
26.2 Includes accrual in respect of gas charges amounting to Rs. 414,492 (2018: Rs. 786,118). Shariah compliant short term finance (note 28.2) 3,075,009 668,065
Money market loans (note 28.3) 1,662,000 -
26.3 Includes Sindh Infrastructure Development Cess amounting to Rs. 751,951 (2018: Rs. 595,500). Export refinance facility (28.4) 200,000 -
15,511,348 6,641,207
26.4 Includes accruals recorded in respect of the following related parties:

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28.1 The short-term running finances available to the Group from various banks under mark-up arrangements amounts to Rs. - On June 27, 2019, EEL furnished a bank guarantee amounting to Rs. 100,000 which expired on October 4, 2019, to
46,602,000 (2018: Rs. 41,867,000). The rates of mark-up on these finances are KIBOR based and range from 0.2% to 0.5% Frontier Works Organization (FWO) along with a proposal for participation as equity partner for the white oil pipeline project
per annum over the relevant period KIBOR (2018: 0.2% to 1.5% over the relevant period KIBOR). The aggregate running being developed by FWO. Management is of the opinion that JDA will be signed with FWO for 2 years and subsequently the
finances are secured by way of hypothecation of ranking floating charge over present and future loans, advances, receivables, guarantee will be extended for the same period as well.
stocks, book debts, and other current assets and pledge over shares.
- During the year, Engro Peroxide (Private) Limited as at December 31, 2019 issued bank guarantee in favor of Excise and
28.2 The shariah compliant finances available to the Group from various banks carry profit rate of 3-Month KIBOR plus 1.10 % per Taxation Department, amounts to Rs. 3,500. The aggregate facilities amounting to Rs. 50,000 has been issued collectively
annum (2018: 3% to 11.9%). These facilities are secured by way of floating charge on all present and future current assets of in favor of Engro Peroxide (Private) Limited , EPCL and Engro Plasticizer (Private) Limited (its associate company).
the respective Group companies.
- EPTL has outstanding bank guarantees in favour of Collector of Customs amounting to Rs. 234,210 in respect of income
tax on import of plant and machinery. The guarantees were issued under the order of the High Court where the Court had
28.3 These represent money market loans obtained from commercial banks carrying mark-up ranging from 13.65% to 14.41% per
allowed the imports to be cleared without the payment of income tax till EPTL’s exemption application is decided by the
annum. These loans were obtained for a period ranging from 9 to 90 days and were secured by a joint parri passu floating
Chief Commissioner, Income tax. During the year, the Commissioner Income tax has granted exemption and based on such
charge over stocks and book debts of EPCL.
exemption order, the Collector of Customs has been releasing bank guarantees after completion of legal formalities.

28.4 This represents export refinancing facility carrying mark-up at the rate of 3% (2018: Nil) on a rollover basis for six months. This Furthermore, EPTL also has outstanding bank guarantees of various expiry dates in favour of the Collector of Customs
facility is secured by a joint pari passu floating charge over stocks and book debts of the Company. amounting to Rs. 184,260 in respect of custom duties and sales tax on import of certain items of plant and machinery. The
Collector of Customs had requested the Federal Board of Revenue (FBR) for a clarity on allowing concessionary rates of
29 UNCLAIMED DIVIDENDS duties on these items. FBR has clarified the matter in favour of EPTL and the bank guarantees are being released after the
completion of legal formalities.
Includes unclaimed dividend amounting to Rs. 215,179 (2018: Rs. 157,589) outstanding for more than 3 years from the date of
declaration. Such unclaimed dividend is payable to the Federal Government as per the Act, subject to fulfillment / clarification - On October 18, 2019, EEL furnished a bank guarantee amounting to Rs. 5,100 expiring on April 14, 2020, to K-Electric as
on certain pre-conditions specified in the Act. tender security for hiring of consultancy engineering services for Design Review and EPC Contract Supervision, Monitoring
and Control of 700 MW coal power plant project.
30. CONTINGENCIES AND COMMITMENTS
30.2 The Holding Company

Contingencies 30.2.1 In the years 2014 and 2016, the Holding Company divested some of its shareholding in Engro Fertilizers Limited (EFert). The
30.1 The details of guarantees extended by the Group are as follows: Holding Company had held such shareholding in EFert since 2010 and is of the view that capital gains on the sale of such
securities do not attract any income tax. However, the Holding Company was informed by the National Clearing Company of
30.1.1 Corporate guarantee amounting to USD 10,000 has been issued by the Holding Company to Allied Bank Limited to open Pakistan Limited (NCCPL) that their clearing system shall deduct capital gain tax on such disposal and NCCPL shall deposit
Debt Service Rerserve Account (DSRA) letter of credit in favour of senior long term lenders of Engro Powergen Qadirpur the same with the tax authorities. The Holding Company had obtained stays thereagainst from High Court of Sindh and had
Limited (EPQL). also provided bank guarantees amounting to Rs. 1,535,000 in this respect in favor of Nazir of High Court of Sindh. During
the year, the matter was decided in favor of the Holding Company by the High Court of Sindh, ordering the release of the
30.1.2 Following bank guarantees have been extended by other companies of the Group: aforementioned bank guarantees.

- EFert has issued bank guarantees amounting to Rs. 3,440,747 (2018: Rs. 2,982,754) in favour of third parties. 30.2.2 In the year 2017, FrieslandCampina Engro Pakistan LImited (FCEPL), an associated company, received an order from the
Competition Commission of Pakistan, imposing a penalty of Rs. 62,293 in respect of FCEPL’s marketing activities relating
- On February 9, 2018, EEL furnished 7 bank guarantees amounting to Rs. 5,530 each, expiring on February 8, 2020, to to one of its products. FCEPL has filed an appeal against the aforementioned order. As per the terms of the Share Purchase
Baluchistan Power Development Board (BPDB). These were issued to acquire Letter of Intents / development rights for Agreement with FrieslandCampina Pakistan Holding B.V. (FCP), the Holding Company is required to reimburse 51% of the
50MW x 7 project sites located in Kuchlak, Khuzdar and Punjgur areas of Baluchistan. amount together will all reasonable cost and expenses to FCP in case any such penalty materializes. The Group, based on
the opinion of the legal advisor, is confident of a favorable outcome of the appeal, and accordingly, no provision has been
- Bank guarantees amounting to Rs. 2,496,126 (2018: Rs. 2,496,126), have been issued by EPQL in favour of Sui Nothern Gas recognized in these consolidated financial statements in this respect.
Pipeline Limited (SNGPL), representing an amount equivalent to three months contractual quantities of gas in accordance
with the terms of Gas Supply Agreement (GSA) between EPQL and the SNGPL. 30.2.3 During 2016, the Holding Company entered into a Share Purchase Agreement (SPA) with FrieslandCampina Pakistan Holding
B.V. (FCP) for the sale of 47.1% of the total issued shares of FCEPL. In accordance with the terms of the SPA, the Holding
- On February 01, 2019, EEL furnished 10 bank guarantees amounting to USD 50 (in Pak Rupee equivalent) each, expiring Company is required to pay to FCP, an amount equivalent to 47.1% of any tax liability (as defined in the SPA) together with
on January 31, 2021, to Baluchistan Power Development Board (BPDB). These, were issued to acquire Letter of Intents / all reasonable costs and expenses incurred, in case any tax contingency materializes. The Holding Company, based on the
development rights for 50MW x 10 project sites located in Chagai corridor, Baluchistan. opinion of FCEPL’ tax and legal advisors, is confident of favorable outcomes in respect of various tax matters being contested
by FCEPL, and accordingly no provision has been recognized in these consolidated financial statements in this respect.

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30.2.4 Following are the details of treasury bills pledged by the Holding Company: curtailing the aforementioned supply. The HCS in its order dated October 18, 2011, has ordered that SNGPL should supply
100 mmscfd of gas per day to the EFert’s new plant. However, five petitions have been filed in the Supreme Court of Pakistan
- The Holding Company has pledged Treasury Bills amounting to Rs. 2,700,000, against the Standby Letters of Credit (Equity
against the aforementioned order of the HCS by SNGPL, MPNR, Agritech Limited, Pak Arab Fertilizers and Kohinoor Mills
SBLCs) provided by EEL, a subsidiary company, through National Bank of Pakistan amounting to US Dollars 12,598 (2018:
Limited alongwith 21 other companies (mainly engaged in textile business). The aforementioned petitions are pending for
US Dollars 12,598) and US Dollars 138 (2018: US Dollars 17,827) for its equity commitments related to the Sindh Engro
further hearing. EFert’s management, as confirmed by the legal advisor, considers the chances of these petitions being allowed
Coal Mining Company Limited (SECMC), its associated company, and Engro Powergen Thar (Private) Limited (EPTL), its
to be remote.
subsidiary company, in favour of the Intercreditor Agent (Habib Bank Limited) and the Project Companies (i.e. SECMC and
EPTL). Equity SBLCs expire on earlier of (i) June 30, 2023; and (ii) fulfilment of sponsor obligations under Sponsor Support Further, EFert upon continual curtailment of gas after the aforementioned decision of the HCS has filed an application in
Agreements respect of Contempt of Court under Article 199 & 204 of the Constitution of Pakistan. EFert, in the aforementioned application
has submitted that SNGPL and MPNR have failed to restore full supply of gas to EFert’s plant despite the judgment of the HCS
- The Holding Company has pledged Treasury Bills amounting to Rs 4,250,000, against a Standby Letter of Credit (Put Option
in EFert’s favor. A show cause notice has also been issued against MPNR and SNGPL dated December 31, 2011 by the HCS.
SBLC) provided by EEL, a subsidiary company, through Allied Bank Limited amounting to US Dollars 21,070 (2018: Dollars
The application is pending for hearing and no orders have yet been passed in this regard.
21,070) in favour of the Put Option Fronting Bank (Habib Bank Limited). The Put Option SBLC has been furnished to meet
sponsor obligations under Sponsor Support Agreement (Put Option SSA) and expires on earlier of (i) January 31, 2029; and 30.3.3 All Pakistan Textile Processing Mills Association (APTPMA), Shan Dying & Printing Industries (Private) Limited, Agritech Limited
(ii) fulfilment of sponsor obligations pursuant to Put Option SSA. (Agritech) and 27 others have each contended, through separate proceedings filed before the Lahore High Court that the
supply to EFert’s expansion plant is premised on the output of Qadirpur gas field exceeding 500 mmscfd by 100 mmscfd
30.2.5 Engro Elengy Terminal (Private) Limited has issued Corporate guarantees, Performance guarantees and SBLC’s amounting
and therefore, the Gas Sale and Purchase Agreement (GSA) dated April 11, 2007 between EFert and Sui Northern Gas
to US Dollars 20,700 (2018: US Dollars 20,700) , US Dollars 10,000 (2018: US Dollars 10,000) and US Dollars 5,000 (2018:
Pipeline Limited (SNGPL) be declared void ab initio because the output of Qadirpur gas field has infact decreased. Agritech
US Dollars 5,000) respectively. These guarantees have been secured by the Holding Company by pledging Treasury Bills
has additionally alleged discrimination in that it is receiving less gas than the other fertilizer companies on the SNGPL system.
amounting to Rs. 5,650,000. During the year, Treasury Bills amounting to Rs. 1,970,000 were partially released against
EFert has out rightly rejected these contentions, and is of the view that it has a strong case for the reasons that (i) 100 mmscfd
Corporate guarantees and were transferred to assets of Engro Elengy Terminal (Private) Limited.
gas has been allocated to EFert through a transparent international competitive bidding process held by the Government of
30.2.6 The Holding Company, as Sponsor Support, has permitted a bank to create ranking charge over receivables of the Company Pakistan, and upon payment of valuable license fee; (ii) GSA guarantees uninterrupted supply of gas to the new plant, with
against the Stand By Letter of Credit (SBLC) facility amounting to US Dollars 4,673 and Rs. 411,949 granted to Engro Elengy right to first 100 mmscfd gas production from the Qadirpur gas field; and (iii) both EFert and Qadirpur, are located in Sindh.
Terminal (Private) Limited. Also neither the gas allocation by the Government of Pakistan nor the GSA predicates the gas supply upon Qadirpur gas field
producing 100 mmscfd over 500 mmscfd. No orders have been passed in this regard and the petition has also been adjourned
30.2.7 Pursuant to the Finance Act, 2017 and the Finance Act, 2018, section 5A ‘Tax on undistributed reserves’ of the Income Tax
sine die given that similar matter is pending in the Supreme Court of Pakistan. However, Group management, as confirmed by
Ordinance, 2001 was substituted by ‘Tax on undistributed profits’ whereby for tax year 2017 to 2019, a tax has been imposed
the legal advisor, considers chances of petitions being allowed to be remote.
at the rate of 5% of accounting profit-before-tax, on every public company, that derives profit for a tax year but does not
distribute at least 20% of its after-tax-profits within six months of the end of the tax year, through cash. 30.3.4 EFert in the year 2013 along with other fertilizer companies, received a show cause notice from the Competition Commission
of Pakistan (CCP) for initiating action under the Competition Act, 2010 in relation to unreasonable increase in fertilizer prices.
The Holding Company has obtained a stay on the levy of aforesaid tax from the Sindh High Court, based on the grounds that
EFert has responded in detail that factors resulting in such increase were mainly the imposition of infrastructure cess and sales
this tax is applicable on the accounting profit-before-tax, that does not represent real income which can be taxed under the law
tax and partially the gas curtailment. The CCP has issued an order in March 2013, whereby it has held that EFert enjoys a
and that the requirement to distribute profits or pay tax, amounts to an interference in corporate actions and implies amendment
dominant position in the urea market and that it has abused this position by unreasonable increases of urea prices in the period
to the relevant company laws, which give shareholders the discretion to approve dividends. Furthermore, it is the contention of
from December 2010 to December 2011. The CCP has also held another fertilizer company to be responsible for abusing its
the Holding Company that such an amendment to company laws could not have been made through a money bill.
dominant position. In addition, the CCP has imposed a penalty of Rs. 3,140,000 and Rs. 5,500,000 on EFert and other fertilizer
The Holding Company, based on the opinion of its legal advisor is confident that it has a reasonable case in favour of the company, respectively. An appeal has been filed in the Competition Appellate Tribunal (CAT) and a writ has been filed in the
Holding Company. HCS and stay has been granted against the recovery of the imposed penalty. Hearings have been conducted at CAT where
Farmer Association has filed an internal application.
30.3 Engro Fertilizers Limited and its subsidiary company
In case of other fertilizer company, the CAT has transferred the case back to the CCP for reassessment. EFert has challenged
30.3.1 EFert has entered into Dealer Finance Agreements (DFAs) with different banks amounting to Rs. 4,500,000 (2018: Rs.
the composition of the CAT. EFert’s management believes that the chances of ultimate success are very good, as confirmed
4,500,000) consequent to which the banks will provide financial assistance to dealers approved by EFert. In respect to DFA of
by legal advisor, hence, no provision has been made in this respect.
Rs. 3,000,000 from the banks, EFert has agreed to bear 5% to 10% of the principal in case of default by the dealers.
30.3.5 During 2015, EFert received a sales tax order from the tax department for the year ended December 31, 2013 pertaining to
As at December 31, 2019, the banks have made disbursements to dealers under the DFAs amounting to Rs. 3,337,876 (2018: discharge of output tax liability, on assumed production of urea amounting to Rs. 402,875 and on presumption that output
Rs. 1,254,832) maturing on various future dates. tax liability is not being discharged by EFert on advances received from dealers amounting to Rs. 1,844,075. EFert filed an
appeal thereagainst with the Commissioner Inland Revenue (Appeals) [CIR(A))] which decided the matters in favour of EFert.
30.3.2 EFert had filed a constitutional petition in the High Court of Sindh (HCS), Karachi against the Ministry of Petroleum and Natural
The department thereafter challenged the decision of the CIR(A) with the Appellate Tribunal Inland Revenue (ATIR), which is
Resources (MPNR), Ministry of Industries and Production (MIP) and Sui Northern Gas Pipeline Company Limited (SNGPL) for
pending to be heard. No provision has been made in this respect in these consolidated financial statements.
continuous supply of 100 mmscfd gas per day to EFert’s new plant (Enven) and to prohibit from suspending, discontinuing or

