APL-double delight

There was ample joy for Attock Petroleum (APL) shareholders yesterday as they sent the share price up by 4.6 percent during the trade session. At the market close, APLs stock was trading at its highest ever level, in more than two years; that too despite a relatively flat earnings statement.
The reason for joy was a massive Rs45/share dividend announcement for the year. There was double delight for the shareholders, as the Company for the first time since FY10 issued 20 percent bonus shares.
APL registered a slight improvement in product margins during the period, which coupled with improved sales volume led to a reasonable increase in revenue. Overrun in administrative expenses, wiped out the good work done at the top, as administration costs surged by 300 basis points on common size basis.
Finance cost was understandably on the higher side, as the circular debt menace spared no one in the entire energy chain. APL, however, managed the situation well, with the finance income more than compensating for the financial charges during the period.
With the Company now out of the Chevron acquisition race, other income is expected to remain strong in the near future, as reflected by the strong cash balance of nearly Rs10 billion as at June 30, 2013.
The dip in after tax earnings also reflects a slightly higher effective tax rate for FY13 compared to that of last year. The pre-tax earnings dipped only slightly, indicating that the APL could well revive the fortunes in the near future.
With the circular debt stock cleared at least for the time being, APL can now focus on its core business instead of wasting time and energy on managing working capital requirements. The next quarterly results should post a much lesser amount in the finance cost columns, as the year-end balance sheet shows the payables at a much reduced level of Rs15 billion, as compared to the level of Rs28 billion seen as at March-end.
APL also enjoys near monopoly in Bitumen Asphalt business and the likely increase in development spending bodes well for the high margin product.

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Attock Petroleum Limited

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Rs (mn)                                FY13        FY12         chg

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Net sales                           164,710     152,843          8%

Cost of sales                       159,533     148,256          8%

Gross profit                          5,177       4,588         13%

Gross margin                           3.1%        3.0%

Operating expenses                    1,468         889         65%

Finance cost                          1,666       1,211         38%

Finance income                        2,750       2,197         25%

Pre-tax profit                        5,593       5,647         -1%

EPS (Rs)                              56.52       59.61         -5%

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