Attock Petroleum Limited (PSX: APL), incorporated in 1998, is an oil marketing company and a part of the vertically integrated Attock Oil Group. While the FY23 shareholding pattern is not yet available, the FY22 annual report indicates that its sponsor, Pharaon Investment Group Limited Holding s.a.l, holds the largest share at 34 percent. Other key shareholders include Attock Refinery, Pakistan Oilfields Limited, and Attock Oil Company, as illustrated.
APL operates a robust retail network with over 700 outlets nationwide. It specializes in the marketing and distribution of various petroleum products, including High-Speed Diesel, Premier Motor Gasoline, Furnace Oil, Bitumen, Kerosene, and Lubricants. Additionally, it offers a range of automotive and industrial-grade lubricants.
APL operational and financial performance
The financial performance of Attock Petroleum Limited (APL), like other oil marketing companies (OMCs), is closely tied to the volumetric sales of petroleum products. In FY16, APL’s volumes were significantly impacted by the phase-out of furnace oil, prompting the company to reduce its exposure in this segment due to unfavorable margins, which resulted in a loss of market share. However, in FY17, the company experienced a strong rebound, with revenue growth fueled by increased sales volumes, leading to a 38 percent year-on-year rise in earnings.
In FY18, APL continued its revenue growth, benefiting from higher petroleum prices and increased sales volumes. The price surge contributed to inventory gains and improved gross margins. However, profit growth was limited to 7 percent year-on-year due to the reversal of other charge provisions and significant exchange losses caused by currency depreciation.
FY19 saw a slowdown in volumetric growth due to falling crude oil prices and sharp rupee depreciation. The OMC sector faced further challenges from monetary and fiscal tightening, leading to inventory and exchange losses. While APL’s topline grew by 26 percent year-on-year, driven by higher petroleum prices, sales volumes declined by 11 percent, primarily in furnace oil and high-speed diesel, resulting in a 30 percent drop in earnings.
FY20 was particularly difficult, as the COVID-19 pandemic severely impacted demand. APL’s earnings fell to Rs1 billion due to inventory losses, reduced volumes, and higher finance costs stemming from elevated interest rates. Volumes declined by 11 percent year-on-year, with diesel seeing the largest drop, followed by petrol and furnace oil.
FY21 marked a strong recovery, with APL’s bottom line increasing fivefold and fourth-quarter earnings surging ninefold. Despite a 6 percent decline in overall topline growth, a 20 percent rise in fourth-quarter volumes, coupled with recovering oil prices and changes in domestic petroleum pricing, drove significant revenue and gross margin improvements. Additional support came from impairment reversals and lower finance costs.
In FY22, APL recorded a 3.5 times increase in earnings, fueled by a 96 percent revenue surge. This was driven by a 22 percent rise in sales volumes—outpacing the industry growth of 14 percent—and a 47 percent increase in average selling prices. High-speed diesel posted the highest growth at 36 percent year-on-year. Market share increased to 10 percent, aided by the addition of 63 new retail outlets. Inventory gains played a major role, with gross margins quadrupling year-on-year, though operating expenses, other charges, and exchange losses from a 30 percent PKR devaluation offset some gains.
FY23 was challenging for OMCs due to declining volumes amid an economic slowdown, weaker demand, and rising prices. Industry-wide oil sales dropped 27 percent year-on-year, the lowest since FY06 (excluding the pandemic-hit FY20). APL’s revenue grew 28 percent year-on-year, driven solely by price increases, as sales volumes 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 contracted from 11 percent in FY22 to 5.5 percent due to significant inventory losses, while finance costs rose by 44 percent year-on-year due to higher interest rates and delayed payment markups. Consequently, APL’s earnings declined by 33 percent, and the company declared a final cash dividend of Rs15 per share.
In FY24, APL demonstrated resilience despite economic challenges and a contracting oil marketing sector. Despite an 8 percent year-on-year decline in sales volumes, the company achieved record profitability, reporting a net profit after tax of PKR 13.8 billion (EPS: PKR 111), reflecting an 11 percent growth. This was primarily driven by a 20 percent rise in average selling prices, which helped offset the impact of lower volumes. Net sales increased by 11.1 percent to PKR 526.3 billion, supported by higher retail petroleum prices 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 due to inventory losses and the absence of prior-year gains. Operating expenses decreased by 19.1 percent due to 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 dropped 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, though legal issues delayed progress on a 23,000 MT terminal in Tarru Jabba. Additionally, APL grew its retail network by adding 44 new outlets, ending FY24 with a total of 798 locations. Strategically, the company pursued diversification into the LPG and electric vehicle (EV) sectors to enhance growth potential. Management actively engaged in EV policy discussions, advocating for incentives to support investment in EV infrastructure, while also exploring mergers and acquisitions to strengthen its market position.
APL in 1HFY25 and beyond
The company reported a net profit exceeding Rs5 billion in 1HFY25, reflecting a 34 percent year-on-year decline. This drop in earnings was primarily driven by a decrease in revenue, as APL’s net sales fell by 15 percent year-on-year. The decline was attributed to lower average retail prices of petroleum products and a reduction in Motor Spirit (MS) and Furnace Oil (FO) sales, which fell by approximately 2 percent and 60 percent year-on-year, respectively. However, diesel sales increased by 6 percent during the same period. In 2QFY25, APL’s earnings saw an 8 percent year-on-year growth, supported by improved margins. The company also announced an interim cash dividend of Rs12.50 per share for the quarter.
Gross margins for 1HFY25 declined by 144 basis points to 3.48 percent. However, in 2QFY25, margins improved to 3.37 percent from 2.29 percent in 2QFY24, driven by inventory gains. Operating expenses increased by 7 percent year-on-year due to higher depreciation charges, while finance costs rose by 29 percent due to increased markup on late payments. Meanwhile, finance income declined by 8 percent year-on-year, reflecting lower returns on cash balances.
An analysis of 1HFY25 industry trends indicates that overall petroleum sales in the OMC sector grew by 4 percent year-on-year, mainly driven by higher High-Speed Diesel (HSD) consumption. However, competition intensified, with PSO and APL losing market share to smaller OMCs that are aggressively expanding their footprint. APL’s sales declined by 11 percent year-on-year in 1HFY25, reducing its market share from 10.1 percent to 8.6 percent.
Looking ahead, demand for HSD is expected to remain strong, supported by economic recovery, infrastructure development, and continued efforts to curb fuel smuggling. However, MS demand may remain volatile, influenced by consumer purchasing power and broader economic conditions. FO consumption is likely to continue its downward trend due to an ongoing structural shift toward alternative energy sources.
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