Oil & Gas Marketing Companies: HAROON OILS LIMITED - Year Ended 30-06-2005 & 9 Months Ended 31-03-2006
The company's sales volume have been persistently declining in the last 10 years and it has booked losses in five years out of last ten years. In the nine months of current year 2005-06, the streak of losses in the last year continued. Since last couple of years there has been unprecedented increase in the crude oil price which forced the domestic refineries to increase base oil prices.
This affected the sales as well as profitability of Haroon Oils Ltd in this write up the review starts with the latest update of company's financials for nine months of current financial year 2005-06. After that comes the Annual Report 2005 of last financial year 2004-05. During 9M 2005-06, sales increased to Rs 183.32 million reflecting 9.05% increase over last year's (9M 2004-05) sales at Rs 168.10 million.
The company suffered pretax loss of Rs 3.35 million (9M 2004-05: pretax profit Rs 0.73 million) and after tax loss at Rs 4.21 million (9M 2004-05: After tax profit of Rs 0.04 million). In this period company's new Chief Executive Ali Raza Bokhari has been assigned the job at the apex of Executive Management. The company is striving to improve sales.
In order to achieve the company's potentials, the Board of directors is recommending the financial restructuring of the company through issue of fresh capital.
Haroon Oils Limited was incorporated in the province of Sindh on May 30 1964 as a public limited company. The company is primarily blending and selling lubricating oils and greases. Its registered office as well as factory is situated at Dockyard Road, West Wharf Industrial Area Karachi.
The shares of Haroon Oils Limited are listed on the Karachi and Lahore Stock Exchanges. At present its shares are trading at Rs 130 per 10-rupee share. During the last one year the spread between the lowest and highest price of the share, was quite narrow as the prices ranged between Rs 128 and Rs 132 per share.
As regards ownership of its equity the major shareholdings were with its associated companies and NBP Trustee Department. One of the associated undertakings Haroon Sons (Pvt) Ltd owned 31.4% and the other Olympia Investment held 30% of the company's stock. NBP Trustee Department held 25.32% and its 265 individual shareholders owned 9.77% of the company's stock. These statistics of shares are dated 30th June 2006, the closing date of the FY 2004-05, under review.
The company has relatively small capital base in the sum of Rs 8 million which has remained constant since 1996 according to the 10 years' Financial Statistical Summary published with the Annual Report 2005. But very high market value of its share has pushed up its market capitalisation to Rs 104 million.
As regards profit distribution, the company had declared cash dividends in seven out of last ten years. During the years 2000, 2002 and 2005 the company has not been able to announce dividends, because in these years the company had booked losses.
During FY 2004-05, the company posted net sales in terms of value at Rs 230.72 million (previous FY 2003-04: Rs 240.34 million) and sales in terms of volume at 3,430 metric tonnes (FY 2003-04 3,972 metric tonnes). Net sales in terms of value decreased by 4% and sales in terms of volume diminished by 13.6% as compared to the preceding year's.
Sales volume figure was the 10 years' lowest figure as compared to the highest figure of 9634 metric tonnes recorded in 1996. Net sales (value) figure is the second lowest figure on a 10 years scale.
The company directors lamented that this was difficult year for the company as far as sales and profitability were concerned. While they experienced drop in contract business, they also had to face shortage of base oils which is the raw material of lubricants and greases.
During the 2nd half of the year, National Refinery Ltd fixed quota for the supply of different grades of base oils, as such the required grades of base oils were not available in desired quantity to meet the production requirement of the company. Resultantly there was restricted supply of lubricants to the customers by the company. Hence the volume sales dropped.
On the other hand, National Refinery increased the base oil prices because of unprecedented increase in crude oil prices in internationally. It has been further reported that base oil prices were increased seven times during the year and the price increase was 50%.
In order to be in line with the competitors, the selling prices of the lubricants could not be increased as frequently as increases in base oil prices.
Gross margin for the year decreased to 16.94% from 18.99% in the previous year. The company booked wafer thin pretax profit of Rs 0.16 million as compared to Rs 5.76 million in the previous year. The bottom line turned into the red with net loss after tax at Rs 1.14, although there were no significant changes in the company's manufacturing, operating and financial expenses inspite of the runaway inflationary trend in the country.
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Performance Statistics (Million Rupees)
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30th June 2005 2004
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Share Capital-Paid-up: 8.00 8.00
Revenue Reserves: 20.12 22.37
Shareholders Equity: 28.12 30.37
L.T. Debts: 7.49 7.42
Deferred Liability-Accumulated
Compensated Staff Benefits: 2.21 1.86
Current Liabilities: 44.16 43.46
Fixed Assets: 25.19 25.19
Intangible Assets: 0.08 0.17
Investment Property: 2.23 2.49
L.T. Deposits: 3.80 3.97
Deferred Tax: 4.32 3.84
Current Assets: 46.36 47.45
Total Assets: 81.98 83.11
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Sales, Profit & Pay Out
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Sales-Net: 230.72 240.34
Gross Profit: 39.09 45.64
Other Operating Income: 3.44 3.54
Profit from Operations: 4.34 9.61
Finance (Cost): (4.18) (3.85)
(Depreciation): (4.79) (4.42)
Profit Before Taxation: 0.16 5.76
Loss/Profit After Taxation: (1.14) 1.38
(Loss)/Earnings Per Share (Rs): (1.42) 1.72
Dividend (%): - 14.00
Share Price (Rs) on 11/08/06: 130.00 -
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Financial Ratios
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Price/Earning Ratio: (-) -
Book Value Per Share: 35.14 37.96
Price/Book Value Ratio: 3.70 -
Debt/Equity Ratio: 21:79 20:80
Current Ratio: 1.05 1.09
Asset Turnover Ratio: 2.81 2.89
Days Receivables: 33 20
Days Inventory: 26 33
Gross Profit Margin (%): 16.94 18.99
Net Profit Margin (%): (0.49) 0.57
R.O.A. (%): (1.39) 1.66
R.O.C.E. (%): (3.01) 3.48
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A) Capacity and Production of Blending Plant Metric Tons
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Plants' Production Capacity in Bulk: 12,000 12,000
Production Capacity Bulk + Drums: 9,000 9,000
Production Capacity in Drums + Cans
Measuring 0.7,1,3,10 and 20 liters: 6,000 6,000
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*The actual production in drums plus cans for the year ended June 30, 2005 was 3,227 metric tons (2004: 3,886 metric tons)
B) * The under-utilization is due to decline in demand for company's products.
COMPANY INFORMATION: Chairperson: Amber H. Saigol; Chief Executive: Imran Azim; Company Secretary & Chief Financial Officer: Abdul Aleem Rafiq; Registered Office & Factory: 11-Dockyard Road West Wharf Industrial Area Karachi 74000; Website: www.haroonnoils.com Regional Office: Regency Plaza 120-P Mini market Gulberg II Lahore; Branch Office: 16-Rafiah Plaza Bank Road Near Malik Fabric & Carpet Rawalpindi.
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