Engro Chemical

Engro is taken from the company logo "Energy for Growth". Engro Chemical Pakistan Limited (ECPL) is a Pakistani fertilizer manufacturing and marketing company. Its production is based in Daharki, Sindh and Karachi. It is included in the KSE 100 stock index at the Karachi Stock Exchange and also listed on the Lahore and Islamabad Stock exchanges. During the past decade it has diversified its business and now owns subsidiary companies like Engro Foods Limited and Engro Energy Limited. It is considered the leading business group of Pakistan."'

History

Engro was previously owned by the American energy giant Exxon. In 1991, Exxon decided to divest its fertilizer business on a global basis. The employees of then Exxon Chemical Pakistan Limited, in partnership with leading international and local financial institutions bought out Exxon’s 75 percent equity. This was at the time and perhaps still is, the most successful employee buy-out in the corporate history of Pakistan. Renamed as Engro Chemical Pakistan Limited, the Company has gone from strength to strength, reflected in its consistent and enviable financial performance, growth of the core fertilizer business and successful business diversification into other fields. Its performance & outlook is following the declared Vision “to be the Premier Pakistani Enterprise with a global reach, passionately pursuing value creation for all stake holders.”

Corporate governance

Engro’s governance structure responds to the industry’s best practices demands ensuring that all aspects with respect to economic, environmental and social obligations are fully considered and business decisions are taken after evaluating their impact on the company’s triple bottom line ----- People, Planet and Profits.

The corporate governance model is implemented through three committees. The Management Committee ensures sustainability values and oversees governance standards and risk management, making critical assessments of all areas from strategy planning to social investments. The Health, Safety and Environment Committee develop a framework for HSE best practices and implements and monitor it. The third committee, the Compensation, Organization & Employee Development Committee, implements human capital systems to motivate and retain employees.

An integral component of the corporate governance model is the Company’s ten-member Board of Directors. The management stands to gain from the immense knowledge and experience that each Board member has in the industry and uses this to make intelligent decisions. The Board of Directors also represents employees and shareholders, thereby ensuring valuable feedback from these two important stakeholder groups. Non-executive Directors receive individually tailored orientation programs. The Board of Directors lend their experience via the Board’s Compensation and Audit Committees which directly involve business conduct, update and monitor policies; the Compensation Committee works to ensure employee satisfaction and best practices in human resources and the Audit Committee checks the financial statements, legal requirements, internal and external audits and so forth.

Engro’s corporate governance strategies aim to achieve higher standards in the future, fully in conformity with the United Nations Millennium Development Goals. At Engro, stakeholder engagement covers customers, investors, communities, employees and the government. It is an ongoing process, structured to maximize dialogue, mutual consultation and feedback.

Management

Engro’s professional expertise can be assessed both quantitatively and qualitatively. On the numbers side a quick look at key financial indicators say it all. Sales for the year 2006 stood at Rs. 17.6 billion. Pre-tax profit was reported at Rs. 3.44 billion - 7 percent higher than the corresponding year. Profit after tax was Rs. 2.55 billion - a new record for the Company and higher by 10 percent over the previous year.

On the qualitative side, the Board and Management of Engro firmly believe in the human potential to strive for excellence and accept challenges in their fields. The Engro team has been acclaimed for its ingenuity and expertise in the fields of fertilizers, energy and management. The Company is now gaining recognition in the food and automation sectors. It is 100 percent compliant on NEQS requirements and initiated disclosure to Sindh Environmental Protection Agency. Engro’s Health, Safety and Environment Management Systems stipulate specific and timely reporting requirements of all events. The company has been continuously monitoring and controlling its environmental footprint and has invested more than Rs. 390 million since 1991 for environmental protection.

Several committees are working towards continuously improving health, safety and environmental performance, including the Corporate HSE Committee, divisional HSE Committees, numerous Safe Operation committees, Departmental Safety Committee and the Shop Floor Safety Committee. Engro has engaged DuPont for further upgrading its Safety Management systems for compliance to OSHA standards & beyond.