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30.3.6 On July 3 2018, the Deputy Commissioner Inland Revenue (DCIR), LTU raised an order for the period June 2016 to July 2017 30.5 Elengy Terminal Pakistan Limited and its subsidiary company
with a demand of Rs. 1,006,000 mainly on account of further sales tax to be charged on sales to unregistered persons. EFert
filed an appeal thereagainst with the CIR(A) who disposed off the appeal in favor of the taxation department on September 30.5.1 The Sindh Finance Act, 1994, prescribed the imposition of an infrastructure fee at the rate of 0.5% of the C&F value of all
24, 2018. A constitutional petition against the said order has been filed with the HCS and stay for recovery of demand against goods entering or leaving the province of Sindh via sea or air. The Act thereafter was last amended through Sindh Finance Act,
CIR(A)’s order was obtained on October 31, 2018. EFert also filed an appeal against CIR(A) decision which is pending before 2014 according to which infrastructure fee will range from 0.9% to 0.95% of total value of goods as assessed by the Custom
the ATIR. EFert’s management believes that the chances of ultimate success are very good, as confirmed by legal advisor, Authorities (the Authorities) plus one paisa per kilometer against various slab of net weight of goods.
hence, no provision has been made in this respect.
On July 11, 2014, Engro Elengy Terminal (Private) Limited (EETPL) filed a petition against the aforementioned levy before
30.3.7 In the year 2017, the High Court of Islamabad in its order dated June 8, 2017 declared that the income derived by the Contractor HCS where it is currently pending. Earlier, the Court through an interim order on November 11, 2014 petitions filed by others,
from its contract with EFert, is subject to tax as per Clause 4 of Article 5 of Double Taxation Treaty between Pakistan and the directed companies to clear the goods on paying 50% of the amount of levy and furnishing bank guarantee / security for the
Netherlands. Thus confirming demand order issued of Rs 1,178,391. In respect thereof, the Contractor preferred an appeal in balance amount. The payment of 50% of the amount of levy has been expensed out in the consolidated financial statements.
the Supreme Court of Pakistan (SCP). During the year, the SCP decided the case on ex-parte basis against the contractor and
review application for case restoration has been filed by the Contractor. It is expected that on adjudication on the merits of the In this respect, EETPL has paid 50% of the above levied cess and has provided bank guarantee amounting to Rs. 15,000
case, the exposure will not exceed Rs 200,000 for EFert. Although certain implications arise under the terms of the Contract, the (2018: Rs. 15,000) in favor of the Custom Authorities to comply with interim orders of the Court. The bank guarantee shall
chances of any obligation crystallising on part of EFert given the time lines of any separate proceedings under the Income Tax continue and remain valid until the decision of the Court in the above mentioned cases. The bank guarantee is secured against
Ordinance, 2001 are remote. Accordingly, no provision has been made in respect of the demand order issued by tax department. lien over deposit. Based on the merits of the case and as per the opinion of its legal advisor, EETPL expects a favorable
outcome on the matter and accordingly no provision has been made in this respect in these consolidated financial statements.
Moreover, management has made an assessment on the basis of profit figures shared by the Contractor and has evaluated
maximum exposure of Rs. 200,000, if the decision is made on the merits of the case. 30.5.2 In 2014, EETPL imported steel linepipes (the goods) for the LNG Project, on which the authorities allowed exemption from
custom duty, but did not allow exemption from sales tax. EETPL filed a petition before the Court against levy of sales tax on
30.3.8 Claims, including pending lawsuits, not acknowledged as debts amounting to Rs. 61,914 (2018: Rs. 58,680). the goods and to restrain the authorities from hindering clearance of the same. Under interim orders, the Court directed the
authorities to release the goods subject to deposit of pay order / bank guarantee with the Nazir of the Court amounting to Rs.
30.4 Engro Energy Limited and its subsidiary companies 9,026 which has been duly deposited. The matter is currently pending for further hearing.

30.4.1 In 2018, EEL took over the operations and maintenance of the power plant owned by Tenega Generasi Limited (TGL) under an Further, EETPL received various orders on December 12, 2017 in respect of the import of pipeline material for natural gas
agreement signed between both parties. EEL needs to submit a perfomance bond equivalent to USD 930,000 on an annual during 2014 and 2015, raising an aggregate demand of Rs. 148,282 in respect of customs duty, sales tax and advance income
basis as per the agreement. The bond was furnished by EEL on October 21, 2019 and is set to expire on October 20, 2020. tax on the same. However, EETPL being exempted from levy of customs duty and sales tax, filed a petition before the Court
on February 14, 2018, and has obtained stay in this regard.
30.4.2 In 2019, EEL submitted bids for further exploration of coal reserves in three blocks in Thar on invitation of bids issued by Sind
Coal Authority. As part of the bids submission requirements, the Company furnished bank guarantees amounting to USD 15 The Group based on the merits of the case and as per the opinion of legal advisor, expects a favorable outcome on the matter
per block for each of the three blocks on November 06, 2019 which are set to expire on May 03, 2020. and accordingly no provision has been made in this respect in these consolidated financial statements.

30.4.3 Meezan Bank Limited (MBL), National Bank Limited (NBP) and Habib Bank Limited (a related party of EPTL), have issued 30.5.3 EETPL in connection with the import of FSRU, received a demand from Customs Authority amounting to Rs. 1,530,494
guarantees of Rs. 1,800,000, 1,500,000 and 1,425,000, each expiring on November 21, 2020, December 31, 2020 and contending that the import of FSRU attracts payment of advance income tax. EETPL is of the view that its profits and gains are
August 01, 2020 respectively, on behalf of the EPTL in favour of SECMC to secure the EPTL’s payment obligations under the exempt from income tax for 5 years from the date of commercial operations. EETPL in response to the above demand has filed
Coal Supply Agreement. The SBLC Issuing Banks have entered into a non-funded financing facility with the Company as Junior an appeal based on which the Chief Commissioner Inland Revenue (CCIR) through its order dated August 22, 2016 remanded
Creditors and acceded the Intercreditor Agreement and security accordingly. the case back to the concerned commissioner, which again rejected the request for exemption against which EETPL filed an
appeal before CCIR. EETPL, based on the merits of the case and opinion of its tax consultant and legal advisor, is expecting a
favorable outcome in this case. Accordingly, no provision has been recorded in this respect.

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30.6 Engro Polymer and Chemicals Limited and its subsidiary companies 30.9.3 As of December 31, 2019, the rentals outstanding amounted to Nil (2018: Rs. 14,053) in respect of storage and handling
contracts of Ethylene Di Chloride (EDC) and caustic soda.
30.6.1 The Deputy Commissioner Inland Revenue (DCIR) through order dated January 8, 2016, raised a sales tax demand of Rs.
524,589 on account of alleged short payment of sales tax due on the finished products of Engro Polymer and Chemicals Limited 30.9.4 EEL has also provided sponsor support contractual commitment, among other commitments, in favour of Senior Lenders
(EPCL) that would have been produced and sold from the excess wastage of raw material. EPCL filed appeal thereagainst amounting to USD 5,400 and USD 41,600 as cost overrun support pursuant to the Sponsor Support Agreements (SSA) dated
before the Commissioner Inland Revenue Appeals [CIR(A)] on the grounds that the order passed against EPCL was absolutely February 22, 2016 for SECMC and February 1, 2016 for EPTL respectively (and the Amendment and Restatement Agreement
baseless as the DCIR had used inappropriate theoretical assumptions for calculating the sales tax liability. The CIR(A) through dated February 12, 2016 relating to the SSA in case of EPTL).
his order dated March 10, 2016, has decided the matter in favor of the Group. However, the department has challenged the
said order of CIR(A) before Appellate Tribunal Inland Revenue (ATIR). No proceedings regarding this matter has been carried 30.9.5 During the year, Engro Peroxide (Private) Limited, a subsidiary of EPCL, has entered into a contract with Chematur Engineering
out by ATIR, till the year end. The Group, based on the advice of its tax consultant, is confident of favourable outcome of this AB to establish a plant of Hydrogen Peroxide at a consideration of EUR 6,993. As at December 31, 2019 commitment for civil
matter, accordingly, no provision has been made in this respect in these consolidated financial statements. works and equipment procurement amounts to EUR 5,140.

30.9.6 EETPL under the Time Charter Party and LNG Storage and Re-gasification Agreement (Agreement) with Excelerate Energy
30.7 Engro Eximp Agriproducts (Private) Limited
Middle East, LLC (EE) has furnished Standby Letter of Credit (SBLC) through National Bank of Pakistan amounting to USD
20,700 ( 2018: USD 20,700) to EE. This SBLC is valid till March 7, 2020 and is renewable annually. The aforementioned
30.7.1 During the year ended December 31, 2017, the tax department had raised a demand of sales tax of Rs. 250,000 for not
guarantee is secured against ECL’s owned Treasury Bills equivalent to 10% margin of the facility amount and it is a
charging sales tax on rice husk / rice bran for the tax year 2015. There was an error in the order as the department had
corporate guarantee.
treated all the by-products falling under the category of rice bran or rice hull / husk; though in reality the proportion of these
two products among by-products is comparatively low while rice bran was admittedly exempt during that period. As the value
30.9.7 Group has entered into commercial lease agreement for lease of office. The aggregate lease payments as monthly rentals
of rice husk was wrongly taken, the Commissioner (Appeals) has vacated the order and demand but upheld the legal position
amounting to Rs. 51,907 (2018: Rs. 90,000)
regarding charging of sales tax on rice husk. EEAP has gone in appeal as it is of the view that the department is not treating
husk correctly. Currently, the matter is pending before the Appellate Tribunal. 30.9.8 On June 27, 2019, EEL furnished a bank guarantee amounting to Rs. 100,000 which expired on October 4, 2019, to Frontier
Works Organization (FWO) along with a proposal for participation as equity partner for the white oil pipeline project being
30.8 Associated Company and Joint Venture developed by FWO. Management is of the opinion that JDA will be signed with FWO for 2 years and subsequently the
guarantee will be extended for the same period as well.
30.8.1 Details of material contingencies which might affect share of profit from associates and joint venture are as follows:
30.9.9 National Bank of Pakistan (NBP) has issued Standby Letters of Credit (Equity SBLCs) worth USD 18,900 and 51,100 (in Pak
30.8.2 On January 18, 2017, FCEPL received an order from Competition Commission of Pakistan (CCP), imposing a penalty of Rupee equivalent) on behalf of EEL for its equity commitments related to SECMC and EPTL in favour of the Inter-creditor Agent
Rs. 62,293 in respect of the FCEPL’s marketing activities relating to one of its products. FCEPL filed an appeal against the (Habib Bank Limited) and the Project Companies (SECMC and EPTL respectively). The Equity SBLCs have been furnished
aforementioned order on February 8, 2017, which was decided by the CCP tribunal on January 16, 2019, in the FCEPL’s favor. for subscription and / or contribution of sponsor equity pursuant to the Sponsor Support Agreements (SSAs) originally dated
However the CCP has appealed the decision of the tribunal in the Supreme Court (SC) of Pakistan and FCEPL has submitted February 26, 2016 and February 1, 2016, respectively, (and both as amended and restated from time to time). Equity SBLCs
its response in the SC which is pending adjudication. expire as per the terms of the relevant SSAs. These SBLCs are secured through lien over cash or cash equivalent of the Holding
Company. As of December 31, 2019, the outstanding amount of these SBLCs are USD 12,599 (2018: 12,599) and USD 138
30.8.3 FCEPL has provided bank guarantees to the Government of Sindh, amounting to Rs. 229,886 (December 31, 2018: Rs. (2018: 17,827) for SECMC and EPTL, respectively.
212,887), upon the order of the High Court of Sindh to furnish bank guarantees for 50% of the amount of Infrastructure cess
of the goods entering or leaving the province through air or sea. 30.9.10 Allied Bank of Pakistan (ABL) has issued a Standby Letter of Credit (Put Option SBLC) worth USD 21,070 on behalf of the
Holding Company relating to EPTL in favour of the Put Option Fronting Bank (Habib Bank Limited). The Put Option SBLC has
30.9 Commitments been furnished to meet sponsor obligations under Sponsor Support Agreement (Put Option SSA) dated March 21, 2016 and
expires on earlier of (i) June 30, 2020 or (ii) on payment of the Maximum Amount. It is secured through lien over cash and cash
Details of commitments as at December 31, 2019 entered by the Group are as follows: equivalent of the The Holding Company.

