Sui Northern Gas Pipelines Limited (SNGPL) was incorporated as a private limited company in 1963 and converted into a public limited company in January 1964 under the Companies Act 1913, now Companies Ordinance 1984. The Company is listed on all the three Stock Exchanges of the country.
Sui Northern Gas Pipelines Limited (SNGPL) is the largest integrated gas company serving more than 3.9 million consumers in North Central Pakistan through an extensive network in Punjab, Khyber-Pakhtunkhwa and Azad Jammu and Kashmir. SNGPL is certified according to ISO 14001:2004 and OHSAS 18001:2007 standards.
The Company has over 48 years of experience in operation and maintenance of high-pressure gas transmission and distribution systems. It has also expanded its activities as Engineering, Procurement and Construction (EPC) Contractor to undertake the planning, designing and construction of pipelines, both for itself and other organisations.
PERFORMANCE SNAPSHOT Pakistan's economic self-reliance mainly depends on the self-sufficiency in its energy requirements as they literally drive the national economy. Unfortunately, Pakistan has been suffering from energy crisis for about a half decade. This energy crisis has given way to increasing demand of natural gas, as it is the least expensive fuel. This high increase in demand against depleting resources has created an imbalance among the demand and supply position of the Company.
During the period under review, the Company witnessed an increase in its sales by 15 percent, followed by a further increase of 14 percent in the cost of gas. This resulted in boosting the gross profit of the Company by 30 percent. SNGPL had posted a profit after tax amounting to Rs 3.0 billion for the year ended 2012, translating into earning per share (EPS) at Rs 5.28, which represented a robust growth over profit after tax at Rs 1.125 billion and EPS at Rs 1.95 per share in the earlier year, marking an increase of 171 percent.
The Company faces the issue of Unaccounted-For-Gas (UFG). The increasing size of the SNGPL's distribution network, wide difference between local gas prices and alternative fuels, increasing gap between demand and supply, theft of gas by consumers, overhead/underground leakages, third party damages, shift of bulk sale to retail sale, illegal connections, meter getting slow with time and use and measurement errors are major factors that contributed to the increase in menace of UFG loss.
However, the management has been trying to restrain the increasing trend of unaccounted-for-gas (UFG). Several steps like, regular inspection of consumers, severe action against non-consumers, installation of GPRS modems for remote communication of data and launch of media campaign against gas pilferers has been taken by the management. These efforts have resulted in the reduction of UFG by more than one percent.
In response to the petition filed by the Company in the Lahore High Court, Oil and Gas Regulatory Authority (OGRA) closed the performance benchmark by allowing the Un-accounted-For-Gas (UFG) limit of seven percent and treating LPS as a non-operating income.
The Company reported a cash dividend at 25 percent, ie, Rs 2.50 per share and bonus shares in the proportion of one share for every 10 shares held. SNGPL has raised its security deposits by 23 percent and recorded Rs 20,277 million, further increasing the long-term liabilities of the Company.
The transmission network of SNGPL has expanded over 7,654 kilometers with high pressure pipelines, ranging from four inches to 36 inches in diameter, across its area of franchise. During the period under review, 412 new towns, villages, District Headquarters (DHQs) and Tehsil Headquarters (THQs) were associated to the Company's network, are now being facilitated with the supply of natural gas.
The Company has also improved the quality of life of its consumers by providing 249,437 new domestic, 1,340 commercial and 96 industrial gas connections during the year. As a result of bad law-and-order situation, the Company is facing a challenge of increasing gap between demand and supply of natural gas due to lack of foreign investment in oil and gas exploring activities in the last decade. The Company is also facing challenges in the areas of currency, credit and liquidity in respect of financial risks. Efforts are being made by the management to minimise these gaps by exploring alternative opportunities viz. importing LPG/LNG.
FUTURE OUTLOOK Sui Northern Gas Pipelines Limited is pursuing to undertake supply of Synthetic Natural Gas (LPG-Air Mix) as a replacement of natural gas to help ease the prevailing energy crisis in the country. The Company is also working to bottle and market LPG cylinders to the prospective areas in order to meet the demand for energy.
The future outlook of the Company may be greatly affected by the court case pending in Lahore High Court (LHC) against OGRA's tariff decision according to which SNGPL demands (1) treatment of LPS as a non-operating income (2) rationalisation of UFG benchmark and (3) the maximum penalty imposed by OGRA should not exceed Rs 750 million per annum.
In case of unfavourable LHC decision, the Company's financial results would be adversely affected, since the applicable tariff in such instance would be computed on the basis of 4.5 percent UFG. The long-term viability of the Company seems stable.
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SUI NORTHERN GAS PIPELINES LIMITED
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Rs in millions 2012 2011 2010
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PROFITABILITY
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Gross profit margin % 3.14 1.95 3.24
Net profit margin % 1.32 0.61 1.48
ROE % 15.24 6.01 14.66
ROCE % 6.21 2.65 4.81
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LIQUIDITY
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D/E ratio % 37 39 14
Current ratio times 0.99 0.94 0.83
Quick acid ratio times 0.95 0.9 0.79
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LEVERAGE
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Interest cover ratio times 2.39 1.44 1.83
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ACTIVITY
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operating cycle days 88 80 74
Fixed asset turnover ratio times 2.48 2.07 1.99
Total asset turnover ratio times 1.33 1.33 1.24
Debtor turnover ratio times 4.19 4.67 5.04
Inventory turnover ratio times 272.96 258.24 204.68
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source: company accounts
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