Attock Petroleum Limited

Belonging to the only fully integrated Attock oil group, Attock Petroleum Limited (APL) was incorporated in 1998; it is the fourth oil marketing company to be granted the marketing license. The oil marketing company (OMC) is engaged in the downstream petroleum sector's business. It serves both the local as well as the international clientele. As an oil marketing company, Attock Petroleum Limited's products include lubricants and commercial and industrial fuels.
APL markets and supplies fuels to manufacturing industry, armed forces, power producers, government/semi-government entities, FMCG companies, developmental sector, agricultural customers etc. APL also offers a range of lubricants which include both automotive and industrial grades blended with base oils and additives. Its main commercial and industrial fuels marketed include: HSD, MS, Jet fuel, kerosene oil, asphalt, furnace oil, light diesel oil and lubricants.
It has an extensive storage transportation & retail outlet network that supplements its product range. It has over 350 retail outlets. Besides facilitating export of naphtha to the Middle East, Far East and South Asia, APL has also become a major exporter of petroleum products to Afghanistan.
INDUSTRY HIGHLIGHTS The oil marketing sector of the country is loaded with problems like increased prices of petroleum products, the unresolved circular debt threat, law and order situation in the country and the shortage of power and gas. These challenges and problems hammered the overall trade in petroleum products during the last fiscal year, particularly due to the ban on the export of petroleum products to Afghanistan and lower consumption of fuel by the power sector because of its inability to clear the dues.
During 1HF13, the OMC industry sales volumes stood around 9.5 million tons, only a one percent rise year-on-year. The muted sale volumes came mostly from the decrease in furnace oil despite the rising motor spirit (petrol) volumes. The prime reason behind petrol demand escalating during the period was the shortage of gas and the resultant CNG outages. And the chief reason behind low furnace oil demand was lower consumption of fuel by the power sector.
APL 1HFY13 PERFORMANCE Amid such strong headwinds, APL was able to increase its market share in the OMC sector from 7.9 percent in FY11 to 9.1 percent in FY12. Besides, with 27 new outlets, the company also witnessed a commendable growth in the number of retail outlet during 1HFY13. These add up to a total of 389 retail outlets for the company by the end December 2012.
However, the OMC might not be too happy with its performance during the first half of FY13. The downstream oil market player missed the target with flattish top line and receding bottom line during 1HFY13. The core revenues of the oil marketing company moved up by five percent year-on-year during 1HFY13, but not due to the volumetric growth. Most of it came from the inventory gains and better product prices predominantly during 1QFY13.
Though the sales could have benefited largely from the rise in demand for petrol due to the CNG shortage and the pricing issue in the country, the lacuna in its motor spirit sales was the ban on the export particularly to Afghanistan. The volumes receded by four percent during 1HFY13 versus comparable period last year.
Also, the company should have seen better Asphalt sales since infrastructural activities gain traction in the election year. Call it a misfortune or the victim of the law and order situation lately, sales revenue has not been able to gain from it due to lack of such development activities.
The bottom line of APL diluted due to higher operating expenses, and unlike the gross margins which improved during 1HFY13 vis-à-vis 1HFY12, the net margin shrank. The net profit of APL for 1HFY13, contracted by three percent year-on-year and by more than 20 percent year-on-year during second quarter of FY13 alone.
Liquidity Due to the increase in receivables from power producers on account of the ongoing and never ending circular debt crisis, timely collection of imparted credit that is not earning interest becomes a concern for the firm. Though its cash to current liabilities has been declining, the change is very gradual. Moreover, the company's cash rich balance sheet, and its relatively limited exposure to circular debt since it is part of the integrated oil group presents APL with an opportunity to expand.
Outlook FY13 has been relatively dull for APL; in its latest financial results for 9MFY13, its earnings receded by six percent year-on-year. Moreover, it has not announced any dividends so far for FY13. The revenues and the profits might not be whopping this season, but the company has a few reasons to be optimistic and cheerful. If the proposed acquisition of Chevron's local assets works out in APL's favour, it will increase the company's presence and market penetration.
Though the demand for furnace oil remained lacklustre during 1HFY13, with the coming of summers and the rising demand for power and electricity, furnace oil off take offers a positive side for the OMC sector. The company also has plans for up-gradation of existing and setting up of new Bulk Oil Terminals at strategic locations. Further it plans improvement in its retail presence and distribution channel for its lubricants division in order to penetrate further into new business segments.

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Attock Petroleum Limited

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Rs (mn)                         1HFY13         YoY

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Net sales                       78,141          5%

Gross profit                     2,914         17%

Operating profit                 3,532          5%

Finance cost                       778         35%

Profit for the year              2,155         -3%

EPS (Rs/share)                   31.18         -3%

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                                1HFY13      1HFY12

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Profitability

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Gross margin                      3.7%        3.3%

Operating margin                  4.5%        4.5%

Net margin                        2.8%        3.0%

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Liquidity

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Current ratio                     1.36        1.47

Quick ratio                       1.11        1.24

Cash to current liabilities       0.27        0.34

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