30.9.1 Commitments in respect of capital and operational expenditure contracted but not incurred amount to Rs. 9,297,407 (2018: 30.9.11 ​EEAP has entered into export selling contracts of 10,793 (2018: 9,521 tons) of Super Basmati Rice to various parties on a
Rs.23,026,122). agreed terms for delivery on various dates subsequent to the year end. The sales value of these open commitments at year
end exchange rate amounts to Rs. 1,352,854 (2018: Rs. 1,181,436).
30.9.2 The aggregate facilities available to Group for opening Letter of credits and bank guarantees, and other commitments other than
30.9.12 Commitments given by the associated companies and joint venture in respect of capital and operational expenditure including
those disclosed elsewhere in these consolidated financial statements, amounts to Rs. 39,185,714 (2018: Rs. 22,419,558).
bank guarantees amount to Rs. 13,952,924 (2018: Rs. 10,020,300). Other commitments include arrangements in respect of
standby letters of credit and Ijarah which are not material to the Group.

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2019 2018 32. COST OF REVENUE

Rupees
2019 2018
31. REVENUE Rupees
Own manufactured products (notes 31.1 and 31.2) 181,614,689 124,315,998
Less: Cost of goods sold (note 32.1) 148,363,615 111,204,177
- Sales tax (12,413,041) (9,670,660) Cost of services rendered (note 32.2) 5,022,189 9,255,589
Finance cost on lease liability 3,847,684 -
- Discounts (523,257) (360,984)
157,233,488 120,459,766
168,678,391 114,284,354
Purchased product (note 31.3) 44,593,196 45,766,185
32.1 Cost of goods sold
Services rendered (note 31.4) 16,027,425 14,347,524
Raw and packing materials consumed
Less: Sales tax (3,379,436) (2,829,825)
including unprocessed rice (note 32.1.1) 69,939,952 36,080,329
57,241,185 57,283,884
Salaries, wages and staff welfare (note 32.1.2) 5,137,830 4,221,010
225,919,576 171,568,238 Fuel and power 18,752,069 20,032,256
31.1 Includes export sales amounting to Rs. 3,559,552 (2018: Rs. 2,857,507). Operation and management 882,069 -
Repairs and maintenance 2,392,542 1,570,319
31.2 Includes revenue from sale of Energy which comprises of: Depreciation - Right of use Asset 399,190 -
Depreciation (note 4.4) 9,623,651 6,905,789
Capacity purchase price (note 31.2.1) 20,809,750 4,037,816 Amortization (note 6.1) 79,236 24,248
Energy purchase price 33,259,700 9,168,762 Reversal of provision for Impairment
54,069,450 13,206,578 against operating assets - (403,516)
Consumable stores 1,623,899 1,056,423
Staff recruitment, training, safety and other expenses 300,916 274,783
31.2.1 Includes amount subject to Commercial Operation Date (COD) tariff adjustment amounting to Rs. 5,967,561. The COD tariff Purchased services 1,666,901 1,034,191
adjustment is a variable consideration based on the management’s best estimate. Variable consideration is not constrained as Storage and handling / product transportation 1,681,375 1,371,309
the potential reversal of cumulative revenue recognized will not be significant. Travel 358,188 218,928
Communication, stationery and other office expenses 100,367 134,749
31.3 This primarily includes sale of Di-Ammonium Phosphate (DAP) by EAPL. Insurance 1,244,075 749,051
Rent, rates and taxes 85,961 78,066
31.4 This includes revenue from services rendered by ETPL which comprises of : Provision against surplus and slow moving spares (note 12.1) 191,058 265,105
Other expenses 82,681 46,568
2019 2018
Rupees Manufacturing cost 114,541,960 73,659,608

Add: Opening stock of work-in-progress (note 13) 43,373 47,372

Capacity charges - 9,688,934

Operating lease rental income 805,133 -
Less: Closing stock of work-in-progress (note 13) 73,289 43,373
Revenue from O&M services 3,001,211 -
(29,916) 3,999
Finance income on sublease 5,290,427 -
Cost of goods manufactured 114,512,044 73,663,607
Revenue from utilization / regasification services 3,615,949 2,912,172
12,712,720 12,601,106 Add: Opening stock of finished goods
manufactured (note 13) 2,596,777 3,543,390
Less: Closing stock of finished goods
manufactured (note 13) 4,900,819 2,596,777
(2,304,042) 946,613
Cost of goods sold
- own manufactured product 112,208,002 74,610,220
- purchased product (note 32.1.1) 36,155,613 36,593,957
148,363,615 111,204,177

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32.1.1 Cost of goods sold - purchased product 34. ADMINISTRATIVE EXPENSES

2019 2018
2019 2018
Rupees Rupees

Opening stock net of NRV (note 13) 8,982,883 4,638,428 Salaries, wages and staff welfare (note 34.1) 2,653,084 1,720,525
Add: Purchases 36,248,515 40,938,412 Staff recruitment, training, safety and other expenses 167,961 165,958
Less: Closing stock net of NRV (note 13) 9,075,785 8,982,883 Repairs and maintenance 69,828 46,472
36,155,613 36,593,957 Advertising 587,608 134,451
Rent, rates and taxes 315,835 703,651
32.1.2 Includes Rs. 310,991 (2018: Rs. 252,797) in respect of staff retirement benefits. Communication, stationery and other office expenses 238,237 133,972
Travel 439,955 133,287
32.2 Cost of services rendered Depreciation - Right of use Asset 295,820 -
Depreciation (note 4.4) 163,259 101,363
Fixed expenses 1,618,324 6,790,703 Amortization (note 6.1) 89,001 34,040
Variable expenses 2,289,421 1,709,105 Purchased services 761,592 674,943
Depreciation (note 4.4) 469,139 478,016 Directors remuneration 262,767 479,594
Depreciation - Right of use Asset 32,837 - Others 111,378 169,046
Amortization of intangible assets 267 - 6,156,325 4,497,302
Amortization of direct cost on FSRU 86,516 86,516
Salaries, wages and benefits (note 32.2.1) 155,997 40,168 34.1 Includes Rs. 306,534 (2018: Rs. 209,934) in respect of staff retirement benefits.
Fuel & Power 71,167 -
Rent, rates and taxes 113,776 -
Repairs and maintenance 83,873 104,875
Travelling and entertainment 25,529 11,894
Security and other expense 75,343 34,312
5,022,189 9,255,589

32.2.1 Includes Rs. 6,278 (2018: 2,236) in respect of staff retirement benefits.

33. SELLING AND DISTRIBUTION EXPENSES

Salaries, wages and staff welfare (note 33.1) 1,213,093 1,115,784
Staff recruitment, training, safety and other expenses 206,514 168,720
Product transportation and handling 5,206,104 5,750,047
Repairs and maintenance 56,139 8,132
Advertising and sales promotion 472,935 632,317
Rent, rates and taxes 436,305 411,288
Communication, stationery and other office expenses 40,157 33,358
Travel 204,389 155,218
Depreciation (note 4.4) 116,222 71,384
Amortization (note 6.1) 15,290 11,530
Purchased services 75,117 107,376
Others 61,021 23,102
8,103,286 8,488,256

33.1 Includes Rs. 96,292 (2018: Rs. 74,296) in respect of staff retirement benefits.

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35. OTHER INCOME 36.1 Auditors’ remuneration:

2019 2018 The aggregate amount charged in respect of auditors’ remuneration, including remuneration of auditors’ of foreign subsidiaries,
Rupees is as follows:
Financial assets:
Income on deposits / other financial assets 10,416,401 5,243,395 2019 2018
Rupees
Income on shariah compliant deposits 40,393 1,228
Exchange gain 121,307 219,208 Fee for:
Interest on receivable from SSGCL 184,236 189,374 - audit of annual financial statements 11,983 13,180
- review of half yearly financial statements 5,040 2,256
Non financial assets: Special audits, certifications, review of compliance with Code of Corporate
Subsidy from Government of Pakistan - 1,271,334 Governance and other assurance & advisory services 28,056 8,337
Insurance claims - 841,790
Gain on disposal of property, plant and equipment 31,618 22,647 Taxation services 14,343 15,746
Income from sale of spares / scrap 124,389 37,677 Reimbursement of expenses 2,571 2,330
Reversal of provision for Worker’s Welfare Fund 999,423 650,110 61,993 41,849
Delayed payment charges on overdue receivables 1,520,555 537,066
Others 225,112 133,539 36.2 This includes cost of construction of a hospital and school at Thar aggregating to Rs. 282,907 (2018: nil).
13,663,434 9,147,368
36. OTHER OPERATING EXPENSES 36.3 Under the Share Purchase Agreement (SPA) with FrieslandCampina Pakistan Holding B.V. (FCP), the Holding Company is
Workers’ profits participation fund 1,732,531 1,493,005 required to pay FCP an amount equal to 51% of the sales tax receivable of FrieslandCampina Engro Pakistan Limited (previously
Workers’ welfare fund 547,554 555,443 Engro Foods Limited) (FCEPL), an associated company, recognized in the financial years 2012 to 2016, if it is not recovered by
Legal and professional charges 1,068,502 486,174 FCEPL within six years after it is recognized. Accordingly, on prudence basis, the Holding Company has recognized its liability
Human resource development 814,624 658,883 under the SPA being 51% of the sales tax receivable pertaining to FCEPL being sales tax short recovered till December 31,
Research and development 272,914 130,198 2019 amounting to Rs. 162,000 included above.
Provision against tax contingency of EVTL (note 7.3) 229,529 875,375
37. FINANCE COST 2019 2018
Auditors’ remuneration (note 36.1) 61,993 41,849 Rupees
Interest / mark-up on:
Provision for doubtful debts 39,009 17,230 - long term borrowings 9,768,552 2,616,418
Provision against sales tax receivable 244,000 - - short term borrowings 1,069,268 445,846
Donations (notes 36.2 and 51) 748,948 308,187 Markup on shariah compliant borrowings 511,780 828,782
Exchange loss 783,185 280,212 Interest on Lease Liabilities 506,170 -
Impairment against long-term investment 1,224,304 154,560 Unwinding of deferred incentive revenue 99,506 -
Write-off of property, plant and equipment 452,484 - Foreign exchange loss, net 682,728 984,374
Others (note 36.3) 258,043 517,540 Amortization of transaction costs 481,262 -
8,477,620 5,518,656 Delayed payment charges 323,377 -
Financial / bank charges 1,282,629 492,810
Others 25,000 84,991
14,750,272 5,453,221
38. SHARE OF INCOME FROM JOINT VENTURE AND ASSOCIATES
Joint venture:
Engro Vopak Terminal Limited (EVTL)
Share of profit before taxation 1,703,386 1,255,425
Less: Share of provision for taxation (599,900) (156,798)
1,103,486 1,098,627
Add / Less: Reversal / Provision for WWF (89,280) 89,280
Share of profit for the year end 1,014,206 1,187,907
Less: Provision against tax contingency (note 7.3) - (1,355,679)
1,014,206 (167,772)

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2019 2018
Rupees

Associates:
Share of profit / (loss) from:
- Sindh Engro Coal Mining Company Limited 685,101 (3,232)
- GEL Utility Limited (170,987) 277,893
- Siddique Sons Energy Limited 670 (3,691)
- FrieslandCampina Engro Pakistan Limited (380,991) 25,449

133,793 296,419

1,147,999 128,647

39. TAXATION
Current
- for the year 9,567,547 13,743,382
- for prior years (note 39.1.1) 261,893 1,667,136
9,829,440 15,410,518

Deferred 5,892,487 (2,615,199)

15,721,927 12,795,319

Details of significant income tax matters are as follows:

39.1 The Holding Company

39.1.1 Includes provision for ‘Super Tax for rehabilitation of temporarily displaced persons’, made last year by the Holding Company
amounting to Rs. 888,413 levied through Finance Act, 2018 retrospectively on the income for the financial year ended December
31, 2017 and 2018. The Holding Company had challenged the levy in the High Court of Sindh and has been granted a stay
in this respect. The Holding Company, based on the opinion of its legal advisor, believes that there is a reasonable case in the
Holding Company’s favour. However, based on prudence, the Holding Company had made provision for Super Tax for the tax
year 2018 and 2019. During the year, through Finance Supplementary Act, 2019, the levy of Super Tax has been abolished
from financial year ended December 31, 2019 onwards for companies other than banking companies.

In addition, to above the Holding Company had also recognised provision for super tax relating to year ended December 31,
2014 to December 31, 2016 amounting to Rs. 2,354,637 (2018: 2,354,637).

39.1.2 In 2016, an amendment was introduced in the Income Tax Ordinance 2001 (the Ordinance) via the Finance Act 2016 which
imposed tax on inter-corporate dividends, which were previously exempt to companies designated as a Group under section
59B of the Ordinance. Subsequent to the year end, the exemption on inter-corporate dividend has been restored through
amendment in the Ordinance vide Tax Laws (Second Amendment) Ordinance, 2019. However, in respect of the dividends
received before the said amendment, the Holding Company had challenged the imposition of tax on inter-corporate dividends
in the High Court of Sindh and has been granted a stay in this respect.

