Attock Petroleum Limited (PSX: APL) was Incorporated in 1998 as an oil marketing company It is part of the vertically integrated Attock Oil Group. While the FY23 shareholding pattern is not available yet, the FY22 annual report shows that its sponsor, Pharaon Investment Group Limited Holding s.a.l holds the largest shareholding at 34 percent, whereas other key shareholders include Attock Refinery, Pakistan Oilfields Limited, and Attock Oil Company as shown in the illustration.
APL has a strong retail network with over 700 retail outlets nationwide and is engaged in the marketing and distribution of numerous petroleum products including High-Speed Diesel, Premier Motor Gasoline, Furnace Oil, Bitumen, Kerosene, and Lubricants, etc. along with a range of automotive and industrial grades lubricants.
APL operational and financial performance
The financial performance of Attock Petroleum Limited (APL), like other oil marketing companies (OMCs), is heavily influenced by volumetric sales of petroleum products. In FY16, the company’s volumes were significantly affected by the phasing out of furnace oil, leading APL to reduce its exposure in this segment due to unattractive margins, which consequently resulted in a loss of market share. However, FY17 marked a strong rebound with revenue growth driven by increased volumes, boosting earnings by 38 percent year-on-year.
In FY18, APL’s revenues continued to grow, supported by high petroleum prices and increased sales volumes. The rise in prices led to inventory gains and higher gross margins. Despite this, profit growth was limited to 7 percent year-on-year due to the reversal of other charges provisions and significant exchange losses caused by currency depreciation.
FY19 saw a slowdown in volumetric growth due to falling crude oil prices and a sharp depreciation of the rupee. Monetary and fiscal tightening further pressured the OMC sector, resulting in inventory and exchange losses. Although APL’s topline grew by 26 percent year-on-year due to higher petroleum prices, volumes declined by 11 percent, primarily in furnace oil and high-speed diesel sales, leading to a 30 percent drop in earnings.
FY20 was particularly challenging, as the COVID-19 pandemic caused demand destruction. APL’s earnings plummeted to Rs1 billion, impacted by inventory losses, a decline in volumes, and higher finance costs due to elevated interest rates. Volumes sold dropped by 11 percent year-on-year, with diesel experiencing the steepest decline, followed by petrol and furnace oil.
FY21 marked a recovery for APL, with its bottom line surging fivefold and fourth-quarter earnings increasing ninefold. While overall topline growth declined by 6 percent year-on-year, a 20 percent increase in volumes in the fourth quarter, coupled with a recovery in oil prices and changes in the domestic petroleum pricing format, drove significant revenue growth and gross margin improvement. Additional support came from impairment reversals and a decline in finance costs.
In FY22, APL reported an impressive 3.5 times increase in earnings, supported by a 96 percent growth in revenues. This was driven by a 22 percent rise in sales volumes, exceeding the overall industry growth of 14 percent, and a 47 percent increase in average selling prices. Notably, high-speed diesel posted the largest growth at 36 percent year-on-year. Market share rose to 10 percent, aided by the addition of 63 new retail outlets. Inventory gains contributed significantly, with gross margins quadrupling year-on-year. However, operating expenses, other charges, and exchange losses from a 30 percent PKR devaluation partially offset these gains.
FY23, however, was a challenging year for OMCs, marked by declining volumes due to economic slowdown, weaker demand, and rising prices. Industry-wide oil sales dropped 27 percent year-on-year, a record low since FY06, excluding the pandemic-hit FY20. APL’s revenue grew 28 percent year-on-year, solely due to price increases, as volumetric sales fell by 24 percent. High-speed diesel sales declined by 27 percent, motor spirit by 14 percent, and furnace oil by 37 percent. Gross margins shrank from 11 percent in FY22 to 5.5 percent due to substantial inventory losses, while finance costs surged 44 percent year-on-year due to higher interest rates and delayed payment markups. Consequently, APL’s earnings fell by 33 percent, with the company declaring a final cash dividend of Rs15 per share.
APL in FY24 and beyond
In FY24, Attock Petroleum Limited (APL) demonstrated resilience in the face of challenging economic conditions and a contracting oil marketing sector. Despite an 8 percent decline in sales volumes year-on-year, APL achieved record profitability, with a net profit after tax of PKR 13.8 billion (EPS: PKR 111), reflecting an 11 percent growth. This success was largely driven by a 20 percent increase in average selling prices, which helped offset the impact of reduced volumes. Net sales grew by 11.1 percent to PKR 526.3 billion, supported by higher retail prices of petroleum products and increased demand for petrol and diesel. However, gross profit declined by 15.5 percent to PKR 22 billion, with gross margins contracting from 5.5 percent in FY23 to 4.2 percent in FY24, primarily due to inventory losses and the absence of significant gains seen in the prior year. Operating expenses decreased by 19.1 percent, aided by lower exchange losses, while finance income surged by 89.4 percent, driven by higher cash balances and improved investment yields.
Operationally, APL’s petroleum product sales fell by 8 percent to 1.7 million tons, reflecting weakened economic activity, inflation, and increased fuel smuggling. Despite these challenges, the company expanded its storage capacity to 211,000 MT by commissioning a 19,000 MT bulk oil terminal in Dera Ismail Khan, although legal issues stalled progress on a 23,000 MT terminal in Tarru Jabba. The company also expanded its retail network, adding 44 new outlets and ending FY24 with 798 outlets. Strategically, APL pursued diversification into the LPG and electric vehicle (EV) sectors to strengthen its growth potential. The management actively participated in EV policy discussions, advocating for incentives to support investments in EV infrastructure, while also exploring mergers and acquisitions to solidify its position in the market.
In 1QFY25, APL experienced a challenging quarter as net profit dropped by 55 percent year-on-year. The decline was primarily driven by a 17 percent decrease in net sales owing to lower average retail prices of petroleum products and a 19 percent contraction in sales volumes. Product-wise, sales of motor spirit (MS), high-speed diesel (HSD), and furnace oil (FO) were down 4 percent, 12 percent, and 62 percent year-on-year, respectively.
Gross margins improved slightly to 3.6 percent in 1QFY25 from 3.1 percent in 1QFY24, despite significant inventory losses, which contrasted sharply with the inventory gains of the previous year. Operating expenses fell by 15 percent year-on-year, reflecting effective cost management, while finance costs increased by 30 percent due to higher markups on late payments. Other income surged by 211 percent year-on-year offering some support to the bottom line. However, the overall profitability of APL was significantly impacted by reduced sales volumes and the persistent challenges of a contracting oil marketing sector.
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