Burshane LPG (Pakistan) Limited

Burshane LPG (Pakistan) Limited (PSX: BPL) was incorporated in Pakistan as a limited liability company. The company is engaged in the storing, marketing and trading of Liquefied Petroleum Gas (LPG) throughout Pakistan and trading of low pressure regulators (LPR).

Pattern of Shareholding

As of June 30, 2023, BPL has a total of 22.489 million shares outstanding which are held by 1228 shareholders. BPL’s directors have the highest stake of 56.90 percent stake in the company followed by local general public holding 28.3 percent of its shares. National Bank of Pakistan accounts for 8.23 percent of the outstanding shares of BPL while 5.94 percent of its shares are held by CDC. The remaining shares are held by other categories of shareholders.

Financial Performance (2019-23)

Since 2019, BPL’s topline dipped twice i.e. in 2020 and 2023 with very marginal year-on-year growth in 2021. Conversely, its bottomline not only tumbled in all the aforementioned years but also posted net losses. During the period under consideration, BPL only registered net profit in 2019 and 2022. Its gross margin rode a downhill journey until 2021 and then recovered thereafter. On the contrary, its operating and net margins stayed in the positive territory only in 2019 and 2022, whereby the latter year margins were considerably lower than the former year. The detailed performance review of each of the years under consideration is given below.

In 2019, BPL’s net sales grew by 11 percent year-on-year on the back of increased prices whereas the quantity sold by the company slumped by 9.7 percent year-on-year to clock in at 38,358 MT on account of lesser supply from local refineries and also the expiry of sales contract with NRL. During the year, the company also imported 12.8 percent lower LPG to clock in at 12,447 MT. During 4QFY19, BPL’s margins turned negative as there was a skimpy demand from the local consumers while the local refineries increased their supply significantly during the period and sold at less than OGRA approved prices. This resulted in 7.4 percent thinner gross profit registered by the company in 2019 with GP margin sliding down from 7.95 percent in 2018 to 6.63 percent in 2019. During the year, BPL was able to cut down its administrative expense by 1.95 percent as it undertook cost control measures in the areas of vehicle maintenance as well as travelling & conveyance.

Distribution expense escalated by 7 percent year-on-year in 2019. BPL was also able to register 20 percent rise in its other income during 2019 as its liability for cylinder and regulatory deposits were written back during the year. Operating profit slipped by 16.4 percent year-on-year in 2019 with OP margin shrinking from 2.86 percent in 2018 to 2.15 percent in 2019. BPL was also able to cut down its finance cost by 83.68 percent in 2019 as the company restructured its demand finance facility with NBP under which the balance payment of Rs.165 million had to be paid over next seven years. As a consequence of loan restructuring and reduced finance cost for the year, BPL was able to post 31.95 percent year-on-year rise in its net profit in 2019 which clocked in at Rs.25.857 million. EPS grew from Rs.0.87 in 2018 to Rs.1.15 in 2019. NP margin also improved from 0.67 percent in 2018 to 0.8 percent in 2019.

In 2020, BPL registered 20.54 percent down tick in its net sales. This was on account of 18 percent year-on-year decline in the company’s sales volume during the year to clock in at 31,465 MT as there was huge influx of imported LPG in the market. Another reason was the withdrawal of participants from the distribution chain on account of government documentation drive. COVID-19 related disruptions are also to be blamed for the reduced sales volume reported by BPL in 2020.

Due to slowdown in sales, the company imported 5652 MT of LPG, down 54.59 percent year-on-year. Cost of sales also slid by 19.3 percent year-on-year in 2020. This pushed the company’s gross profit down by 37.86 percent in 2020 with GP margin slipping to 5.2 percent. Administrative expense and distribution expense surged by 4.67 percent and 2.65 percent respectively in 2020 mainly on account of depreciation, advertising and publicity, transportation as well as freight & octroi. As a consequence, BPL posted operating loss of Rs.26.01 million in 2020. Finance cost mounted by a massive 810.69 percent in 2020 resulting in net loss of Rs.109.829 million with loss per share of Rs.4.88.