39.1.3 Following is the position of the Holding Company’s open tax assessments:

39.1.3.1 In 2013, the income tax department, in respect of the tax year 2011, determined additional income tax liability of Rs. 218,790
and raised a demand of Rs. 139,575 whereby the Deputy Commissioner Inland Revenue (DCIR) - Audit disallowed allocation
of expenses against interest income and apportioned expenses against dividend income and capital gains. The Holding
Company filed an appeal with the Commissioner Inland Revenue (CIR) - Appeals who maintained the apportionment of
expenses against dividend income and capital gains but allowed the allocation of administrative expenses against interest
income, thereby reducing the income tax liability to Rs. 184,191 and revised the demand to Rs. 104,976. The Holding

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Subsidiary Companies 39.2.5 EFert had filed a suit in the HCS, contesting the applicability of Super Tax, under section 4B ‘Super Tax for rehabilitation
of temporary displaced persons’ of the Income Tax Ordinance, 2001 (the Ordinance), applicability as unconstitutional and
39.2 Engro Fertilizers Limited (EFert) and its subsidiary companies ultravires the laws. On January 27, 2018, the Supreme Court of Pakistan passed an order requiring that a minimum of 50%
of tax calculated by the taxation authorities be deposited with the taxation authorities to maintain / entertain a suit filed / to
39.2.1 During the year 2015, the income tax department amended the assessment filed by EFert for tax year 2014. EFert filed be filed with any Court of Pakistan. Pursuant to this, the legal suits filed against applicability of Super tax were withdrawn by
an appeal before CIR(A) against the disallowances, which mainly pertained to exchange gain and loss, loss on derivative EFert.
and losses purchased from Engro Eximp Agriproducts (Private) Limited, an associate, under section 59B of the Income Tax
Ordinance, 2001 resulting in additions to taxable income of Rs. 3,191,963. In addition the tax department raised demand for During the year, EFert received recovery notice from Federal Board of Revenue (FBR) for payment of Super Tax in respect of
the Alternative Corporate Tax (ACT) through the same order, for which the EFert specifically obtained a stay order. tax year 2018. EFert has filed a constitutional petition against the same in the HCS and stay thereagainst has been obtained.
Adequate provision for Super Tax for the respective tax years are being maintained in these consolidated financial statements.
During the year, the matter was heard by CIR(A) and favorable decision was made in respect of exchange losses and acceptance
of prior years tax refunds, whilst other additions made by the tax department in respect of ACT, loss on derivatives and group 39.2.6 As a result of demerger in 2009, all pending tax issues of the then Holding Company, Engro Chemical Pakistan Ltd. had been
relief under section 59B were maintained in the order. EFert has filed an appeal against the order of CIR(A) before the Income transferred to EFert. Major issues pending before the tax authorities are described below:
Tax Appellate Tribunal.
In previous years, the taxation department had filed reference applications in the HCS against the below-mentioned ATIR’s
39.2.2 During the year, the income tax department amended the assessment filed by EFert for the tax years 2015, 2016 and 2017. decisions in EFert’s favor. No hearing has been conducted to-date. The reference application includes the following matters:
EFert filed appeals there against before the Commissioner Inland Revenue Appeals (CIRA) for disallowances made in the orders
which mainly included proration of expenses to exempt/FTR incomes, exchange loss disallowances, loss on derivatives and ● Group Relief (Financial year 2006 to 2008): Rs. 1,500,847
losses purchased from Engro Eximp Agriproducts Limited under section 59B of the Income Tax Ordinance, 2001, resulting ● Inter-Corporate Dividend (Financial year 2007 and 2008): Rs. 336,500
in cumulative addition of Rs. 16,173,826 to taxable income of these tax years. During the year, CIRA passed an order for tax ● G.P. Apportionment (Financial years 1995 to 2002): Rs. 653,000
years 2015, 2016 and 2017 maintaining most of the additions made by taxation officer in the amendment order, whilst allowing
deletion of expenses on allocation basis to exempt income and claim of exchange losses on realised basis. EFert, as well as EFert is confident that all the aforementioned pending issues will eventually be decided in its favor. Therefore, no provision in
the tax department, has filed appeals against the order of CIRA before the Appellate Tribunal (ITAT). The matter was heard by respect of these is being maintained in these consolidated financial statements.
the ITAT for tax year 2015 and 2016 on January 7, 2020 and the order has been reserved for judgement. EFert is confident of
a favourable outcome of the appeals. 39.2.7 “As a result of merger of Engro Eximp (Private) Limited (EXIMP) with EFert, all pending tax issues of EXIMP have been
transferred to EFert. Major pending issue pertains to exercise of option to be taxed under the Normal Tax Regime (NTR) by
39.2.3 In 2014, the income tax department amended the assessment filed by EFert for tax years 2010 and 2011. EFert filed appeals EXIMP for the years 2012 and 2013, resulting in an aggregate refund of Rs. 796,000. The tax department had not accepted
thereagainst before the Appellate Tribunal Inland Revenue (ATIR) against the said disallowances, which through its decision the said treatment for tax year 2013, however, the matter was decided in favor of EFert by the Commissioner Income Tax
provided relief in respect of certain items and confirmed certain disallowances in favor of the tax department. The said Appeals(CIT(A)), against which the tax department has filed an appeal with the Appellate Tribunal. However, during the year,
disallowances included the charge in respect of exchange gain and loss incurred for tax year 2010 and 2011, and loss on the department has given appeal effect order to the aforementioned favourable decision of the CIT(A) for tax year 2013.
derivative for tax year 2011 raising a demand in respect of these years in aggregate of Rs. 1,075,466. EFert had challenged
the said decision before the HCS, which is pending to be heard, however, EFert is confident of a favourable outcome. During the year, on September 26, 2019, the matter was decided by the ITAT in favor of EFert for TY 2013 and the departments
appeal in this respect was rejected. The management is confident for a favorable outcome on this case and therefore no
39.2.4 During the year, EFert had filed a suit in the HCS, contesting both the retrospective and prospective application of the Alternative provision is being maintained in these consolidated financial statements in this respect.”
Corporate Tax (ACT) under section 113C. On January 27, 2018, the Supreme Court of Pakistan passed an order requiring that
a minimum of 50% of tax calculated by the taxation authorities be deposited with taxation authorities to maintain / entertain 39.3 Engro Polymer and Chemicals Limited (EPCL) and its subsidiary companies
a suit filed / to be filed with any Court of Pakistan. Pursuant to this, EFert made payment of Rs 615,600 in respect of ACT
for tax year 2014 to maintain its stay granted by the HCS. However, in respect of tax years 2015, 2016 and 2017, since no 39.3.1 The DCIR, through the order dated November 26, 2009 raised a tax demand of Rs. 213,172. The demand arose as a
amendments to the returns filed by EFert were received from the tax department, therefore, suits thereagainst were withdrawn result of additions on account of trading liabilities of Rs. 47,582 under section 34(5) of the Income Tax Ordinance, 2001 (the
by EFert. Later, on September 13, 2018, EFert received recovery notice for payment in respect of tax years 2015, 2016 and Ordinance); disallowance of provision for retirement benefits of Rs. 5,899; addition of imputed interest on loans to employees
2017 against which a constitutional petition was filed by EFert with the HCS. Stay for recovery of ACT has been granted in and executives of Rs. 16,069 to income; disallowance of finance cost of Rs. 134,414 and not considering adjustment of
respect of the constitutional petition. minimum tax paid for tax years 2004 to 2007 against the above demand.

During the year, persuant to the approval of the Board of Directors of the Holding Company on May 10, 2019, EFert withdrew
its cases pending in the HCS in respect of ACT for tax years 2014 to 2017 and discharged the related net tax liability amounting
to Rs. 1,995,054.

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EPCL filed an appeal against the aforesaid order before CIR(A), but discharged the entire demand through adjustment against 39.5 Engro Energy Limited (EEL) and its subsidiary companies
assessed refunds of Rs. 180,768 and paying the balance of Rs. 32,404 ‘under protest’. Through his appellate order, the CIR(A)
maintained certain additions aggregating Rs. 189,810 including finance cost amounting to Rs. 134,414 and remanded back 39.5.1 Tax Year 2014 was selected for audit under section 214C of the Income Tax Ordinance, 2001 (the Ordinance). The Deputy
the issue of imputed interest on loans to employees and executives and directed the DCIR to allow credit of the minimum tax Commissioner Inland Revenue (DCIR) after conducting audit made certain additions and disallowances, and hence amended
charged for the period of tax years 2004 to 2007. An appeal against the said appellate order was filed by EPCL before the ATIR. the return filed by EEL vide order dated January 12, 2017, framed under section 122(1)/(5) of the Ordinance and raised a tax
The department also filed an appeal against the said appellate order challenging the actions of the CIR(A) demand of Rs. 268,584. EEL being aggrieved filed an appeal before CIR(A). EEL also approached the HCS for a stay against
recovery of said demand which was duly granted till the adjudication of appeal by the CIR(A).
In 2013, the ATIR issued an order whereby the aforementioned appeal was disposed off by accepting EPCL’s position except
for additions on account of trading liabilities to the extent of Rs. 20,280 and minimum turnover tax for tax years 2004 and 2007 During the year, EEL received an order of CIR(A) in which certain issues were remanded back to the DCIR while other issues
to the extent of Rs. 19,692 and Rs. 7,300 respectively, which were maintained. were decided in favour of tax authorities. EEL filed an appeal before the (ATIR) on the issues decided against it which is currently
pending. Based on the views of tax advisor and legal consultant of EEL, the management believes that EEL has a good case on
EPCL filed a reference to the HCS against the additions maintained by ATIR. Likewise, the tax department has also filed merits and expects a favourable outcome. Accordingly no provision has been made in respect of the aforementioned demand
reference to the HCS against the order passed by the ATIR in favour of EPCL. The Group management, based on the advice in these consolidated financial statements.
of tax consultant, is confident that the ultimate outcome of the aforementioned matters would be favorable and accordingly, no
provision has been recognized in these consolidated financial statements. 39.5.2 The ACIR, through separate show cause notices dated December 11, 2017 and December 12, 2017, issued in respect of tax
years 2012, 2013, 2015 and 2016, raised an issue with respect to the inter-corporate dividend claimed as exempt. The ACIR
39.3.2 The DCIR through his order dated November 30, 2010 raised a tax demand of Rs. 163,206. The demand arose as a result of also showed an intention to levy super tax on dividend income for tax years 2015 and 2016. EEL challenged these notices
disallowance of finance cost of Rs. 457,282; additions to income of trading liabilities of Rs. 21,859 under section 34(5) of the before the HCS which has restrained the tax authorities from taking any coercive action including passing an order on the basis
Ordinance; disallowance of provision for retirement benefits of Rs. 14,239; disallowance of provision against Special Excise of the said notices. Accordingly, no provision has been made in this respect in these consolidated financial statements.
Duty (SED) refundable of Rs. 36,687; addition of imputed interest on loans to employees and executives of Rs. 20,599 and not
considering net loss. 39.5.3 The Tax Year 2016 was selected for audit under section 214C of the Ordinance. The DCIR after conducting audit made certain
additions and disallowances, and hence amended the return filed by EEL vide order dated November 2, 2018, framed under
The entire demand of Rs. 163,206 was adjusted against assessed tax refunds and an appeal was filed by EPCL before the section 122(1)/(5) of the Ordinance. These additions primarily relate to treating reimbursement from subsidiary as services,
CIR(A). Through his appellate order, the CIR(A) maintained certain additions aggregating to Rs. 493,971 including disallowance additions on account of apportionment of administrative expenses and receipts on account of the project management services
of finance cost amounting to Rs. 457,282 and remanded back the issue of imputed interest on loans to employees and to be taxed under normal tax regime / minimum tax regime and resulted in tax demand of Rs. 80,888. EEL being aggrieved
executives. An appeal against the said appellate order was filed before the ATIR. The department also filed an appeal against filed an appeal before the CIR(A). EEL also approached the HCS for stay against recovery of demand which was duly granted
the said appellate order challenging the action of CIR(A), regarding deletion of addition on account of provision for the till the adjudication of appeal by the CIR(A).
retirement benefits.
During the year, EEL received an order from the CIR(A) in which certain issues were remanded back to the DCIR while the
In 2013, the ATIR issued an order whereby the aforementioned appeal was disposed off by accepting EPCL’s position except other issues were decided in favour of tax authorities. EEL filed an appeal before the ATIR on the issues decided against it
for additions on account of SED provision of Rs. 36,687 and imputed interest on loans to employees and executives to the which is currently pending. Based on the views of tax advisor and legal consultant of EEL, the management believes that EEL
extent of Rs. 17,430, which were maintained. has a good case on merits and expects a favourable outcome. Accordingly no provision has been made in respect of the
aforementioned demand in these consolidated financial statements.
39.4 Elengy Terminal Pakistan Limited
39.5.4 In November 2017, EPTL, a subsidiary of EEL, received a demand from ACIR amounting to Rs. 1,489,327, inclusive of default
39.4.1 EETPL in connection with the import of FSRU received a demand from Customs Authority amounting to Rs. 1,530,494 surcharge Rs. 202,994, on account of non-withholding of tax on payments made by EPTL to its contractors China Machinery
contending that the import of FSRU attracts payment of advance income tax. EETPL is of the view that the EETPL’s profits Engineering Corporation (CMEC) and China East Resources Import and Export Corporation (CERIEC) under the ‘Offshore
and gains are exempt from income tax for 5 years from the date of commercial operations. EETPL in response to the above Supply and Services Agreement for Power Plant’ and ‘Onshore Supply and Services Agreement for Power Plant’ respectively
demand has filed an appeal based on which the Chief Commissioner Inland Revenue (CCIR) through its order dated August in relation to the construction of the power plant being set up by EPTL. The ACIR was of the view that the aforementioned
22, 2016 remanded the case back to the concerned commissioner, which again rejected the request for exemption against payments attract the requirements of withholding of taxes under the Income Tax Ordinance, 2001 (ITO) and as such EPTL
which EETPL filed an appeal before CCIR. EETPL, based on the merits of the case and opinion of its tax consultant and legal was required to withhold tax from such payments. EPTL filed an appeal to CIR(A) with the view that payments to CERIEC fall
advisor, is expecting a favorable outcome in this case. Accordingly, no provision has been recorded in this respect. under the ambit of a specific exemption from withholding of taxes under ITO for coal mining and coal based power generation
projects in Sindh. Furthermore, payments to CMEC are made for supply of plant and machinery and EPTL, being an importer,
is not liable to withhold taxes.