Engro has implemented ENCON (Energy Conservation) Project and reduced energy consumption per ton of urea by a substantial 31.6 percent over 15 years. The WWF has conducted a fauna and flora survey of Engro Chemical’s site and has identified no major impacts on biodiversity. The site is host to approximately 20,000 migratory birds each year.

Professional management practices have been endorsed through various international certifications that the Company holds. These include:

*Certified to OHSAS18001 ( Occupational Safety Standards )
*Certified to ISO 14001 ( Environmental Management Systems )
*Certified to ISO 9001 ( Quality Management System )

The accounting policies fully reflect the requirements of the Companies Ordinance,1984 and such approved International Accounting and Financial Reporting Standard as notified under this Ordinance and directives issued by the Securities and Exchange Commission of Pakistan.

Pakistan Credit Rating Agency in its recent annual review of the Company’s credit worthiness has upgraded Engro’s long-term ratings and maintained its short-term ratings as AA “Double A” and “A One Plus” respectively.

The Labor Colony Issue

The labor colony was a residential scheme in the neighborhood of the company developed by the government in order to provide low cost shelter to poor laborers of the area. The local people were again deprived as the company along with other major operating industries acquired the majority of the houses for their employees that belonged to Skilled Labor Group thus denying the rights of other low class labors earning their livelihood in the form of daily wages ( The skilled Labor Group of the company can be regarded as well-to-do families earning Rs.10,000/= to Rs. 40,000/= per month and even more, thus they can afford their own houses, where as other poor labors who can hardly earn up to Rs. 5000/= per month remain shelterless). Since the majority of the employees that belong to Skilled Labor Group are not locals, so they had no intentions to live in those houses but yet they were rewarded with the ownership rights. Most of the people acquiring the houses either sold the houses or gave away on monthly rent, however these houses were acquired by the government in the form of small annual installments. More interestingly the government law denies such use of these houses but such acts are still practiced.

Corporate responsibility (CR)

Doing business in Pakistan, with a still emerging socio-economic sector requires being acutely sensitive to the needs of the community. The company has been seen engaged in corporate philanthropy since its inception some 40 years ago. Only in 2006, the company policy was changed from philanthropy to a full fledged CSR based approach under the lead of their Public Affairs Manager, Wajid H. Junejo, who got the company engaged with UN Global Compact and claimed international recognition to Pakistan for the first time. The company received many prestigious awards during 2006 and 2007 based on new CSR concepts introduced and first ever intevention by any Pakistani Company to register and WIN the Asian CSR Award among 178 entries across the globe. More awards included notable COP status on UN Global Compact Reporting System, CSR award by helpline trust, best company award by the prime minister of Pakistan, highest tax payer award by Large Tax Payers Unit of Income Tax Department, awards by National forum of Environment & Health, award of best CSR Report by WWF and top company award by Karachi Stock Exchange. The company also published the first ever CSR report in its history which was declared as role model for other during UN Global Compact Pakistan Chapter Seminar. the report itself was launched by Regional Representative UNDP Pakistan, Mr. Hao Liang Xu.

The Company now bases its CR program on the 10 principles of UN Global Compact on GRI format. The first and foremost commitment is to maintain ethical behavior in all aspects of business.

The social investment projects principally cover the fields of healthcare, education, infrastructure development, conservation and local sponsorship. The Company’s social investments and philanthropic contributions exceeding Rs. 52 million have directly benefited over 130,000 individuals at the grassroots level.

Engro’s CR program follows the company’s goals of, respecting human rights, promoting a culture of honesty and creating an environment of philanthropy within the organization. Engro was the first Pakistani company to publish a CR report based on the Global Reporting Initiative (GRI)under the lead of Wajid Junejo, Engro's Public Affairs Manager.

