Engro Polymer & Chemicals Limited (“EPCL” or “the Company”) was incorporated in 1997 as a Public Limited Company under the repealed Companies Ordinance, 1984 (now Companies Act, 2017) and commenced commercial operations in the same year. The Company is listed on the Pakistan Stock Exchange (PSX). The registered office of the Company is situated at 8th Floor, The Harbour Front Building, Marine Drive, Block 4, Clifton, Karachi. EPCL is the holding company of two wholly-owned subsidiaries: Think PVC (Private) Limited, which operates the Company's downstream, retail-facing PVC products business under the “thinkPVC” brand, and Engro Peroxide (Private) Limited (“EPPL”), which owns and operates the Hydrogen Peroxide (HPO) plant commissioned in February 2025. The current report analysis is based on the unconsolidated financial statements.

EPCL represents the chlor-vinyl manufacturing arm of the Engro Group, one of Pakistan's leading industrial conglomerates. The Company was established to produce PVC resin domestically, reducing Pakistan's dependence on PVC imports. Since commercial operations commenced, EPCL has undertaken a series of capacity expansions and efficiency projects. Recent milestone includes the commissioning of 100 KT PVC III plant and debottlenecking of VCM by 50 KT in 2021, and the execution of the VCM plant relocation from Baton Rouge, Louisiana. In 2023, the Company recorded its highest PVC sales volumes to that point. More recently, the Group commissioned, through EPPL, its Hydrogen Peroxide (HPO) plant on February 17, 2025, and separately completed the High Temperature Direct Chlorination (HTDC) project at EPCL, diversifying the product portfolio and adding value-added downstream chemical segments. 

EPCL is the sole manufacturer of PVC suspension resin in Pakistan, operating under the brand name SABZ, available in multiple grades (AU 58, AU 60, AU 72, AU 67R, and AU 67S). The Company's manufacturing facility is located at Daharki, Ghotki, Sindh, within an integrated industrial complex. Installed capacities as of CY2025 stand at PVC: 295 KT per annum, VCM: 245 KT per annum, and EDC: 127 KT per annum, with the HPO plant adding a further 28 KT per annum at the EPPL level. During CY25, actual PVC production reached 230 KT against installed capacity of 295 KT, a capacity utilization of ~78%; domestic PVC sales volumes of 68.5 KT in 1QCY26 point to continued utilization gains into CY26. The Company's operational model encompasses the full chlor-vinyl value chain: from the import of Ethylene and EDC as key primary raw materials, through the manufacture of VCM and its downstream conversion into PVC resin. The Chlor-Alkali segment produces Caustic Soda, Sodium Hypochlorite, and Hydrochloric Acid as co-products of the electrolysis process. The Company also supplies surplus power generated from its captive power plants (installed capacity: 60 MW) to Engro Fertilizers Limited. The manufacturing facility holds ISO 9001 and ISO 14001 certifications.

EPCL is a subsidiary of Engro Corporation Limited, which holds 56.19% of the Company's ordinary share capital and is itself a wholly-owned subsidiary of Engro Holdings Limited (formerly Dawood Hercules Corporation), the ultimate parent company. Mitsubishi Corporation holds 11.01% of EPCL's share capital. The remaining shareholding is held by Mr. Nadeem Nisar (approximately 10%), an EPCL employees' trust, and the general public.

The controlling ownership structure recorded no change in the period under review. However, two potential ownership transactions were disclosed during the review period that have a bearing on the ownership-stability assessment going forward. First, Mitsubishi Corporation has entered into a Share Purchase Agreement for the sale of its entire 11.01% shareholding in EPCL; completion remains subject to conditions precedent, including corporate and regulatory approvals, and had not occurred as of March 31, 2026. Second, as announced at the Pakistan Stock Exchange on March 13, 2026, Engro Corporation Limited has received a non-binding offer from Lotte Chemical Pakistan Limited for the acquisition of its entire 56.19% shareholding in EPCL; discussions remain ongoing, and no binding sale agreement had been executed as of the reporting date. These developments introduce a degree of forward-looking uncertainty around EPCL's ownership structure. As of the reporting date, Engro Corporation's controlling stake and the associated financial and strategic support to EPCL remain intact and unchanged, and both shareholders retain their full shareholding and associated governance representation.