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In 2018, CIR(A) decided the matter in favour of tax authorities and maintained the order of ACIR. EPTL filed an application to 39.7 Relationship between tax expense and accounting profit
the ATIR who through an order has remanded back the case to ACIR for review of facts and to issue a fresh order in the light of
emerging facts. EPTL, as a result of various discussion with the tax authorities, agreed and paid Rs 1,400,000 being the lump The tax on the Group’s profit before tax differs from the theoretical amount that would arise using the Group’s applicable tax
sum settlement of withholding tax demands for all payments under the contract with CMEC and CERIEC during the project rate as follows:
phase. Formal tax demands are yet to be issued by the Tax Authorities. Based on the advice of the tax advisors of EPTL, the 2019 2018
Rupees
management believes that EPTL will not be liable towards making any further payment in this respect.

39.6 Associated Company Profit before taxation 46,010,018 36,427,052

Tax calculated at the rate of 29% (2018: 29%) 13,342,905 10,563,845

39.6.1 FrieslandCampina Engro Pakistan Limited
Depreciation on exempt assets not deductible
39.6.1.1 FCEPL in accordance with section 59 B (Group Relief) of the Income Tax Ordinance (ITO), 2001 has surrendered to the for tax purposes 529 7,660
Holding Company its tax losses amounting to Rs. 4,288,134 out of the total tax losses of Rs. 4,485,498 for the years ended Effect of exemption from tax on certain income (1,160,291) (1,302,112)
December 31, 2006, 2007 and 2008 (Tax years 2007, 2008 and 2009) for cash consideration aggregating Rs. 1,500,847, Effect of applicability of lower tax rate, Final Tax Regime and
being equivalent to tax benefit/effect thereof. other tax credits / debits 1,509,096 (474,987)
Prior year current and deferred tax charge 121,968 2,849,519
FCEPL had been designated as part of the Group of Engro Corporation Limited by the Securities and Exchange Commission Tax effect of expenses not allowed for tax 1,703,631 1,287,626
of Pakistan (SECP) through its letter dated February 26, 2010. Such designation was mandatory for availing Group tax relief Others 204,089 (136,232)
under section 59B of ITO and a requirement under the Group Companies Registration Regulations, 2008 (the Regulations) Tax charge for the year 15,721,927 12,795,319
notified by the SECP on December 31, 2008.

Further, the Appellate Tribunal, in respect of surrender of aforementioned tax losses by FCEPL to the Holding Company for the 40. EARNINGS PER SHARE - BASIC AND DILUTED
years ended December 31, 2006 and 2007, decided the appeals in 2010 in favour of the Holding Company, whereby, allowing
the surrender of tax losses by FCEPL to the Holding Company. The tax department has filed reference application there Basic earnings per share has been calculated by dividing the profit attributable to equity holders of the Group by weighted
against before the High Court of Sindh, which is under the process of hearings. In 2013, the Appellate Tribunal also decided average number of ordinary shares in issue during the year.
similar appeal filed by the Holding Company for the year ended December 31, 2008 in favour of the Holding Company. FCEPL
based on the merits of the case expects a favourable outcome of the matter.
As at December 31, 2019, there is no dilutive effect on the basic earnings per share of the Group. Earnings per share is based
on following:
2019 2018
39.6.1.2 In 2013, CIR raised a demand of Rs. 223,369 for tax year 2009 by disallowing the provision for advances, stock written- Rupees
off, repair and maintenance, sales promotion and advertisement expenses etc. During 2015, in response to the appeal filed
against the audit proceedings, CIR Appeals issued an appellate order in favour of FCEPL holding the selection of case for
audit to be illegal and without jurisdiction. The tax department has filed an appeal against the order with the Appellate Tribunal Profit for the year 16,532,846 12,707,526
Inland Revenue (ATIR), however, no hearing has been conducted to date. FCEPL, based on the opinion of its tax consultant,
is confident of a favourable outcome of the appeal, and, accordingly taxes recoverable of FCEPL have not been reduced by Number in thousands
the effect of the aforementioned disallowances. Weighted average number of ordinary shares for (Restated)
determination of basic and diluted EPS 576,163 576,163
39.6.1.3 In 2014, the Additional Commissioner Inland Revenue (ACIR) raised a demand of Rs. 713,341 for tax year 2012 by disallowing
the initial allowance and depreciation on certain additions to property, plant and equipment, provision for retirement and Earnings per share - Basic and Diluted 28.69 22.06
other service benefits, purchase expenses, sales promotion and advertisement and other expenses etc. In 2017, CIR(A)
upheld the decision of ACIR in respect of provision for retirement benefits and marketing support reimbursements. FCEPL 41. REMUNERATION OF CHIEF EXECUTIVE, DIRECTORS AND EXECUTIVES
has filed an appeal with ATIR against the order of CIR(A) and based on the opinion of its tax consultant, is confident of a
favourable outcome of the appeal, and, accordingly taxes recoverable of FCEPL have not been reduced by the effect of the The aggregate amounts for remuneration, including all benefits, to the Chief Executive and Directors of the Holding Company
aforementioned disallowances. and Executives of the Group are as follows:

39.6.1.4 In 2017, ACIR raised a demand of Rs. 511,801 for tax year 2016 by disallowing minimum turnover tax credit, expenses on
account of Employee Share Option Scheme and Worker’s Welfare Fund. On June 30, 2018, CIR(A) upheld the decision of
ACIR in respect of minimum turnover tax credit and Employee Share Option Scheme against the appeal filed with CIR(A) on
November 23, 2017. On August 15, 2018, FCEPL filed an appeal with ATIR against order of CIR(A) and based on the opinion
of its tax consultant, is confident of a favourable outcome of the appeal, and, accordingly taxes recoverable have not been
reduced by the effect of the aforementioned disallowances.

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2019 2018 Investment risks - The risk of the investment underperforming and not being sufficient to meet the liabilities. This risk is
Directors Executives Directors Executives mitigated by closely monitoring the performance of investment.
Chief Others Chief Others
Executive Executive Risk of insufficiency of assets - This is managed by making regular contribution to the Fund as advised by the actuary.
Rupees
In addition to above, the pension fund exposes the Group to Longevity Risk i.e. the pensioners survive longer than expected.
Managerial remuneration 95,771 - 4,587,835 86,672 - 3,918,054
Retirement benefits funds - - 485,702 - - 427,331
42.1.1 Valuation results
Fees - 86,907 44,693 - 80,893 5,744
Directors emoluments - - - - 310,500 - The latest actuarial valuation of the defined benefit plans was carried out as at December 31, 2019, using the Projected Unit
Other benefits 26 - 627,894 70 - 511,163 Credit Method. Details of the defined benefit plans are as follows:
Total 95,797 86,907 5,746,124 86,742 391,393 4,862,292
42.1.2 Statement of financial position reconciliation
Number of persons
including those who Defined Benefit Gratuity Plan Defined Benefit Pension Plan
worked part of the year 1 9 943 1 12 763 Funded Funded (Curtailed)
2019 2018 2019 2018
Rupees
41.1 The Group also makes contributions to pension and gratuity funds and provides certain household items for use of some
executives.The Group also provides certain household items for use of some employees and Chief Executive. Cars are also Present value of defined benefit obligation 517,729 503,530 24,018 24,600
provided for use of certain employees and directors. In addition, certain directors of the Holding Company are also entitled for Fair value of plan assets (306,420) (364,649) (38,277) (38,104)
travelling benefits in respect of which Rs. 139,697 (2018: Rs. 40,729) have been incurred. Deficit / (Surplus) 211,309 138,881 (14,259) (13,504)
Payable to Defined Contribution Gratuity Fund 10,110 10,110 - -
41.2 Premium charged during the year in respect of directors indemnity insurance policy, purchased by the Group, amounts to Payable in respect of inter group transfers 46 46 - -
Rs.3,719 (2018: Rs. 3,784). Unrecognized asset - - 14,259 13,504
Net liability recognized in the Statement of Financial Position 221,465 149,037 - -
42. RETIREMENT BENEFITS

42.1.3 Movement in net liability

42.1 Defined benefit plans
recognized in the Statement of Financial Position

The Group offers a defined post-employment gratuity benefit to permanent management and non-management employees.
In addition, until June 30, 2005, the Group offered a defined post-employment pension benefit to management employees in Net liability at beginning of the year 149,037 120,277 - -
service which has been discontinued and the plan now only covers a handful of retired pensioners. Expense / (income) for the year 42,070 34,648 (1,621) (970)
Remeasurement (gain) / loss to Other
The gratuity and pension funds are governed under the Trusts Act, 1882, Trust Deed and Rules of Fund, Companies Act, Comprehensive Income 31,444 (3,550) 1,621 970
2017, the Income Tax Ordinance, 2001 and the Income Tax Rules, 2002. Unrecognized asset (1,086) (2,338) - -
Net liability at end of the year 221,465 149,037 - -
Responsibility for governance of plan, including investment decisions and contribution schedule lie with Board of Trustees of
221,465 149,037 - -
the Fund.

The Group faces the following risks on account of defined benefit plans:
Final salary risk - The risk that the final salary at the time of cessation of service is greater than what the Company has
assumed. Since the benefit is calculated on the final salary, the benefit amount would also increase proportionately.

Asset volatility - Most assets are invested in risk free investments of 3, 5 or 10 year SSC’s, RIC’s, DSC’s or Government Bonds.
However, investments in equity instruments is subject to adverse fluctuations as a result of change in the market price.

Discount rate fluctuation -  The plan liabilities are calculated using a discount rate set with reference to corporate bond yields.
A decrease in corporate bond yields will increase plan liabilities, although this will be partially offset by an increase in the value
of the current plans’ bond holdings.

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42.1.4 Movement in present value of defined 42.1.9 Plan assets comprise of the following
benefit obligation 2019 2018
Defined Benefit Gratuity Plan Defined Benefit Pension Plan
Funded Funded (Curtailed) Rupees % Rupees %
2019 2018 2019 2018 Rupees
Rupees Defined Benefit Gratuity Plans
As at beginning of the year 503,530 520,887 24,600 29,156 Debt 228,371 75% 306,918 84%
Current service cost 23,733 24,863 - - Equity 78,051 25% 57,731 16%
Interest cost 61,519 41,911 2,881 2,384 306,422 100% 364,649 100%
Benefits paid during the year (111,665) (78,161) (3,929) (4,042) Defined Benefit Pension Plan
Remeasurement loss / (gain) to Other Debt 38,277 100% 29,264 77%
Equity - 0% 6,850 18%
Comprehensive Income 41,698 (3,633) 466 (2,898)
Others - 0% 1,990 5%
Liability in respect of promotions (1,086) (2,337) - -
38,277 100% 38,104 100%
As at end of the year 517,729 503,530 24,018 24,600

42.1.5 Movement in fair value of plan assets

42.1.10 The expected return on plan assets was determined by considering the expected returns available on the assets underlying
the current investment policy. Expected yields on fixed interest investments are based on gross redemption yields as at the
As at beginning of the year 364,649 410,766 38,104 40,713
Statement of Financial Position date.
Expected return on plan assets 43,182 32,126 4,502 3,354
Benefits paid during the year (111,665) (78,162) (3,929) (4,042) 42.1.11 Historical information of staff retirement benefits
Remeasurement (loss) / gain to Other
2019 2018 2017 2016 2015
Comprehensive Income 10,254 (81) (400) (1,921)
Rupees
As at end of the year 306,420 364,649 38,277 38,104
Defined benefit gratuity plans Present value of
defined benefit obligation (517,731) (503,530) (520,887) (463,804) (988,477)
42.1.6 Charge for the year
Fair value of plan assets 306,422 364,649 410,766 418,228 876,698
(Deficit) / Surplus (211,309) (138,881) (110,121) (45,576) (111,779)
Current service cost 23,733 24,863 - -

Net Interest cost 18,337 9,785 (1,621) (970)

42,070 34,648 (1,621) (970) Defined benefit pension plan Present value
of defined benefit obligation (24,018) (24,600) (29,156) (32,132) (33,367)
42.1.7 Principal actuarial assumptions used in Fair value of plan assets 38,277 38,104 40,713 44,213 40,835
the actuarial valuation Surplus 14,259 13,504 11,557 12,081 7,468

Discount rate 11.25% - 11.3% 12.75% - 13.25% 11.25% 12.75% 42.1.12 Expected future cost / (reversal) for the year ending December 31, 2019 is as follows:
Expected rate of return on plan assets - per annum 11.25% - 11.3% 12.75% - 13.25% - -
Expected rate of increase in future salaries - per annum 10.3% - 11.3% 12.25% - 12.75% - - Rupees

Rupees
Defined benefit gratuity plans 49,491
42.1.8 Actual return on plan assets 54,598 34,438 4,102 2,254 Defined benefit pension plan (1,521)

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42.1.13 Remeasurement recognized in Other 43. CASH GENERATED FROM OPERATIONS

