APL – volumes churning growth

All factors went in favor as Attock Petroleum Limited (PSX: APL) announced over three times increase in bottomline for the first six months of FY22 (1HFY22). The first half earnings were also supported massively by over six times increase in 2QFY22 profits.

The surge in earnings is interplay of key factors: volumetric sales, inventory gains and product margins amid rising petroleum product prices in the country. APL’s topline grew by 72 percent year-on-year in 1HFY22, while the revenue growth in 2QFY22 was 82 percent. The rise in revenue was due to rise in petroleum product prices as well as increase in volumes sold by the oil marketing company. APL’s sales volumes in 7MFY21 were seen growing by over 16 percent year-on-year led by retail fuels: petrol and diesel. The OMC’s financial performance in FY21 was also driven mostly by the fourth quarterly improvement led by the volumetric growth versus weak base of 4QFY20. .

While gross margins slipped slightly in 1QFY21, 1HFY22 gross margins were significantly up due to the gross margins of 2QFY22 primarily from inventory gains. APL’s other operating expenses saw a jump in 1HFY22, which adversely affected the bottomline. However, APL witnessed growth in finance income and finance cost in 2QFY22 due to higher policy rates and higher receivables.

The last quarter of FY21 started the recovery in volumes for the OMC sector including APL with a rebound in economic activity including car sales, industrial activity, and agriculture output, along with continued restrictions on cross-border smuggling. The trend has continued as volumes have continued to grow despite rising petroleum prices. Overall, is in a better position as the OMC was able to increase market share during the quarter.