Engro Corporation is one of Pakistan's established industrial conglomerates, with a business portfolio spanning petrochemicals, energy and related infrastructure, telecommunication infrastructure, food and agriculture, and international trading. The Chairman of EPCL, Mr. Ahsan Zafar Syed, serves as President and CEO of Engro Corporation and brings over three decades of experience in operations, project management, and strategic leadership across the petrochemical, energy, and food and agriculture sectors. Mitsubishi Corporation's co-sponsorship has historically introduced international commercial and technical expertise in the global chemicals and energy business; the pending sale of its EPCL shareholding, as discussed above, is a relevant consideration for the continuity of this dimension of support. The sponsoring group's track record in executing large-scale capital projects and managing complex industrial operations remains a relevant supporting factor for the Company's business risk profile.

EPCL derives financial strength from its affiliation with the Engro Group, whose consolidated asset base and diversified earnings streams provide a supportive financial backdrop. Engro Corporation's group presence across fertilizers, polymers, energy, and food platforms provides access to group-level financial support when required. The Company's association with Mitsubishi Corporation has also historically provided access to international commercial relationships and capital market expertise; as noted above, this relationship is subject to change pending completion of Mitsubishi's announced divestment.

The Board of Directors comprises eight members: one Chairman (Non-Executive), one Chief Executive Officer (Executive), four Non-Executive Directors, and two Independent Directors, consistent with the requirements of the Listed Companies (Code of Corporate Governance) Regulations, 2019. The Board's composition was unchanged as of March 31, 2026. Mr. Ahsan Zafar Syed, Chairman and President & CEO of Engro Corporation, brings over three decades of professional experience. The board seat previously held by a Mitsubishi Corporation nominee was vacated during CY25 and has not been separately replaced.

The profiles of the Board of Directors are provided below:

Mr. Ahsan Zafar Syed (Chairman, Non-Executive Director): President and CEO of Engro Corporation. Alumnus of NED Karachi and Manhattan College New York. Over three decades of experience in petrochemicals, energy, and food and agriculture sectors. Recipient of the National Engineering Excellence Award by the Institution of Engineers Pakistan in 2024.

Mr. Kamran Nishat (Independent Director, Chairman BARC): Fellow member of ICAP with over 42 years of professional experience. Serves as Managing Director and CEO of Muller & Phipps Pakistan (Private) Limited. Member of boards of AGP Limited, Hugo Bank Limited, ABL Asset Management Company Limited, and Novartis (Pharma) Pakistan Limited.

Ms. Ayesha Aziz (Independent Director, Chairperson Board People Committee): CFA charter holder with an MBA from IBA Karachi. Over 30 years of financial sector experience including investment banking, treasury, credit, and planning. Founding Managing Director of Pak Brunei Investment Company. Currently serves on boards of Haleon Pakistan Ltd, Exim Bank of Pakistan, KSB Pumps Company Limited, and Alfalah Asset Management Limited.

Mr. Nazoor Ali Baig (Independent Director): Electrical Engineer with over 45 years of industry experience. Former power generation division manager at Detroit Edison Company (subsidiary of DTE Energy). Has served on the EPCL board since 2020.

Mian Tariq Nisar (Non-Executive Director): Businessman with over four decades of experience across manufacturing, petrochemicals, and spinning industries. Currently CEO of Nimir Chemicals Pakistan Limited. Recipient of Businessman of the Year Gold Medal in 2005, 2006, and 2011.

Mr. Athar Abrar Khwaja (Non-Executive Director): Presently serving as CEO of Engro Energy Limited. Nearly 20 years of experience at EPCL including roles in Process Engineering, Projects, Marketing, and Business Development. Holds a bachelor's degree in chemical engineering from McGill University, Montreal.

Mr. Muhammad Bilal Ahmed (Non-Executive Director): Director on the Board of Dawood Hercules Corporation since August 2023. Chief Investment Officer at Dawood Investments Limited. Over 13 years of experience in commercial and financial management within the Engro group. CFA charter holder with BSc (Hons) in Mathematics from LUMS and a Master's in Economics from the University of Cambridge.