Comprehensive Income Defined Benefit Defined Benefit Pension Plan
2019 2018
Rupees
Gratuity Plan Funded Funded (Curtailed)
2019 2018 2019 2018
Rupees Profit before taxation 46,010,018 36,427,052
Adjustment for non-cash charges and other items:
Gain / (Loss) from change in experience adjustments (42,354) 4,875 1,132 (2,636) Depreciation (note 4.4) 10,372,271 7,556,552
(Loss) / Gain from change in financial assumptions 656 (1,244) (1,598) 5,534
Depreciation on right-of-use asset 727,847 -
Remeasurement of obligation (41,698) 3,631 (466) 2,898
Amortization of intangible assets (note 6.1) 188,161 69,818
Actual Return on plan assets 54,598 34,439 4,102 2,254
Amortization of prepaid financial charges 92,314 64,617
Expected Return on plan assets (43,182) (32,127) (4,502) (3,354)
Amortization of direct cost on FSRU 86,516 86,516
Difference in opening fair value of plan assets (1,162) (2,391) - (821)
Gain on disposal of property, plant and equipment - net (note 35) (31,618) (22,647)
Remeasurement of plan assets 10,254 (79) (400) (1,921)
Transfer from capital work-in-progress charged-off to
Effect of asset ceiling - - (755) (1,947)
(31,444) 3,552 (1,621) (970) profit or loss as Corporate Social Responsibility 171,689 -
42.1.14 Sensitivity analysis Impairment of Intangible and operating assets 452,485 -
Provisions, net 1,817,029 1,958,577
The impact of 1% change in following variables on defined benefit obligation is as follows: Impairment of long term investment 1,224,304 -
Financial charges 11,876,878 4,468,847
Finance income on net investment in lease (5,290,427) -
Defined Benefit Defined Benefit Pension Plan Finance cost on lease liability 4,180,765 -
Gratuity Plan Funded Funded (Curtailed)
Income on deposits / other financial assets (11,321,777) (5,244,623)
Increase in Decrease in Increase in Decrease in
Share of income from joint venture and associates (note 38) (1,147,999) (128,647)
Assumption Assumption Assumption Assumption
Rupees Foreign currency translation 1,303,187 1,165,654
Reversal of provision of Workers Welfare Fund (note 35) (999,423) (650,110)
Discount rate 118,433 470,394 22,928 23,517 Working capital changes (note 43.1) 2,759,418 1,928,205
Long term salary increases 128,676 541,091 - - 62,471,638 47,679,811
Long term pension increases - - 25,343 25,933

43.1 Working capital changes

42.1.15 Maturity Profile
Gratuity Plans Pension Plan (Increase) / Decrease in current assets
Rupees
Time in years - Stores, spares and loose tools (436,452) (667,358)
1 34,787 3,910
- Stock-in-trade (2,447,915) (3,815,782)
2 38,050 3,910
3 28,545 3,910 - Trade debts (33,352,798) (5,013,862)
4 74,560 3,910 - Loans, advances, deposits and prepayments (6,896,268) (1,528,506)
5-10 395,757 3,910 - Other receivables - net (5,969,473) 241,382
11-15 466,867 3,910
(49,102,906) (10,784,126)
16-20 874,816 3,910
20+ 1,838,393 3,910 Increase in current liabilities
- Trade and other payables and provisions 51,862,324 12,712,331
Weighted average duration 5.59 4.54 2,759,418 1,928,205
42.2 Defined contribution plans

42.2.1 An amount of Rs. 401,129 (2018: Rs. 350,547) has been charged during the year in respect of defined contribution plans
maintained by the Holding Company.

225 226
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(Amounts in thousand) (Amounts in thousand)

44. CASH AND CASH EQUIVALENTS 46. FINANCIAL RISK MANAGEMENT

2019 2018
Rupees 46.1 Financial risk factors

Cash and bank balances (notes 19 and 44.1) 20,445,652 10,618,049 The Group’s activities expose it to a variety of financial risks: market risk (including currency risk, interest rate risk and other
Short term investments with original maturity less than 3 months (note 18) 19,249,587 66,346,054 price risk), credit risk and liquidity risk. The Group’s overall risk management programme focuses on having cost efficient
Short-term borrowings (note 28) (15,511,348) (6,641,207) funding as well as to manage financial risk to minimize earnings volatility and provide maximum return to shareholders.
24,183,891 70,322,896
Risk management is carried out by the Group’s Finance and Planning departments under policies approved by the Senior
44.1 Balances of Rs. 433,470 (2018: Rs. 15,000) held against bank guarantee and Rs. 13,612 (2018: Rs. 1,247,762) held against Management.
letter of credit in favor of Custom Authorities have been excluded from cash and cash equivalents for the purpose of statement
of cash flows.
a) Market risk
i) Currency risk
45.
FINANCIAL INSTRUMENTS BY CATEGORY 2019 2018
Rupees Currency risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes
in foreign exchange rates.

45.1 Financial assets
This exists due to the Group’s exposure resulting from outstanding import payments, foreign commercial transactions,
- Financial assets at amortised cost foreign currency loan liabilities and related interest payments. A foreign exchange risk management policy has been
Loans and advances 1,857,608 1,732,713 developed and approved by the management. The policy allows the Group to take currency exposure for limited
Trade debts 51,816,893 18,629,468 periods within predefined limits while open exposures are rigorously monitored. The Group ensures to the extent
Other receivables 6,663,063 2,348,191 possible that it has options available to manage exposure, either through forward contracts, options or prepayments,
Cash and bank balances 20,892,734 11,880,811 etc. subject to the prevailing foreign exchange regulations.
Contract asset 5,313,283 -
Accrued income 484,224 524,809 The Holding Company has given guarantees in favor of its subsidiary companies amounting to USD 10,000
87,027,805 35,115,992 (2018: USD 10,000). The devaluation / revaluation of currency will only impact contingent liabilities and the impact on
- Financial assets measures at fair value consolidated post tax profit for the year is Nil.
through other comprehensive income
Treasury bills 35,532,891 58,642,472 At December 31, 2019, if the Pakistani Rupee had weakened / strengthened by 1% against the US Dollars with all
Pakistan Investment Bonds 1,795,904 7,699,778 other variables held constant, consolidated post tax profit for the year would have been lower / higher by Rs. 623,120.
37,328,795 66,342,250
ii) Interest rate risk

- Financial assets measured at fair value through profit or loss Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of
Mutual fund units 27,372,021 200,000 changes in market interest rates. The Group’s interest rate risk arises from short and long-term borrowings and
obligations under finance lease. These are benchmarked to variable rates which expose the Group to cash flow
45.2 Financial liabilities
interest rate risk.

- Financial liabilities at amortized cost

The Group analyses its interest rate exposure on a regular basis by monitoring interest rate trends to determine
Borrowings 173,967,789 138,067,602
whether they should enter into hedging alternatives.
Trade and other payables 98,014,289 42,918,102
Lease liability 55,348,213 -
Accrued interest / mark-up 3,315,762 2,242,686 The Group manages its interest rate exposure through floating to fixed rate interest swaps on its foreign
330,646,053 183,228,390 currency borrowings.
- Financial liabilities measured at fair value through profit or loss
Derivatives financial instruments 154 - As at December 31, 2019, if interest rates on Group’s borrowings had been 1% higher / lower with all other variables
held constant, consolidated post tax profit for the year would have been lower / higher by Rs. 269,189, mainly as a
result of interest exposure on variable rate borrowings.

227 228
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(Amounts in thousand) (Amounts in thousand)

iii) Other price risk The credit quality of receivables can be assessed with reference to their historical performance with no or negligible defaults
Other price risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of in recent history. The credit quality of Group’s bank balances and short term investments can be assessed with reference to
changes in market prices (other than those arising from currency risk or interest rate risk), whether those changes external credit ratings as follows:
are caused by factors specific to the individual financial instrument or its issuer, or factors effecting all similar financial
instruments traded in the market. The Group is exposed to price risk on its mutual fund investments. Bank Rating agency Rating
Short Term Long Term
b) Credit risk
Albaraka Bank (Pakistan) Limited PACRA A1 A
Credit risk represents the risk of financial loss being caused if counter party fails to discharge an obligation.
Allied Bank Limited PACRA A1+ AAA
Askari Bank Limited PACRA A1+ AA+
Credit risk arises from deposits with banks and financial institutions, trade debts, loans, advances, deposits, bank Bank AL Habib Limited PACRA A1+ AA+
guarantees and other receivables. The credit risk on liquid funds is limited because the counter parties are banks with Bank Alfalah Limited PACRA A1+ AA+
a reasonably high credit rating or mutual funds which in turn are deposited in banks and government securities. The Bank Islami Pakistan Limited PACRA A1 A+
maximum exposure to credit risk is equal to the carrying amount of financial assets. The Group accepts bank guarantees Citi Bank Europe plc MOODY’S P-1 a3
of banks of reasonably high credit ratings as approved by management. Citi Bank N.A. MOODY’S P1 Aa3
CIMB Bank Berhud MOODY’S P2 A3
Deutsche Bank A.G MOODY’S P2 Ba3
The Group’s fertilizer segment is exposed to concentration of credit risk on its trade debts by virtue of all its customers
Dubai Islamic Bank (Pakistan) Limited JCR-VIS A1 AA
being agri-based businesses in Pakistan. However, this risk is mitigated by applying individual credit limits and by securing Faysal Bank Limited PACRA A1+ AA
a majority of trade debts against bank guarantees inland letter of credits and by the fact that the exposure is spread over Habib Bank Limited JCR-VIS A-1+ AAA
a wide customer base. Habib Metropolitan Bank Limited PACRA A1+ AA+
HSBC Bank Middle East MOODY’S P-2 A3
The Group’s power segment is not exposed to any credit risk on its trade debts as these are secured by sovereign Industrial and Commercial Bank of China MOODY’S P-1 A1
guarantee from the Government of Pakistan. JS Bank Limited PACRA A1+ AA-
Mashreq Bank MOODY’S P-2 B aa2
MCB Bank Limited PACRA A1+ AAA
The Group’s polymer / chemical segment is not materially exposed to credit risk on trade debts as unsecured credit is Meezan Bank Limited JCR-VIS A-1+ AA+
provided to selected parties with no default in recent history and a major part is secured by bank guarantees and letters National Bank of Pakistan PACRA A1+ AAA
of credit from customers or written terms of agreement. Noor Bank FITCH - A-
Samba Bank Limited JCR-VIS A-1 AA
The Group’s terminal segment is not materially exposed to credit risk on trade debt, other and lease receivables from Silk Bank Limited JCR-VIS A-2 A-
SSGC considering history, no default has been made by the customer and payments are received on a timely basis. Summit Bank Limited JCR-VIS Suspended
Soneri Bank Limited PACRA A1+ AA-
Standard Chartered Bank (Pakistan) Limited PACRA A1+ AAA
The Group monitors the credit quality of its financial assets with reference to historical performance of such assets
The Bank of Punjab PACRA A1+ AA
and available external credit ratings. The carrying values of financial assets which are neither past due nor impaired U Microfinance Bank JCR-VIS A-1 A
are as under: United Bank Limited JCR-VIS A-1+ AAA

2019 2018
Rupees
c) Liquidity risk

Loans and advances 1,857,608 1,732,713

Liquidity risk represents the risk that the Group will encounter difficulties in meeting obligations associated with
Trade debts 24,662,750 13,536,854 financial liabilities.
Other receivables 5,584,594 1,269,722
Short term investments 74,004,144 81,791,320 Prudent liquidity risk management implies maintaining sufficient cash and marketable securities, the availability of funding
Bank balance 20,888,472 11,878,828 through an adequate amount of committed credit facilities. Due to dynamic nature of the business, the Group maintains
Accrued income 484,224 524,809 flexibility in funding by maintaining committed credit lines available.
127,481,792 110,734,246
The Group’s liquidity management involves projecting cash flows and considering the level of liquid assets necessary
to meet these, monitoring liquidity ratios against internal and external regulatory requirements and maintaining debt
financing plans.

229 230
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(Amounts in thousand) (Amounts in thousand)

The table below analyses the Group’s financial liabilities into relevant maturity groupings based on the remaining period at the 47. FAIR VALUE ESTIMATION
balance sheet date to contractual maturity dates. The amounts disclosed in the table are the contractual undiscounted cash
flows. The carrying value of all financial assets and liabilities reflected in the financial statements approximate their fair values. The
2019 2018 table below analyses financial instruments carried at fair value by valuation method. The different level have been defined as
follows:
Maturity Maturity Maturity Maturity
- Quoted prices (unadjusted) in active markets for identical assets or liabilities (level1);
upto after Total upto after Total
one year one year one year one year - Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (i.e. as
Rupees prices) or indirectly (i.e. derived from prices) (level 2); and
- Inputs for the asset or liability that are not based on observable market data (level 3).
Financial liabilities
Borrowings 35,367,772 138,600,017 173,967,789 16,957,131 123,820,762 140,777,893 Level 1 Level 2 Level 3 Total
Trade and other payables 98,014,289 - 98,014,289 42,918,102 - 42,918,102 Rupees
Lease liability 4,406,997 50,941,216 55,348,213 - - - As at December 31, 2019
Accrued interest / mark-up 3,315,762 - 3,315,762 2,242,686 - 2,242,686 Fair value through profit and loss
- Mutual fund units - 27,372,021 - 27,372,021
141,104,820 189,541,233 330,646,053 62,117,919 123,820,762 185,938,681

46.2 Capital risk management Fair value through other comprehensive income
- Treasury Bills - 35,532,891 - 35,532,891
The Group’s objective when managing capital are to safeguard the Group’s ability to continue as a going concern in order to - Pakistan Investment Bonds (PIBs) - 1,795,904 - 1,795,904
provide returns for shareholders and benefit for other stake holders and to maintain an optimal capital structure to reduce the - 37,328,795 - 37,328,795
cost of capital. As at December 31, 2018
Fair value through profit and loss
The Group manages its capital structure and makes adjustments to it in the light of changes in economic conditions. To
maintain or adjust the capital structure, the Group may adjust the dividend payment to shareholders or issue new shares. - Mutual fund Units - 200,000 - 200,000

The management seeks to maintain a balance between higher returns that might be possible with higher levels of borrowings Fair value through other comprehensive income
and the advantages and security afforded by a sound capital position. - Treasury Bills - 58,642,472 - 58,642,472
- Pakistan Investment Bonds - 7,699,778 - 7,699,778
The regulatory regime in which the Group’s power segment operates, renders the value of the equity to a bond given the
guaranteed IRR of 15% with an indexation allowed under the Power Purchase Agreement for changes in US $ / PKR exchange - 66,342,250 - 66,342,250
rate.
Level 1 fair valued instruments comprise mutual fund units.
The Group’s strategy is to ensure compliance with the Prudential Regulations issued by the State Bank of Pakistan and is in
accordance with agreements executed with financial institutions so that the total long term borrowings to equity ratio does not Level 2 fair valued have been determined on the basis of PKRV rates and closing net asset values for government securities
exceed the lender covenants. The proportion of borrowing to equity at year end was:
and mutual fund units respectively
2019 2018
Rupees
There were no transfers amongst the levels during the year. Further, there were no changes in the valuation techniques during
Borrowings (note 23) 158,456,441 121,110,471 the year.
Lease liabilities (note 24) 55,348,213 -
Total Borrowings 213,804,654 121,110,471
Equity 195,249,376 185,587,239

409,054,030 306,697,710

Gearing ratio 52.27% 39.49%

The Group finances its operations through equity, borrowings and management of working capital with a view to maintaining
an appropriate mix between various sources of finance to minimize risk.

