APL in 9MFY23

After a good year (FY22), the oil marketing companies’ (OMCs) earnings were expected to come under pressure during FY23 due to significant inventory losses owing to the decline in international crude oil prices. This was particularly evident in 1HFY23 profitability, while the latest quarter (3QFY23) was also a slow period as the industry continued to witness a decline in volumetric sales of petroleum products along with inventory losses. OMC sales during 9MFY23 were down by 21 percent during the nine month period. However, higher prices offset this decline to result in higher revenues for the OMCs.

Attock Petroleum Limited’s (PSX: APL) revenues growth stood high at 46 percent year-on-year in 9MFY23, led by increase in average selling prices. However, volumetric sales were down by 21 percent year-on-year where the company’s sales volume of High-Speed Diesel (HSD) decreased by 25 percent year-on-year, while sales volume of Motor Spirit (MS) decreased by 13percent year-on-year and the company’s sales volume of Furnace Oil (FO) decreased by 30 percent year-on-year. The topline during 3QFY23 ascended by 30 percent year-on-year too amid higher product prices, while the volumes reported a fall of 17 percent year-on-year with MS, FO and HSD volumes down by 15, 24 and 29 percent year-on-year, respectively.

APL however announced a sharp decline in gross profits for 9MFY23, with much of the decline in gross profits coming in the second quarter. The gross margins shrunk due inventory losses during the period. On the other hand, 3QFY23 gross margins depleted due to lower inventory gains. Operating expenses in 9MFY23 were up on account of exchange losses - primarily due to the 1QFY23 as the same were down by 14 percent year-on-year in 2QFY23. In 3QFY23, the operating expenses were up by around 4 percent year-on-year due to moderate exchange losses.

APL’s bottomline in 9MFY23 also affected by higher finance cost that surged by 52 percent year-on-year during the period and by 72 percent year-on-year in 3QFY23 due to higher markup charged on late payments.

APL’s earnings were down by 12.5 percent in 9MFY23 and by 7.3 percent year-on-year in 3QFY23 despite the rise in topline due to the above-mentioned factors. With demand for petroleum products bleak in the ongoing year amid record inflation, and the continued weakening of the currency, the profitability of the OMC sector will remain weaker in FY23 versus FY22.