Attock Petroleum Limited (PSX: APL) is an oil marketing company involved in the downstream petroleum sector; it is part of the Attock Oil Group. APL was incorporated in 1998, and its portfolio consists of lubricants, commercial and industrial fuels. The company markets and supplies fuels to manufacturing industry, armed forces, power producers, government/semi-government entities, FMCG companies, developmental sector, and agricultural customers.
APL has a strong retail network with over 645 outlets storage nationwide while hundreds are at different stages of NOCs or construction. These are fully equipped with state-of-the-art facilities and service techniques. And besides a logistics and transportation network, the company's storage network is also a strong one in the following different locations: Rawalpindi Bulk Oil Terminal (RBT), Korangi Bulk Oil Terminal (KBT), Karachi, and Machike Bulk Oil Terminal (MBT), Sheikhupura. Recently, the bulk oil terminal at Shikarpur has also been commissioned.
In the industrial and commercial fuels, it markets high speed diesel, motor spirit, jet fuel, kerosene oil, asphalt, furnace oil, light diesel oil and lubricants. It also offers a range of lubricants that include both automotive and industrial grades blended with base oils and additives. The exports include naphtha to the Middle East, Far East and South Asia, and some petroleum products to Afghanistan.
Shareholding pattern
Largely held by the Attock Group's Attock Refinery, Pakistan Oilfields Limited, and Attock Oil Company, APL's another key shareholder, rather the largest shareholder is Pharaon Investment Group Limited Holding s.a.l., a Lebanese holding company that holds most of the Groups businesses (around 34 percent). Initially R. Pharaon & Fils, the company was established in 1868 in Beirut, Lebanon and has regularly expanded and developed its activities in diversified fields such as insurance, household appliances, consumer electronics, agrochemicals, industrial and domestic gases, flavours and fragrances, pharmaceuticals and medical equipment. For a breakup of shareholding, refer to the illustration.
Previous performance
The OMC sector has faced good and bad times in recent years. Its growth has largely been hinged on increased demand and consumption of petroleum products with low international crude oil prices. While its recent weak performance has come from increased prices as well as some policy changes and lower economic activity that have all contributed to the sluggishness in the sector lately.
Back in FY14, the OMC sector came in the limelight driven largely by volumetric growth in retail fuels. At the same time, furnace oil consumption continued to peak in the power sector. Growth in retail fuels was because of improvement in the liquidity of the companies and rising petroleum product consumption in the country amid lower oil prices. APL was able to increase its market share from 9.3 percent in FY13 to 10.1 percent in FY14 due to its better product sales. In terms of profitability, FY14 was good for APL where revenues improved ion the back of volumetric growth in fuels. However, rising inventory losses kept margins in check.
The OMC sector continued its volumetric growth journey in FY15 when crude oil prices touched historic lows. However, lower oil prices affected the liquidity position of the downstream oil marketing companies. Even so, APL was able to achieve 8 percent year-on-year increase in sales volume; it continued to focus on retail fuels like HSD and MS, and surpassed its 500th retail outlet. Its market share increased slightly from 10.1 percent in FY14 to 10.4 percent in FY15.
However, higher inventory losses axed the revenues where APL's top line declined by 16 percent year-on-year, and Its bottom-line dropped by 24 percent year-on-year due to the overall impact of inventory losses, the reduction in HSD volumes, petroleum prices, and decline in other income.
The opposite happened in FY16; inventory gains lifted revenues and hence gross margins for APL. Moreover, the retail drive continued in FY16, and APL was able to add 35 new outlets to its retail network. Despite MS increasing its share in volumes and margins for APL, the firm's volumes like the rest of the OMC sector was adversely affected by the phasing out of furnace oil. The firm also lost some market share in attempt to reduce exposure in furnace oil due to unattractive margins with increased focus on fixed margin retail segment.
FY17 was again a good year for APL in terms of sales; net revenues for APL were up by almost 27 percent year-on-year, which was largely brought by strong growth in volumetric flows; High Speed Diesel (HSD) and Motor Gasoline (petrol) grew by around 17 percent and 38 percent, respectively on a year-on-year basis. However, a subsequent growth in cost of sales restricted the gross margins. Overall, APL's earnings were up by 38 percent year-on-year due to effective inventory management, increased storage capacities and cost control measures
The most recent fiscal year was once again a volatile year for oil prices. APL's revenues in FY18 increased by 28 percent, year-on-year due to higher petroleum product prices and growth of around 6 percent year-on-year in volumes. Increase in sales volume and inventory gains due to rising price trend of petroleum products during the year resulted in higher gross margins. However, earnings increased by only 7 percent, year-on-year due to reversal of provision of other charges and higher operating expense on account of exchange losses. The liquidity in FY18 was affected by the increase in trade debts and corresponding trade payable due to supply of products to the IPPs and increase in stock and corresponding liabilities as per the company's annual accounts.
