Oil & Gas Marketing Companies: SHELL PAKISTAN LIMITED - Year Ended 30-06-2005

During the year under review, the company's net sales revenue shot up to Rs 98.527 billion up by 24.4% from Rs 79.180 billion in the previous year showing impressive growth.
Net profit after taxation increased by 62.54% to Rs 2.451 billion from Rs 1.508 billion in the preceding year. Chairman of Shell Pakistan Ltd Farooq Rahmatullah attributed this robust growth in profitability to better product mix and increasing international oil prices.
According to him despite healthy increase in profits, the year saw an unfavourable cash flow of Rs 2 billion caused mainly by increased product costs that were not fully recovered as a consequence of the government's decision to freeze prices and by the requirement to invest in the initial line fill of the new white oil pipeline.
The company continued to maintain a high profile in the profit distribution and mostly the beneficiary of this dividend was its parent company who hold 76.11% of the company's equity. The market value of Shell Pakistan share carries very high premium.
The Shell brand name enjoys a 100 year history in this part of the world. Before independence of Pakistan in 1947 the company was named as Burmah Shell Oil Storage and Distribution Company of India.
After our independence the name was changed to the Burmah Shell Oil Distribution Company of Pakistan.
In 1970 when 51% of the shareholding was transferred to Pakistani investors, its name was changed to Pakistan Burmah Shell (PBS) Limited.
The Shell and the Burmah Groups retained the remaining 49% in equal propositions.
In 1993, as economic liberalisation began to take root and the Burmah divested from PBS, Shell Petroleum stepped in to raise its stake to 51%. The year 2001-2002, witnessed the Shell Petroleum Company successfully increasing its share, with the group now having a 76% stake in Shell Pakistan Ltd (SPL).
It is a limited liability company, listed on the Karachi and Lahore Stock Exchanges. On September 2, 2005, the closing price of Shell Pakistan share was quoted at Rs 670 per share, which is 67 times of the par value. During the last one year, the market value of the share peaked at Rs 680.00 per share. In the 7-member sector of Oil and Marketing Gas Companies the price of its share is the highest and almost double of the second highest priced share.
The company has excellent track record of profit distribution. This year its AGM is scheduled on September 22, 2005 and its agenda has two more significant items among several items. In this agenda the approval for the final cash dividend @ 270% will be sought. This will be in addition to the interim cash dividend of 80% declared on January 19, 2005. The total cash dividend works out to Rs 35 per share and this is the third consecutive year of cash dividend at the rate also, this is the higher cash dividend rate since 1994.
In addition, the company will also seek approval at the AGM for the Bonus Stock Dividend in the proportion of 1:4.
Shell Pakistan Ltd markets petroleum, petrochemical products and compressed natural gas. It also blends and market, various kinds of lubricants oils.
In terms of business operations SPL has been steadily increasing its network strength to reach more convenient locations for customers across the country. This year the RVI (Retail Visual Identity) network grew from 760 sites to 826 sites and CNG network expanded from 77 sites last year to 96 sites currently.
The company has adopted strategic decision to focus on value-added products that deliver better performance by moving away from volume oriented to a profit oriented business model. This is evidenced from the recent survey that Shell brand is the most preferred brand amongst motorists across the country.
In the business of lubricants the company successfully launched repositioning Shell Helix. Furthermore an agreement between Pak Suzuki and Shell Pakistan was inked under which Pak Suzuki recommended Shell Helix as the preferred oil for all of its cars sold in Pakistan. In December 2004, three year fuels and lubricants supply agreement was signed with China International Water and Electric Corporation (CWE) for the Mangla Raising Project, which is one of the largest infrastructure projects in Pakistan.
In the aviation business SPL has made strong performance resultantly the business has positioned itself as the supplier of first choice.
It has been acclaimed by one and all that SPL is committed to the delivery of right quantity, and top quality.
On March 1, 2005, White Oil Pipeline (WOP) was commissioned. This pipeline transports imported diesel upcountry from Port Qasim and thereby eliminates inefficient transport through tank lorries. WOP is $480 million project in which SPL owns 26% equity share.
Substantial progress has been achieved in the area of SPL's Information Technology (IT) security and compliance. Certification audits by international auditors have been successfully completed. The audit findings prove the high level of compliance of the company's IT infrastructure with international standards.

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Performance Statistics                (Million Rupees)

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30th June                            2005         2004

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Share Capital Paid-up:             350.66       350.66

Reserves & Surplus:              7,952.41     6,781.24

Shareholders Equity:             8,303,07     7,131.90

Deferred Taxation:                  20.75       126.42

L.T. Debts:                         16.27        42.79

Asset Retirement Obligation:        31.95            -

Current Liabilities:            11,951.06     8,043.01

Fixed Assets:                    5,587.84     5,399.28

L.T. Investment:                 1,877.00     1,877.00

L.T. Loans & Advances:              84.88        78.51

L.T. Deposits & Prepayments:        48.25        76.70

Current Assets:                 12,725.13     7,912.63

Total Assets:                   20,323.10    15,344.12

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Sales, Profit & Pay Out

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Net Revenues:                   98,526.62    79,180.35

Gross Profit:                    8,842.03     6,207.24

Operating Profit:                4,232.27     2,401.23

Other Income:                      330.94        73.82

Financial (Charges):                 7.27        12.02

(Depreciation) & Amortisation:     690.70       616.98

Profit Before Taxation:          3,642.98     2,188.92

Profit After Taxation:           2,451.07     1,508.01

Earning Per Share (Rs):             69.90        43.01

Dividend Per Share (Rs):            35.00        35.00

Share Price (Rs) on 02/09/05:      670.00            -

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Financial Ratios

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Price/Earning Ratio:                19.14            -

Book Value Per Share:              237.23       203.75

Price/Book Value Ratio:             28.24            -

Debt/Equity Ratio:                  0:100         1:99

Current Ratio:                       1.60         0.98

Asset Turn Over Ratio:               4.85         5.16

Gross Profit Margin (%):             8.97         7.84

Net Profit Margin (%):               2.49         1.90

R.O.A     (%):                      12.06         9.83

R.O.C.E (%):                        29.28        20.65

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