Mr. Abdul Qayoom Shaikh (Chief Executive Officer): Over 25 years of experience in the petrochemical and polymer value chain. Joined EPCL in 2000 as a Graduate Trainee Engineer and progressed through Technical, Operations, Commercial, and Business Development functions before his appointment as CEO. Alumnus of Harvard University's High Potential Leadership Program. Holds a master's degree in economics and a bachelor's degree in chemical engineering.

The Board has established two committees: the Board Audit and Risk Committee (BARC) and the Board People Committee, both chaired by Independent Directors. During CY25, BARC held six meetings and the Board People Committee held five meetings, with high attendance recorded across both committees. The Committee Secretary for BARC is Mr. Khawaja Haider Abbas, Head of Internal Audit. No material changes to committee composition or meeting cadence have been noted for 1QCY26.

A.F. Ferguson & Co. Chartered Accountants, listed in Category 'A' of the SBP's panel of auditors, are the external auditors of the Company and expressed an unqualified opinion on the financial statements for the year ended December 31, 2025. The Company's condensed interim financial statements for the quarter ended March 31, 2026 were prepared on an unaudited basis in accordance with IAS 34.

The Company operates under a defined organizational structure with the CEO at the apex, supported by a Management Committee comprising divisional heads across Operations, Commercial, Finance, HR and Corporate Communications, Manufacturing, Digital Transformation, and Supply Chain, each reporting directly to the CEO. The Internal Audit function, led by the Head of Internal Audit, maintains a reporting line to BARC to preserve independence, in addition to its administrative reporting within the organization.

The senior management team of EPCL comprises experienced professionals with diverse industry backgrounds and strong technical and managerial credentials.

Mr. Abdul Qayoom Shaikh (Chief Executive Officer): Profile detailed under Board Members above.

Ms. Rabia Wafah Khan (Chief Financial Officer): Leads the finance function, including financial strategy, capital management, and reporting, and brings relevant experience within the Engro group ecosystem.

Mr. Hussain Hasanali (Chief Commercial Officer): Responsible for commercial strategy, sales, and business development.

Mr. Arif Jalil (Vice President Operations): Oversees the operational functions across the chlor-vinyl and chemicals businesses.

Mr. M. Saad Khan (Vice President Manufacturing): Responsible for manufacturing operations, quality, and plant reliability.

Ms. Beenish Kajani (Head of HR and Corporate Communications): Leads human capital and communications functions.

This leadership team is supported by a group of experienced professionals, ensuring strong governance and strategic direction.

The Management Committee meets regularly to review operational and strategic matters, including cost optimization, operational efficiency, energy alternatives, and expansion project tracking. Functional heads operate against defined KPIs, and the Company conducts periodic orientation for new Board members.

EPCL operates on an integrated Enterprise Planning Platform comprising SAP S/4HANA, SAP Ariba, and SuccessFactors, supplemented by a range of digital initiatives directed at plant reliability, safety, and customer experience. These include Adaptive Advanced Process Control and Multi-Variate Modelling for plant optimization, Digital Twin technology developed with Aspen Technology, 3D intelligent modelling supporting virtual walkthroughs and turnaround and emergency-response planning, an AI-based Hazard Management System, AI-enabled thermal cameras for leak detection, and drone-based visual inspection of plant assets. Customer-facing systems include a Salesforce-based platform supporting digital payments and real-time vehicle tracking, alongside predictive-analytics dashboards supporting asset reliability. Cybersecurity measures include air-gapped Data Diode technology for operational infrastructure. The Company received Pakistan Digital Awards recognition in two categories during the period.

The Board has delegated the detailed design and operation of the internal control system to the CEO, with controls embedded in operational processes through documented operating manuals. The Company maintains a Speak Out whistle-blower system monitored by BARC, and risk assessment results are presented to BARC on a quarterly basis under an Enterprise Risk Management framework aligned with recognized standards. As of the CY25 year-end, the Board had reviewed and expressed satisfaction with the effectiveness of the internal control system; no material change has been noted for 1QCY26.