In 2006, Engro received the highest taxpayer award in chemical sector awarded by Large Taxpayers Unit. The same year Engro’s “Project Hope” was declared the most outstanding project in the healthcare category amongst 178 entries from 14 countries and awarded the Asian CSR award held at Manila, Philippines. This is the first Asian CSR award ever given to a Company in Pakistan. The award was presented to Mr. wajid Hussain Junejo by Ms Corazon C. Acquino, former president of the Philippines in a glittering ceremony at Manila.

Project Hope is a unique initiative that combines the expertise of Engro, the Telemedicine Association of Pakistan, Government of Sindh’s Health Department and Jinnah Postgraduate Medical Centre in Karachi. The project utilizes state-of-the-art technology to provide tertiary healthcare and referral services for rural communities around telemedicine rural spokes established at Gambat, Shikarpur, Jacobabad, Ghotki, Mirpurkhas, Sanghar and Sukkur. The system links rural spokes via video-conferencing systems to specialist doctors located at the hub in Karachi. Using the system, specialists can access X-rays, electrocardiograms and vital signs for real time consultation.

The Project Hope Telemedicine initiative by Engro makes available doctors in no less than fifteen medical specialties ranging from neonatology to cardiology on a daily basis - and free of cost, to the communities. The project has provided online consultation by specialist doctors to about 1400 patients to date.

There are approximately 20,000 reported snakebite deaths a year in Pakistan. The geographical area where Engro’s plant is situated is particularly susceptible to snakebites. One of Engro's first community health interventions was a snakebite treatment program, which since 1977 has saved more than 68,500 lives. Open 24 hours a day throughout the year, it handled 5,600 cases in year 2006 alone. The Company’s several other regularly sponsored projects and programs include the Engro Thalassemia Centre located in Sukkur, which recorded more than 8,000 blood transfusions in year 2006 and the Hepatitis B awareness and vaccination program in Daharki that recorded over 2,400 vaccinations in the same year.

In Education, Engro’s involvement has moved far beyond the traditional financial support or ‘cheque-writing’ model. This is exhibited through the Katcha Schools program. Based on a series of dialogues with the elders of the area, Engro started with two experimental schools in the riverine communities of Ghotki district in 2001. The program now has 11 schools with permanent buildings, 18 trained full-time teachers and over 850 students. Three of the schools were started in collaboration with the USAID.

The Company also embarked upon reconstruction of 100 seismic resistant houses at EARTHQUAKE hit area of battal in District Mansehra. The initiative started in 2005 with immediate support activities got culminated in the mid of 2007 when construction of home were completed in collaboration with TCF.

While the Katcha Schools project remains the flagship support-to-education intervention, the company has also undertaken a number of other projects in this field to its credit. These include a contribution of Rs. 1.0 million to establish a central library at IBA Sukkur campus, adoption of six government schools that impart education to 2,250 students and the TCF School-Engro Campus which imparts quality education to less privileged children at a level comparable to the best urban private schools.

A Pakistani success story

In core business sector of urea fertilizer manufacturing, Engro enhanced urea production from an annual capacity of 270,000 tonsvague|which tons? in 1991 to 945,000 tons in 2006. In 2006, the Government of Pakistan carried out bidding for allocation of 100 MSCFD gas from Qadirpur Gas field. Engro acquired the rights in 2007 and is accordingly expanding the Urea production facility. The new plant is expected to be complete in 2010. Subsequently, Engro’s market share is expected to rise from the current 20% to 35% in 2011. The planned expansion will be the world’s largest single train urea plant with a capacity of 1.3 million tones per annum and also the largest capital investment by a private sector Pakistani company in the country’s corporate history.

As part of growth and diversification plans, Engro established a 60 million dollars, 50:50 Joint Venture company named “Engro Vopak Terminal Limited”(EVTL) in 1995, with Royal Vopak, a Netherlands based company and one of the foremost terminal operators in the world. This joint venture company operates a modern jetty & terminal at Port Qasim, Karachi for handling and storage of bulk liquid chemicals. In 2007, it will complete 10 years of safe operations without lost work injury. It is a key infrastructure facility for the development of the capital intensive chemical industry in the heavy industrial zone of Port Qasim, Karachi.