In 2021, the company witnessed a negligible 0.34 percent year-on-year growth in its topline despite the fact that its volume grew by 4.6 percent year-on-year to clock in at 32,925 MT. This was due to price reduction due to ample availability of imported LPG in the local market amid sluggish demand due to COVID-19 related protocols. Lower prices resulted in 74.97 percent shrinkage in BPL gross profit in 2021 with GP margin diminishing to 1.29 percent. Administrative expense spiked by 11.82 percent year-on-year in 2021 as legal charges went up during the year on account of complaints lodged by Investigation & Intelligence - Inland Revenue (I&I IR) department and also because of general inflation. Conversely, drop in hospitality charges as low LPG filling was taking place at third party plants culminated into 5.88 percent plunge in distribution cost in 2021. BPL registered operating loss of Rs.137.14 million in 2021.

Due to monetary easing, finance cost dwindled by 39.42 percent in 2021. Despite this, BPL’s net loss magnified by 9 percent year-on-year in 2021 to clock in at Rs.119.754 million with loss per share of Rs.5.33.

BPL’s sales volume which showed slight uptick in the previous year, dropped by 4.2 percent year-on-year in 2022 to clock in at 31,548 MT. However, there was a staggering 73.45 percent year-on-year rise in the company’s topline in 2022 due to increase in prices. Gross profit multiplied by over 396 percent in 2022 with GP margin marching up to 3.7 percent. Administrative expense plummeted by 7 percent in 2022 due to reduction in litigation charges related to the complaint lodged by I&I IR. Distribution expense posted 3.8 percent growth in 2022 due to higher freight charges. Gain on restructuring of loan during the year drove up BPL’s other income by 127.89 percent in 2022. BPL posted operating profit of Rs.40.31 million in 2022 with OP margin of 0.9 percent. Loan restructuring resulted in 49.39 percent down tick in the company’s finance cost for the year. This resulted in net profit of Rs.26.839 million in 2022 with EPS of Rs.1.19 and NP margin of 0.6 percent.

Yet again, BPL’s top line shrank by 21.38 percent year-on-year in 2023. This was on account of 1.9 percent lower sales volume to clock in at 30,960 MT in 2023. Higher availability of imported LPG took its toll on the sales volume of BPL during the period. However, higher international crude oil prices improved the company’s GP margin to 4.28 percent in 2023, despite 9 percent year-on-year diminution in gross profit. Administrative expense stayed constant despite huge inflationary pressure due to lower legal charges incurred during the year. Distribution expense also slumped by 4.5 percent year-on-year in 2023 due to lower hospitality charges due to low LPG filling at third party plants. Gain on restructuring of loan which BPL booked last year wasn’t available in 2023, resulting in 54.69 percent plunge in other income in 2023. BPL posted operating loss of Rs.7.34 million in 2023. Finance cost magnified by 315.92 percent in 2023. As a consequence, BPL posted net loss of Rs.66.151 million in 2023 with loss per share of Rs.2.94.

Recent Performance (1QFY24)

BPL’s topline diminished by 37 percent year-on-year in 1QFY24 due to 39.99 percent reduction in the company’s sales volume which clocked in at 2497 MT in 1QFY24. This was due to reduced local LPG quota and higher prices of imported LPG. Cost of sales slid by 40 percent year-on-year in 1QFY24, resulting in 13 percent higher gross profit and GP margin climbing up from 5.25 percent in 1QFY23 to 9.43 percent in 1QFY24. Lower litigation charges owing to complaint lodged by I&I IR department drove administrative expense down by 18 percent year-on-year in 1QFY24, however, selling and distribution expense rose by 3 percent year-on-year during the period. BPL registered 63 percent year-on-year growth in its operating profit in 1QFY24 with OP margin mounting from 1.57 percent in 1QFY23 to 4.05 percent in 1QFY24. Finance cost surged by 43 percent year-on-year in 1QFY24 due to higher discount rate. BPL posted 429 percent rise in its net profit which clocked in at Rs.7.47 million in 1QFY24 with EPS of Rs.0.33 versus Rs.0.06 during the same period last year. NP margin also improved from 0.13 percent in 1QFY23 to 1.10 percent in 1QFY24.

Future Outlook

With the dearth of indigenous pipeline gas, LPG has become a cost effective alternative particularly for the household consumers. This coupled with the upward price revision will bode well for the LPG businesses and will greatly buttress their margins.