Global PVC and ethylene markets experienced pronounced volatility during 1QCY26, following a period of sustained oversupply through CY25. PVC prices rose by over USD 400 per ton during the quarter, initially supported by China’s announcement to rescind its VAT export rebate (effective April 2026), which shifted market sentiment, and accelerating sharply following the onset of the US-Iran conflict, which disrupted global supply chains. Ethylene prices moved in the opposite direction on cost grounds, more than doubling in March 2026 amid a naphtha shortage, forcing widespread operating-rate cuts and force majeure declarations among naphtha-based producers across East Asia. Despite the sharp rise in feedstock costs, the core delta (the PVC-ethylene spread that most directly drives EPCL's profitability) tracked above USD 300 per ton throughout 1QCY26, an improvement on the USD 275–320 per ton range prevailing through CY25, as PVC price gains outpaced the increase in ethylene costs. Domestically, the PVC market remained resilient despite international volatility, with market-wide demand growing by approximately 40% year-on-year in 1QCY26, supported by increased government and private construction-sector investment. EPCL's own domestic PVC sales of 68.5 KT during the quarter were achieved through disciplined pricing, close customer engagement, and targeted market development rather than through capacity expansion. The global caustic soda market tightened during 1QCY26, with prices rising on the back of increased shutdowns of chlor-vinyl plants across the region amid the conflict-related disruption, and stable demand from key end-markets such as alumina and pulp & paper. This near-term tightening sits alongside a more structural oversupply concern: approximately 800 KT of new Chinese caustic soda capacity commissioned during CY2025 is expected to continue weighing on global balances through CY26, even as developed markets rationalize capacity (Westlake closed its 410KT US chlor-alkali facility at end-CY25). Domestically, caustic soda revenue was supported by resilient textile-sector demand (7% export growth in FY25), though rising energy costs continued to weigh on segment margins. Captive energy costs remain a source of pressure across the sector: gas prices for captive producers continued to rise through the escalation of the gas levy, reaching PKR 1,406 per MMBtu in January 2026, further exacerbated by higher RLNG prices linked to international crude oil costs. The Company continues to carry a related provision and holds a stay order from the Islamabad High Court against recovery of amounts billed from December 2025 onward, discussed further under Capitalization; this is a distinct matter from the longer-standing GIDC levy dispute, on which the Company separately continues to carry a provision under a Sindh High Court stay. The Hydrogen Peroxide segment (operated through EPPL) began CY26 on a subdued note, with continued pressure from excess global supply, before market dynamics shifted toward quarter-end as the US-Iran conflict disrupted global energy markets and affected regional producers' production economics. As global HPO prices and fuel costs rose sharply, the Company was able to raise its own domestic prices to partially offset the cost increase. On the regulatory front, PVC continues to benefit from tariff protection, with 10% customs duty, alongside anti-dumping duties ranging from 3–20% on imports originating from China, Thailand, Taiwan, and Korea; VCM, EPCL's key intermediate raw material, remains duty-free. This tariff structure continues to underpin EPCL's structural position in the domestic PVC resin market, though imports remain a channel through which downstream buyers can access internationally-priced material, and management has flagged this as a continuing competitive consideration.

EPCL retains its position as the sole domestic manufacturer of PVC resin in Pakistan, a structural position that insulates the Company from local manufacturing competition, notwithstanding continued exposure to internationally-priced PVC imports. Domestic PVC sales volumes reached 239 KT in CY25, EPCL’s highest recorded domestic sales to date (up 16% year-on-year), and this momentum continued into 1QCY26 with domestic sales of 68.5 KT, against a backdrop of approximately 40% year-on-year domestic market growth. The Company also continued to expand its non-conventional, downstream PVC product lines under the thinkPVC brand, including a new retail outlet in Lahore and an extension into lifestyle PVC products, contributing to 41% growth in non-conventional product revenue during CY25. On cost competitiveness, the Company remains exposed to elevated and rising captive energy costs. Continued investment in cost efficiencies and operational digitization, including advanced process control, predictive maintenance analytics, and AI-enabled leak detection, supports asset reliability and cost discipline, while an initial 2 MW solar installation reflects early steps toward energy source diversification, modest in scale relative to the Company's overall energy requirement.

