LAHORE - Engro Polymer and Chemicals Limited (EPCL) released its 1H2010 result where the company posted a loss of Rs476mn (loss per share: Rs0.72) versus earnings of Rs7mn in the same period last year. Experts said that the loss was mainly attributable to higher finance costs incurred as a consequence of cost overruns caused by the delay in the Commercial Operations Date (CoD) of the VCM plant. In 1H2010, the topline of the company registered a significant growth of 37% to Rs6.81bn, despite lower PVC offtake which stood at 50k tons as compared to 61k tons in the 1H2009. Limited availability of VCM in the international market and operational upsets in the VCM plant at EPCL were the two primary reasons for constrained production, and in turn low volumetric sales of PVC. However, higher PVC prices in the 1H2010 (US$1,002 per ton versus US$710 per ton in the same period last year), caustic soda sales of 38k tons, EDC exports of 23k tons and power sales in the first quarter helped offset the impact of low PVC sales. Given the low volumes in 1H2010, we have revised down our full year PVC sales estimate to 117k tons from the previous forecast of 131k tons, and expect it to grow at a 4-year CAGR of 5.8% during 2010-2014. Despite a growth in the companys net revenue, the gross profit remained almost flat at Rs433mn in 1H2010. This was mainly on the back of relatively higher VCM prices, leading to reduced international PVC-VCM margins of US$119 per ton as against US$141 per ton in the same period last year. With regards to the VCM plant, the company resumed operations on 24th April post a shut down in 1Q and produced about 12k tons in the 2Q. However owing to a planned maintenance, the production halted on 9th June. The company restarted the plant on 3rd July and has been operating at more than 80% utilization since then. The scrubbers that had been damaged in the Dec-09 fire incident have now been replaced with the refurbished ones which are currently under mechanical commissioning. The management expects to initiate the CoD once all the reliability tests are complete, which is likely to be around early Oct. We expect full year VCM production to stand at 51k tons.