Engro formed a Joint Venture company with Mitsubishi and Asahi Glass of Japan, namely “Engro Asahi Polymer & Chemicals Ltd.”, to develop a Polyvinyl Chloride (PVC) resin project at Port Qasim, Karachi. The project with an initial capacity of 100,000 tonsvague per year commenced production in November 1999 and the plant production is being marketed both in domestic and export markets. The equity stake of Engro increased from 50% to 80% in 2006 when it acquired additional 30% shareholding from Asahi Glass Company (AGS) of Japan. The Board of EAPCL approved an expansion and back integration project involving PVC resin production by 50,000 tonnes (totaling 150,000) and back integrating by setting up an EDC/VCM plant and a Chlor alkali plant. The entire project will cost around 220 million U.S dollars and is expected to come on stream in a phased manner commencing from 2nd half 2008 and ending in 1st half 2009.

A 100,000 tons per annum capacity NPK fertilizers plant was set up at Port Qasim, at a cost of US $10 million, in 2001. The plant is in production and benefiting the country’s agriculture by providing balanced nutrition to improve farm yields.

Further business diversification took place in April 2003, when Engro acquired 51 percent interest in the Automation & Control Division of Innovative (Private) Limited, a Lahore based company that provides process control industrial solutions in the knowledge based services sector. The company is now named Engro Innovative Automation Limited (EIAL). It is a market leader in Industrial automation business. It also offers power and energy management software. In 2007, EIAL acquired 70% stake in an automation engineering company in the USA for 7 million U.S dollars. The business plan includes developing an outsourcing model which capitalizes upon the wage differential between the U.S and Pakistan. With experience of executing major automation projects in Pakistan and the Middle East, EIAL is well positioned to expand overseas business.

Engro is essentially an agro-based company that has a holistic approach to business development. In 2005, the company took a major business diversification initiative by launching its wholly owned subsidiary Engro Foods Limited (EFL). During 2006, EFL launched UHT milk and cream under the brand name OLPER’s and HCLF milk under the brand name OLWELL. EFL plant located in Sukkur was set up at a cost Rs 1.0 billion and commenced commercial production in March 2006. Another plant near Sahiwal in the Punjab, is nearing completion. The EFL plan envisages a fast track growth model, driven by innovative launches to command a product range across the dairy spectrum backed by compatible milk collection infrastructure and top end in the distribution of these products. EFL is well positioned to become a substantial player in the dairy sector during the next three years.

In line with its diversification plan, a wholly owned subsidiary of Engro namely, Engro Energy Limited (EEL), was formed in 2006 whose first project is setting up an Independent Power Plant (IPP) near QadirPur, Sindh by 2009-10. The plant will utilize low heating value permeate gas from QadirPur gas field which is currently wasted by being flared. EEL has plans to further grow in the energy sector by expansion as well as suitable acquisitions in the future. The 16 years since Exxon became Engro have been both exciting and rewarding for the organization and people associated with it. Challenges have been overcome, goals achieved and new goals set. Engro today stands recognized not only as a successful business operation but also as an excellent case study for doing business in Pakistan.

Awards

In 2001 Engro was listed as one of the Karachi Stock Exchange's Top 25 Companies. In 2006 Forbes Asia listed Engro as one of Asia's "200 Best Under a Billion". In 2006 Engro was awarded the Asian Asian CSR Award in the Concern for Health category for its sponsorship of Project Hope, a telemedicine program bringing the advice of medical specialists to underserved areas in Sindh province; the program has been sponsored by the company since 2005 and helped about 500 patients in its first year alone.

External links

* [http://www.engro.com/ Engro Chemical Pakistan Limited]
* [http://www.kse.com.pk/ Karachi Stock Exchange]
* [http://www.forbes.com/lists/2006/24/biz_06bub_Asias-200-Best-Under-A-Billion_Company_3.html Forbes Asia listing]