EPCL recorded unconsolidated net sales of PKR 21,817mln in 1QCY26, reflecting a sharp year-on-year expansion of ~21.6% compared to PKR 17,947mln in 1QCY25. On a consolidated basis, top-line growth was more pronounced at ~24% year-on-year, reaching PKR 22,182mln. This performance marks a notable departure from the historical trajectory, which was characterized by contractions in CY23 (-1.0%) and CY24 (-6.8%), followed by a modest recovery of 2.3% in CY25 (PKR 77,406mln). The primary catalyst for this recent revenue acceleration is dual-pronged: (i) Volatile Pricing Dynamics: A sharp, conflict-driven escalation in global PVC prices, which spiked by over USD 400 per ton in 1QCY26 following structural supply shifts in China and geopolitical disruptions in the Middle East; (ii) Volume Resilience: Strong domestic demand growth of ~40% year-on-year, allowing EPCL to achieve high quarterly domestic PVC sales of 68.5 KT. From a credit perspective, while the volumetric growth indicates strong domestic market integration and successful commercial positioning, the price-driven component introduces material volatility. The revenue rebound, while substantial, remains heavily reliant on exogenous geopolitical triggers rather than structural changes in the domestic market, rendering long-term top-line stability vulnerable to a normalization of international commodity cycles.

The Company’s profitability profile improved in 1QCY26, recovering from the severe margin compression experienced during the CY24–CY25 periods. Gross profit margin recovered to 11.9% in 1QCY26, compared to a historic low of 6.8% in CY25 and 8.7% in CY24 (CY23: 25.3%). Similarly, operating margin improved to 9.2% (1QCY25: 5.3%), and the net profit margin trended back into positive territory at 2.3%. Standalone net income stood at PKR 501mln for the quarter, fully reversing the heavy net loss of PKR 3,043mln recorded in CY25. An analytical evaluation of the cost structure highlights that the margin expansion was driven by the core PVC-ethylene delta widening above USD 300 per ton, as PVC price hikes outpaced rising feedstock costs. The margin improvement observed in 1QCY26 represents a sharp, sentiment-driven cyclical recovery rather than a permanent structural reset.

EPCL’s long-term sustainability continues to rest on its position as Pakistan's sole domestic PVC producer, the country's comparatively low per capita PVC consumption of ~1.2 kg, among the lowest in the region (India: ~3 kg and China: ~14 kg), and the demonstrated financial and strategic support of the Engro Group. The commissioning of the HPO plant (via EPPL) and the HTDC project during CY2025 has broadened the Group’s revenue base and improved EPCL's cost structure, with both initiatives at a more mature operating stage entering CY26. Government policy direction, reflected in the FY2026–27 budget’s shift toward supporting construction sector growth, together with continued monetary easing, is expected to support medium-term demand for PVC and downstream products; the approximately 40% year-on-year domestic PVC market growth recorded in 1QCY26 is an early indicator of this dynamic. On feedstock and cost security, EPCL's revenue base, priced with reference to international PVC benchmarks in USD terms, provides a natural hedge against Pakistan Rupee depreciation. Raw material supply is diversified across established international suppliers (Mitsubishi, Marubeni, and ADNOC for Ethylene; Muntajat, Kolmar, Sipchem, and SABIC for EDC). Captive gas costs which reduced comparatively, remain a source of cost uncertainty; management continues to evaluate alternative energy solutions, including grid connectivity, renewables, and an initial 2 MW solar installation, though the pace of this transition remains gradual relative to the Company's overall energy base.

