Where low oil prices have been a reason for the improvement in fuel margins and hence a surge in sales volumes for the oil marketing companies, it has also been the main source of concern for them in shape of inventory losses. The highlight of Attock Petroleum Limited’s (KSE: APL) financial performance for 9MFY15 has been the same – inventory losses marring earnings growth.
The OMC’s volumetric sales in the latest three months have been marked by around 15 percent and 45 percent year-on-year increase in high speed diesel and motor gasoline volumes, while those of furnace oil remained more or less flat. This spur in volumes together with a varied fuel mix that rests more on better margin products like motor gasoline and HSD are the key propeller for the firm’s earnings. Whereas, furnace oil margins have been lower during the latest quarter, and thus weighed heavy on the firm’s earnings.
At the same time, APL’s earnings were impaired by a sharp increase in the inventory losses due to low oil price environment. In the overall 9MFY15 period, the inventory losses were the chief reason for the dent in the firm’s earnings. Where the firm’s top line diminished by around eight percent year-on-year in 9MFY15, the bottom line shrunk by almost half. With that, it can easily be deciphered that FY15 will be a weaker year for the OMC.
Continued fall in the oil prices globally and a slowdown of petroleum product sales will be a double whammy for the firm and the sector, but that’s unlikely right now; at least the volumetric sales are expected to grow as CNG will be continued to be restricted instilling demand for petrol and diesel. The firm also has less exposure to circular debt, which is a real treat in the current macroeconomic environment.
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Attock Petroleum Limited
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Rs (mn) 9MFY15 9MFY14 Chg 3QFY15 3QFY14 Chg
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Net sales 134,620 146,665 -8% 34,468 48,054 -28%
Gross profit 2,648 4,937 -46% 770 1,157 -33%
Other income 891 1,011 -12% 242 365 -34%
Operating expenses 1,537 1,272 21% 531 302 76%
Operating profit 2,002 4,677 -57% 480 1,220 -61%
Finance Income 831 808 3% 249 286 -13%
Finance cost 105 90 16% 8 44 -81%
PAT 1,952 3,649 -47% 484 980 -51%
EPS (Rs/share) 23.53 44 -47% 5.84 11.82 -51%
Gross margin 1.97% 3.37% 2.23% 2.41%
Operating margin 1.49% 3.19% 1.39% 2.54%
Net margin 1.45% 2.49% 1.41% 2.04%
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Source: KSE Announcement
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