231 232


233
48.

48.1

Polymer
Fertilizer

Terminal
(Amounts in thousand)

Other operations
Power and mining
Type of segments
SEGMENT REPORTING

the following operating segments:

Nature of business

services and products.

across Pakistan as phosphatic fertilizers.

financial statements. Segment results and assets include items directly attributable to a segment.
Pakistan and operations and management services in Pakistan and Nigeria.
storage farm, and LNG terminal for receipt, storage and regasification of LNG
Caustic soda and related chemicals all over Pakistan and few Central Asian countries.

or loss which in certain respects, as explained in table below, is measured differently from profit or loss in the consolidated
about resources to be allocated and of assessing performance. Segment performance is evaluated based on operating profit
Management monitors the operating results of the abovementioned segments separately for the purpose of making decisions
includes investments made in the foods, telecommunication infrastructure and digital and technology
It includes management of investments in associates and joint ventures by the Holding Company. It also
This part of the business includes power generation, distribution, transmission and sale of electricity in
This part of the business includes operating and maintaining integrated liquid chemical terminal and
This part of the business manufactures, markets and sells Poly Vinyl Chloride (PVC), PVC compounds,
the segment is a leading importer and seller of phosphate products which are marketed extensively
Zarkhez, Zingro, Engro DAP and Envy etc. optimized for local cultivation needs and demand. Further,
segment includes a wide range of fertilizer brands, besides urea, which primarily comprises of Engro
This part of the business manufactures, purchases and markets fertilizers. The operations of this
performance. Based on internal management reporting structure and products produced and sold, the Group is organized into
on the information that is presented to the Board of Directors of the Group for allocation of resources and assessment of
that are different from those of other business segments. The management has determined the operating segments based
A business segment is a group of assets and operations engaged in providing products that are subject to risks and returns

48.2 The following information presents operating results regarding operating segments for the year ended December 31, 2019 and
asset information regarding operating segments as at December 31, 2019:

Fertilizer Polymer Terminal Power and mining Other operations Elimination - net Consolidated
2019 2018 2019 2018 2019 2018 2019 2018 2019 2018 2019 2018 2019 2018
Rupees

Revenue from external customers (note 31)

At a point in time 121,354,758 109,196,586 37,764,699 35,212,095 - - 50,039,229 11,954,606 17,838,194 13,775,658 (14,153,165) (11,231,353) 212,843,715 158,907,592
Over the Time - - 71,933 59,540 12,712,720 12,601,106 - - 363,141 60,844 (71,933) (60,844) 13,075,861 12,660,646

121,354,758 109,196,586 37,836,632 35,271,635 12,712,720 12,601,106 50,039,229 11,954,606 18,201,335 13,836,503 (14,225,098) (11,292,198) 225,919,576 171,568,238

Segment gross profit / (loss) 39,539,888 35,316,447 8,106,015 8,736,015 4,308,306 3,352,346 16,364,363 3,090,343 14,550,774 11,844,041 (14,183,258) (11,230,719) 68,686,088 51,108,472

Segment expenses - net of other income (9,986,904) (9,456,885) (2,130,268) (2,012,076) (185,227) (110,348) 119,360 (535,797) (5,902,521) 843,172 (1,445,030) (3,329,535) (19,530,591) (14,601,469)

Income on deposits / other financial assets (note 35) 1,731,489 493,572 857,324 345,512 324,981 90,288 561,396 195,515 7,682,945 4,495,769 (701,341) (376,033) 10,456,794 5,244,623

Finance cost (note 37) (3,886,870) (2,070,933) (1,793,775) (606,148) (1,306,250) (1,726,446) (7,583,444) (613,295) (889,788) (265,095) 709,856 (171,304) (14,750,271) (5,453,221)

Share of income from joint venture and

associates (note 38) - - - - 1,014,206 - 514,784 270,969 (380,991) (142,322) - - 1,147,999 128,647

Income tax (charge) / credit (note 39) (10,526,380) (6,868,683) (1,343,259) (1,533,132) (206,869) 49,301 (1,163,742) (810,879) (2,538,956) (3,986,251) 57,278 354,324 (15,721,927) (12,795,319)

Segment profit / (loss) after tax 16,871,223 17,413,518 3,696,037 4,930,171 3,949,147 1,655,141 8,812,717 1,596,856 12,521,463 12,789,314 (15,562,495) (14,753,267) 30,288,091 23,631,733

Segment assets 127,261,901 117,721,049 57,519,217 36,023,287 64,714,675 15,414,039 206,084,446 129,761,553 80,785,099 96,878,267 (17,408,859) (34,228,807) 518,956,479 361,569,388

Investment in joint venture / associates (note 7) - - - - - - 3,388,819 3,410,904 26,574,181 28,174,476 - - 29,963,000 31,585,380

Total segment assets 127,261,901 117,721,049 57,519,217 36,023,287 64,714,675 15,414,039 209,473,265 133,172,457 107,359,280 125,052,743 (17,408,859) (34,228,807) 548,919,479 393,154,768

Total segment liabilities 83,982,441 72,197,894 39,743,061 19,227,103 56,614,312 8,998,126 166,705,951 102,452,003 19,665,855 9,632,687 (11,715,922) (4,940,284) 354,995,698 207,567,529

Capital expenditure 4,018,508 4,495,017 13,114,040 4,259,715 271,517 492,865 27,200,197 26,859,945 3,048,868 554,929 (678,000) (82,926) 46,975,130 36,579,545

Depreciation (note 4.4 and 5) 5,601,299 5,166,276 1,443,161 958,607 424,930 492,681 3,116,444 815,413 593,573 123,575 - - 11,179,407 7,556,552

Amortization of intangible assets (note 6.1) 76,130 28,413 75,362 15,970 3,363 3,263 14,883 11,045 22,288 14,992 (3,865) (3,865) 188,161 69,818
234
Annual Report 2019
 Annual Report 2019

(Amounts in thousand) (Amounts in thousand)

49. TRANSACTIONS WITH RELATED PARTIES S.No. Name of Related parties Direct shareholding Relationship
% of the Holding Company
49.1 Following are the details of associated undertakings and other related parties with whom the Group entered into transactions
or had agreements and arrangements in place during the year: 53 Imran Ahmed N/A Director of Group Company
54 Mohsin Ali Mangi N/A Director of Group Company
S.No. Name of Related parties Direct shareholding Relationship 55 Nadir Salar Qureshi N/A Director of Group Company
% of the Holding Company 56 Faiz Chapra N/A Key Management Personnel
1 Dawood Hercules Corporation Limited 37.22% Parent Company 57 Hasnain Moochhala N/A Key Management Personnel
2 Engro Foundation N/A Associated Company 58 Muhammad Ovais Aziz N/A Key Management Personnel
3 Sindh Engro Coal Mining Company Limited N/A Associated Company 59 Atif Muhammad Ali N/A Key Management Personnel
4 FrieslandCampina Engro Pakistan Limited 39.90% Associated Company 60 Faisal Shafiq N/A Key Management Personnel
5 Reon Energy Solutions N/A Associated Company 61 Farooq Nazim Shah N/A Key Management Personnel
6 GEL Utility Limited N/A Associated Company 62 Tarique Quadir Lakhiar N/A Key Management Personnel
7 Siddiqusons Energy Limited N/A Associated Company 63 Adil Mushtaq N/A Key Management Personnel
8 International Finance Corporation N/A Associated Company 64 Amir Mahmud N/A Key Management Personnel
9 Arabian Sea Country Club N/A Associated Company 65 Fahim N/A Key Management Personnel
10 Mitsubishi Corporation N/A Associated Company 66 Sadaf Aslam N/A Key Management Personnel
11 Dawood Lawrencepur Limited N/A Associated Company 67 Syed Ammar Shah N/A Key Management Personnel
12 Habib Bank Limited N/A Associated Company 68 Usman Mehmood Khan N/A Key Management Personnel
13 Engro Vopak Terminal Limited 50.00% Joint Venture 69 Abdul Qayoom Shaikh N/A Key Management Personnel
14 Dawood Industries (Private) Limited N/A Common Directorship 70 Aneeq Ahmed N/A Key Management Personnel
15 Inbox Business Technologies Private Limited N/A Common Directorship 71 Jahangir Waheed N/A Key Management Personnel
16 Karachi School for Business & Leadership N/A Common Directorship 72 Muhammad Imran Khalil N/A Key Management Personnel
17 Meezan Bank Limited N/A Common Directorship 73 Salman Hafeez N/A Key Management Personnel
18 Overseas Investors Chamber of Commerce and Industry N/A Common Directorship 74 Syed Abbas Raza N/A Key Management Personnel
19 Patek (Private) Limited 6.24% Common Directorship 75 Syed Ali Akbar N/A Key Management Personnel
20 The Dawood Foundation (Trustee) N/A Common Directorship 76 Vijay Kumar N/A Key Management Personnel
21 Dawood Corporation (Private) Limited 0.60% Common Directorship 77 Aasim Butt N/A Key Management Personnel
22 Tenaga Generasi Limited N/A Common Directorship 78 Atif Kaludi N/A Key Management Personnel
23 Pakistan Oxygen Ltd (formerly known as Linde Pakistan Limited) N/A Common directorship 79 Fahd Khawaja N/A Key Management Personnel
24 Abdul Samad Dawood N/A Director 80 Mohammad Azhar Malik N/A Key Management Personnel
25 Ghias Khan N/A Director 81 Mudassar Yaqub Rathore N/A Key Management Personnel
26 Heena Inam N/A Director 82 Muhammad Majid Latif N/A Key Management Personnel
27 Hussian Dawood 0.69% Director 83 Syed Shahzad Nabi N/A Key Management Personnel
28 Khawaja Iqbal Hassan N/A Director 84 Engro Corporation Limited DB Gratuity Fund N/A Post Employement Benefits Fund
29 Mohammad Abdul Aleem N/A Director 85 Engro Corporation Limited DC Gratuity Fund N/A Post Employement Benefits Fund
30 Raihan Merchant N/A Director 86 Engro Corporation Limited DC Pension Fund N/A Post Employement Benefits Fund
31 Rizwan Diwan N/A Director 87 Engro Corporation Limited Provident Fund N/A Post Employement Benefits Fund
32 Shahzada Dawood 0.43% Director 88 Engro Corporation Limited MPT Gratuity Fund N/A Post Employement Benefits Fund
33 Waqar Ahmed Malik N/A Director 89 Engro Corporation Limited NMPT Gratuity Fund N/A Post Employement Benefits Fund
34 Inam Ur Rahman N/A Director of Group Company 90 Aysha Dawood N/A Spouse of director
35 Muhammad Imran Sayeed N/A Director of Group Company 91 Humera Aleem N/A Spouse of director
36 Zafaryab Khan N/A Director of Group Company 92 Kulsum Dawood 0.52% Spouse of director
37 Khusrau Nadir Gilani N/A Director of Group Company 93 Ahsan Zafar Syed N/A Common Directorship
38 Shahab Qadir N/A Director of Group Company 94 Pakistan Institute of Corporate Governance N/A Common Directorship
39 Shamsuddin Ahmad Sheikh N/A Ex-Director of Group Company 95 Eram Hassan N/A Director
40 Syed Manzoor Hussain Zaidi N/A Director of Group Company 96 Mazhar Hasnani N/A Key Management Personnel
41 Jahangir Piracha N/A Director of Group Company 97 Kalimuddin A Khan N/A Key Management Personnel
42 Vaqar Zakaria N/A Director of Group Company 98 Sirius (Private) Limited N/A Associate/Common Directorship
43 Feroz Rizvi N/A Director of Group Company 99 Teach the World N/A Associate/Common Directorship
44 Imran Anwer N/A Director of Group Company 100 Cyan Limited N/A Associate/Common Directorship
45 Mohammad Asif Sultan Tajik N/A Director of Group Company 101 Mozart Private Limited N/A Associate/Common Directorship
46 Noriyuki Koga N/A Director of Group Company 102 Abrax Pvt Limited N/A Associate/Common Directorship
47 Asad Said Jafar N/A Director of Group Company 103 Grid Egde Pvt limited N/A Associate/Common Directorship
48 Asim Murtaza Khan N/A Director of Group Company 104 Karachi Education Institute N/A Associate/Common Directorship
49 Javed Akbar N/A Director of Group Company 105 Sach international N/A Associate/Common Directorship
50 Sadia Khan N/A Director of Group Company 106 Emperical limited N/A Associate/Common Directorship
51 Amir Iqbal N/A Director of Group Company 107 Najam Saeed N/A Associate/Common Directorship
52 Asif Sultan Tajik N/A Director of Group Company 108 Thomas Patrik N/A Associate/Common Directorship