EPCL’s operational liquidity management demonstrated continued discipline in 1QCY26, extending the structural efficiencies captured during CY25. The net working capital cycle compressed to a negative (4) days in 1QCY26, down from 11 days in CY25 and a historic high of 52 days in CY24. Key operational drivers of this cycle optimization include: (i) Inventory Rationalization: Total inventory days declined to 48 days (down from 72 days in CY24), driven by robust domestic off-take and tight raw material throughput, (ii) Receivable Control: Collection periods remained locked at a lean 7 days, insulated by the Company’s stringent advance-payment structures and bank-guaranteed credit terms for industrial clients, and (iii) Payable Extension: Trade payable days stretched significantly to 59 days (up from 15 days in CY23), effectively passing funding requirements back onto the trade supply chain. Furthermore, the current ratio hovered at 1.0x in 1QCY26 (CY25: 0.9x), remaining below historical levels of 1.3x in CY23–CY24. This compression is tied to a reduction in short-term investments, which dropped to PKR 16,161mln in March 2026 from PKR 21,404mln at year-end CY25, reflecting cash consumption for operational and capital commitments and narrowing the available buffer against unexpected liquidity shocks.

In alignment with the operational turnaround, EPCL’s coverage metrics staged a notable recovery in 1QCY26, though they remain structurally altered relative to pre-CY25 levels due to a permanently higher finance cost base. Quarterly EBITDA stood at PKR 3,901mln, which annualized, indicates an improved capacity to service debt. Consequently, EBITDA-to-finance-cost coverage strengthened to 2.8x from a highly constrained 1.1x in CY24 and 1.6x in CY25. Free Cash Flow from Operations (FCFO) reached PKR 3,011mln for the 3-month period, driven by improved cash conversion efficiency (13.8% of sales). This pushed interest coverage up to 2.2x (CY25: 1.3x). Crucially, the core debt service coverage ratio rebounded to 1.4x, moving back above the critical 1.0x threshold after slipping to a precarious 0.9x in CY25. The annualized debt payback period shortened to ~8.3 years from an unsustainable 43.0 years in CY25, but remains elongated compared to the 2.6 years achieved in CY23, emphasizing the residual weight of the debt load. Liquid coverage moderated to 3.5x (CY25: 5.4x) due to the strategic drawdown of liquid investment reserves. The coverage recovery is clear but fresh; its credit stability is entirely contingent upon the Company maintaining its current cash generation run-rate, leaving the debt-servicing cushion vulnerable to any sudden contraction in international chemical spreads.

EPCL's capital structure is showing initial signs of stabilization following the elevated leverage associated with its expansionary investment cycle, although debt levels remain materially higher than historical norms. Total borrowings marginally declined to PKR 54,483mln as of end-Mar'26 from PKR 55,117mln at end-CY25, reflecting a modest reduction in overall debt alongside a shift in the borrowing mix toward long-term financing. Concurrently, equity strengthened to PKR 25,861mln, supported by the retention of earnings generated during 1QCY26. Consequently, gross leverage improved slightly to 67.8% from 68.5% at end-CY25. After adjusting for the Company's sizeable cash reserves held as short-term investments, net leverage stands at approximately 56.5%, providing a more representative view of the Company's financial risk profile. Nevertheless, leverage remains elevated relative to the 54.0% recorded in CY23, reflecting the structural increase in debt incurred to finance the PVC-III expansion, the High-Temperature Direct Chlorination (HTDC) project, and downstream Hydrogen Peroxide investments. The debt profile remains a key credit strength, with approximately 98.8% of total borrowings comprising long-term facilities, thereby limiting refinancing and near-term liquidity risks. Reliance on short-term borrowings is minimal, accounting for only 1.2% of total debt, while the availability of substantial unutilized short-term credit lines provides adequate financial flexibility to meet seasonal working capital requirements. A key credit variable is the escalation of off-balance sheet exposures and contingent liabilities: (i) Commitments & Contingencies: Stood at PKR 6,695mln as of March 2026 (~25.9% of equity), and (ii) Gas Levy Dispute: Out of these, a distinct captive-gas levy dispute accumulated a provision of PKR 2,212mln by March 31, 2026. Although the Islamabad High Court granted interim relief via a stay order on March 17, 2026, the requirement to furnish post-dated cheques creates a formal, back-ended liquidity risk. The unresolved status of these legal disputes, alongside high structural gearing, creates a layer of forward-looking financial uncertainty that necessitates sustained operational outperformance to manage effectively.