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Topline Flash Note: Engro Polymer Chemicals (EPCL): Analyst briefing takeaways

• PVC sales went down by 31% YoY to 33K MT in 2Q2020 due to COVID-19 related lockdowns and restrictions. Similarly, PVC production was down by 22% YoY to 35k MT compared 45k MT in 2Q2019.
• Caustic sales were down by 55% YoY to 9K MT in 2Q2020 vs. 20K MT in the same period last year due to decline in demand from the textile sector. Similarly, Caustic production was down by 42% YoY to 15k MT compared 26k MT same period last year.
• To highlight, EPCL had closed down its production from Mar 24, 2020 to Apr 20, 2020 due to government mandated lockdown.
• Post easing of lockdown, demand of PVC has started recovering strongly and has reached near pre COVID-19 levels. To note, 50-60% of PVC is used in the construction sector.
• Going forward, management expects Caustic sales to remain slightly lower till the demand from the textile sector completely pickups. 
• PVC-Ethylene core delta decreased during the quarter, averaging at US$460/MT during 2Q2020 compared to US$538/MT during 1Q2020.
• International prices has recovered due to increase in global demand amidst easing of lockdowns. Going forward, PVC/Ethylene prices will continue to be influenced by global economic sentiments and COVID-19.
• Gross margin declined by 12.1ppts YoY to 9.8% in 2Q2020 from 21.9% in 2Q2019 due to lower efficiencies amid lower volumetric sales and increase in gas prices.
• Regarding the PVC expansion and VCM debottlenecking, the project timeline has been revised and the management is targeting COD in 1Q2021. To highlight, company has resumed construction activity effective from May 21, 2020.
• Work on other projects which includes, Hydrogen Peroxide Plant and LABSA (Linear Alkyle Benzene Sulphonic Acid) plant is on hold.