235 236
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(Amounts in thousand) (Amounts in thousand)

49.2
Details of transactions with related parties during the year, other than those which have been disclosed elsewhere in these 49.3 Details of related parties incorporated outside Pakistan with whom the Group had transactions or arrangements in place are
financial statements, are as follows: as follows:
2019 2018 GEL Utlility Limited China Machinery Engineering Chine East Resources Import & Magboro Power
Rupees
Corporation Export Corporation Company Limited
Country of Incorporation Nigeria People’s Republic of China People’s Republic of China Nigeria
Parent Company
% of holding of EEL 45% N/A N/A 3.33%
Dividend paid 5,322,751 4,094,424
(indirectly through subsidiary)
Bonus Share issued 194,973 -
Reimbursements to Parent company 138,422 12,214
50. PROVIDENT FUND
Associated Companies
Purchases and services 2,241,800 4,328,879
Sale of goods and rendering of services 14,267 560,901 The employees of the Group participate in the Provident Fund maintained by the Holding Company. Monthly contributions are
Dividends received - 122,430 made both by the companies in the Group and the employees to the fund maintained by the Holding Company at the rate of
Donations 425,710 149,253 10% of basic salary.
Payment of interest on TFCs and repayment
of principal amount - 1,025
Advance against share capital / Share capital issued 4,548,437 1,901,703 The investments out of the provident funds have been made in accordance with the provisions of Section 218 of the Companies
Payments against EPC contract 18,949,378 22,189,403 Act, 2017 and the conditions specified there under.
Long term loan received 384,304 847,065
Bonus Share issued 36,132 -
51. DONATIONS
Reimbursement to associated companies 567,067 107,099
Expenses paid on behalf of associated companies 24,243,627 66,278
Interest on deposit - 92,141 51.1 Donations include the following in which the Directors of the Holding Company or Group companies are interested:
Bank charges - 49
Dividends paid / payable 11,318,505 1,429,225 Director Interest Name of donee 2019
Loans repaid - 353,648 in Donee -----Rupees-----
Finance costs 577,053 362,714
Investment in subsidiary company by associates - 3,892,547 Ghias Khan Chairman, Board of Trustees Engro Foundation 313,653
Joint Venture Nadir Salar Qureshi Trustee
Purchase of services 1,546,131 1,896,398 Ahsan Zafar Syed Trustee
Reimbursements 42,561 27,853 Imran Anwar Trustee
Dividend received 1,305,000 1,170,000 Jahangir Piracha Trustee
Expenses paid on behalf of joint venture company 126,141 -
Disbursement of loan 200,000 -
Ahsan Zafar Syed Trustee Thar Foundation 61,034
Mark-up on loan 153 -
Retirement funds 51.2 During the year the Group made the following donations which are above Rs. 1000 or 10% of Group’s total amount of
Contribution to retirement benefit funds 409,809 604,533
donation:
Directors 2019
Dividend paid 264,262 191,103 -----Rupees-----
Directors emoluments - 310,500
Directors’ fees 100,611 80,893
Profit on Engro Rupiya Certificates 19,504 - Citizens Foundation 13,543
Sina Health Education & Welfare Trust 26,390
Others
Thar Foundation 61,034
Other benefits paid 80,864 477,944
Engro Foundation 313,653
Remuneration of key management personnel 1,239,282 912,204
Bonus Share Issued 6,076 -
Reimbursement to key management personnel 36,432 23,314

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(Amounts in thousand) (Amounts in thousand)

52. PRODUCTION CAPACITY 55. NON-ADJUSTING EVENT AFTER REPORTING DATE

Designed
55.1 The Board of Directors of the Holding Company in its meeting held on February 21, 2020 has proposed a final cash dividend of
Annual Capacity Actual Production
Rs. 1 per share for the year ended December 31, 2019 amounting to Rs. 576,163 for approval of the members at the Annual
2019 2018 2019 2018 General Meeting to be held on April 7, 2020.
Urea (note 52.1) Metric Tons 2,275,000 2,275,000 2,003,035 1,928,080 55.2 The Board of Directors of Engro Vopak Terminal Limited, a joint venture company, in its meeting held on January 31, 2020 has
NPK (note 52.1) Metric Tons 100,000 100,000 134,784 132,790 proposed a final cash dividend of Rs. 6.00 per share for the year ended December 31, 2019, amounting to Rs. 540,000, of
PVC Resin (note 52.1) Metric Tons 195,000 195,000 197,000 202,000 which the proportionate share of the Holding Company amounts to Rs. 270,000.
EDC (note 52.1) Metric Tons 127,000 127,000 110,000 107,000
Caustic soda (note 52.1) Metric Tons 106,000 106,000 105,000 105,000 The consolidated financial statements for the year ended December 31, 2019 do not include the effect of the aforementioned
Caustic flakes (note 52.1) Metric Tons 20 - 4 - proposed dividends, which will be accounted for in the consolidated financial statements for the year ending December
VCM (note 52.1) Metric Tons 204,000 204,000 184,000 195,000 31, 2020.
Power (note 52.2) Mega Watt Hours 4,397,963 1,863,724 3,097,604 1,526,309
Power Mega Watt 66 66 48 48 56. LISTING OF SUBSIDIARY COMPANIES, ASSOCIATED
Milling / Drying unit of rice COMPANIES AND JOINT VENTURE
processing plant (note 52.3) Metric Tons 414,000 414,000 93,689 77,008
Name of Subsidiaries Financial year end

52.1 Production planned as per market demand and in house consumption needs. Engro Fertilizers Limited (EFert) December 31
EFERT Agritrade (Private) Limited (EAPL) December 31
52.2 Output produced by the plants of EPQL and EPTL is dependent on the load demanded by NTDC and plants’ availability. Engro Polymer and Chemicals Limited (EPCL) December 31
Engro Polymer Trading (Private) Limited (EPTL) December 31
Engro Peroxide (Private) Limited December 31
52.3 Three months season design capacity and production is dependent on availability of rice paddy.
Engro Plasticizer (Private) Limited December 31
Engro Energy Limited December 31
52.4 The annual capacity of EETPL as service provider to SSGCL is 4.5 MTPA and there has been no shortfall during the year. Engro Power Services Limited (EPSL) December 31
Engro Power International Holding B.V. (EPIH) December 31
53. NUMBER OF EMPLOYEES OF THE GROUP Engro Power Services Holding B.V. (EPSH B.V.) December 31
Number of employees Average number of employees Engro Power Investment International B.V. (EPII B.V.) December 31
as at as at Kolachi Portgen (Private) Limited (KPPL) December 31
December 31, December 31, December 31, December 31, Engro Powergen Qadirpur Limited (EPQL) December 31
2019 2018 2019 2018 Engro Powergen Thar (Private) Limited (EPTPL) December 31
Elengy Terminal Pakistan Limited (ETPL) December 31
Engro Elengy Terminal (Private) Limited (EETPL) December 31
Engro Eximp FZE (FZE) December 31
Management employees 2,088 1,583 1,927 1,556
Engro Eximp Agriproducts (Private) Limited (EEAPL) December 31
Non-management employees 531 722 524 638
Engro Digital Limited (EDigital) December 31
2,619 2,305 2,451 2,194
Engro Infiniti (Private) Limited December 31
Enfrashare (Private) Limited December 31
54. SEASONALITY Engro Energy Services Limited (EESL) December 31

Name of Joint Venture

The Group’s fertilizer business is subject to seasonal fluctuations as a result of two different farming seasons viz, Rabi (from
October to March) and Kharif (from April to September). On an average fertilizer sales are more tilted towards Rabi season. The Engro Vopak Terminal Limited (EVTL) December 31
Group manages seasonality in the business through appropriate inventory management. Name of Associates

The Group’s agri business is subject to seasonal fluctuation as majority of paddy / unprocessed rice is procured during the last FrieslandCampina Engro Pakistan Limited (FCEPL) December 31
quarter of the year which is the harvesting period for all rice varieties grown in Pakistan. However, rice is sold evenly throughout Sindh Engro Coal Mining Company Limited (SECMC) December 31
the year. The Group manages seasonality in the business through appropriate inventory management. Gel Utility Limited (GEL) December 31
Siddiqsons Energy Limited (SEL) June 30
Pakistan Energy Gateway Limited (PEGL) December 31

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(Amounts in thousand)

56.1 Set out below is summarised financial information for each subsidiary that has Non-Controlling Interests (NCI). The amounts
disclosed for each subsidiary are before inter-company eliminations:
EPQL EPTPL ETPL EFert EPCL
Rupees

Total Assets 27,541,251 186,456,120 64,714,675 127,261,901 57,519,217

Total Liabilities 13,578,068 144,900,877 56,614,312 83,982,441 39,743,061

Total Comprehensive Income 3,401,808 6,123,585 2,934,941 17,135,067 3,696,037

Total Comprehensive Income
allocated to NCI 1,058,740 3,055,669 1,291,374 6,730,227 1,615,153

Accumulated NCI 4,373,064 23,593,100 3,552,819 18,215,197 7,866,750

Cash and cash equivalents (3,700,454) 5,465,563 4,017,848 4,029,957 7,951,181

Cash (utilized in) / generated from

- operating activities 4,234,290 14,366,231 5,178,590 21,988,785 7,679,131
- investing activities (114,387) (26,301,368) (271,483) 4,502,608 (17,675,057)
- financing activities (4,124,606) 13,674,496 (3,598,903) (22,547,158) 8,787,053

Dividend paid / payable to NCI 302,250 - 550,235 8,175,822 358,371

Interest of NCI 31.11% 49.90% 44% 43.73% 43.81%

57. CORRESPONDING FIGURES

Corresponding figures and balances have been rearranged and reclassified, wherever considered necessary, for the purpose
of comparison and better presentation, the effects of which are not material.

58. DATE OF AUTHORIZATION FOR ISSUE

These consolidated financial statements were authorized for issue on February 21, 2020 by the Board of Directors of the
Holding Company.

Abdul Samad Dawood Hasnain Moochhala Ghias Khan

Vice Chairman Chief Financial Officer President and Chief Executive

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proxy form
I/We ____________________________________________________________________________________________________
of ______________________________________________________ being a member of ENGRO CORPORATION LIMITED
and holder of ____________________________________________________________________________________________

(Number of Shares)

Ordinary shares as per share Register Folio No. ____________________________________________________ and/or CDC
Participant I.D. No. ___________________________________ and Sub Account No. __________________________, hereby
appoint _____________________________________________ of _______________________________________or failing him
____________________________________________________ of __________________________________________________
as my/our proxy to vote for me/us and on my/our behalf at the Annual General Meeting of the Company to be held on the
07th day of April, 2020 and at any adjournment thereof.

Signed this _______________________day of ______________ 2020.

WITNESSES:
1. Signature : __________________________________________
Name : __________________________________________
Address : __________________________________________
__________________________________________
CNIC or : __________________________________________ __________________________________
Passport No. : __________________________________________ Signature
Signature should agree with the specimen
2. Signature : __________________________________________ registered with the Company
Name : __________________________________________
Address : __________________________________________
__________________________________________
CNIC or : __________________________________________
Passport No. : __________________________________________

Note: Proxies in order to be effective, must be received by the Company not less than 48 hours before the meeting.
A Proxy need not be a member of the Company.

CDC Shareholders and their proxies are each requested to attach an attested photocopy of their Computerized National
Identity Card or Passport with this proxy form before submission to the Company.

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 Annual Report 2019

standard request form

circulation of annual audited accounts
The Share Registrar Date: _________________
Engro Corporation Ltd.
FAMCO Associates (Pvt.) Ltd.
8-F, Near Hotel Faran
Nursery, Block-6, P.E.C.H.S., Shahra-e-Faisal
KARACHI.
E-mail: [email protected]
Telephone No. (9221) 3438 0101-5, 3438 4621-3

Dear Sirs,
Subject: Request for Hard Copy of Annual Report of Engro Corporation Limited.

As notified by the Securities and Exchange Commission of Pakistan (SECP) vide S.R.O. 470(I)/2016 dated May 21, 2016
and approved by the Shareholders in the Annual General Meeting of the Company held on April 06, 2017, the Company is
circulating its annual balance sheet, and profit and loss account, auditor’s report and directors report etc. (“Annual Audited
Accounts”) to its members through CD/DVD/USB at their registered addresses, save for those who opt for a hardcopy of
the Annual Audited Accounts by filling out the details below and sending it to the Company’s share registrar and Company
Secretary.

I, ________________________________ S/o, D/o, W/o ________________________ being a registered shareholder of Engro

Corporation Ltd. with the particulars as mentioned below would request that my name be added to the list of Shareholders
of the Company who opt for delivery of a hardcopy of the Annual Audited Accounts of the Company and hereby request you
send to me the Annual Audited Accounts in hard copy form at my registered address as contained in the member register
instead of providing the same through CD/DVD/USB.

Particlars
Name of Shareholder
Folio No. / CDC ID No.
CNIC / NICOP / Passport No.
Land Line Telephone No. (if any)
Cell No.(if any)

Yours truly,

___________________________
Shareholder’s Signature

Copy to:

Company Secretary
Engro Corporation Ltd.
8th Floor, The Harbour Front, Dolmen City
HC-3, Block 4, Clifton, Karachi-75600.
E-mail: [email protected]

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