APL in 1HFY19 and beyond
The oil marketing segment's growth in the last few years has been driven by retail volumes as demand increased, which has pushed the OMCs to expand their retail network. APL too has been focusing on retail fuels and increasing retail outlets. With over 645 outlets across the country, the company has also been focusing on expanding its storage facilities at tactical points in the country, and is also in the process of establishing various bulk oil terminals and depots throughout the country.
However, the segment hasn't had a smooth ride in FY19 so far. Retail product volumes have started to consolidate, while furnace oil is on constant decline; the outlook for petroleum product sales is also not robust due to furnace oil curtailment, slow economic growth, and hence lower consumption. APL's financial performance for 1HFY19 showed a 25 percent year-on-year decrease in profits, and over 62 percent year-on-year decrease in the earnings for 2QFY19. Despite increase in revenues, the firm's earnings and margins- net as well as gross fell during the latest half yearly performance.
APL's net revenues 1HFY19 were up by more than 50 percent, year-on-year, primarily due to higher petroleum product prices. However, volume of the products sold decreased by 4 percent year-on-year due to increased prices, economic uncertainties and slow business growth.
Earnings for APL however, fell on account of a higher than proportionate increase in the cost of sales and higher competition. Higher cost of sales came from higher inventory losses; meanwhile, the margins also shrunk from exchange losses.
Despite the challenges, Attock Petroleum Limited has been one of the most favoured stocks of the brokerage industry from the OMC sector for its stable market share compared to its peers and also lower exposure to the circular debt along with relatively guaranteed procurement of petroleum products via Attock Refinery. The company during the times of falling volumes has been able to increase its market share from 8.8 percent in 1HFY18 to 11.2 percent in 1HFY19. The company commissioned Shikarpur Bulk Oil Terminal during the period, and plans to heavily invest in development of more bulk oil terminals across the country. Construction of bulk oil terminals at Sahiwal and Daulatpur are expected to complete soon and land has been acquired to develop terminals at Tarujabba and Gatti Faisalabad as per the quarterly accounts.
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Attock Petroleum Limited-Shareholding Pattern (June 30, 2018)
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Categories Percentage
held (%)
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DIRECTORS, CHIEF EXECUTIVE OFFICER,
THEIR SPOUSES & MINOR CHILDREN 6.69
ASSOCIATED COMPANIES, UNDERTAKINGS
AND RELATED PARTIES 72.51
Pharaon Investment Group Limited Holding s.a.l. 34.38
Attock Refinery Limited 21.88
Attock Petroleum Limited Employees Welfare Trust 7.04
Pakistan Oilfields Limited 7.02
The Attock Oil Company Limited 2.2
NATIONAL INVESTMENT TRUST & INDUSTRIAL
CORPORATION OF PAKISTAN 0.06
BANKS, DEVELOPMENT FINANCE INSTITUTIONS,
NON-BANKING FINANCIAL INSTITUTIONS 4.04
INSURANCE COMPANIES 3.6
MODARABAS & MUTUAL FUNDS 2.58
FOREIGN COMPANIES 1.12
TRUSTS AND FUNDS 1.89
JOINT STOCK COMPANIES 0.9
GENERAL PUBLIC (LOCAL) 6.59
GENERAL PUBLIC (FOREIGN) 0.02
Total 100
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Source: Company Accounts
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APL 5-Year Ratio Analysis
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FY14 FY15 FY16 FY17 FY18
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Profitability
Gross margin 2.9% 2.9% 5.26% 5.3% 5.5%
Net margin 2.1% 1.9% 3.50% 3.8% 3.2%
Operating leverage 22.8% 142.2% -66.3% 136.1% 27.5%
Return on equity 31.1% 24.0% 24.5% 34.6% 32.6%
FY14 FY15 FY16 FY17 FY18
Liquidity
Current ratio 1.59 1.66 1.67 1.52 1.42
Quick ratio 1.24 1.3 1.36 1.18 0.96
Cash to current liabilities 0.39 0.31 0.59 0.51 0.16
Cash flow from operations to Sales 0.01 0.03 0.03 0.03 -0.01
FY14 FY15 FY16 FY17 FY18
Activity/Turnover
Inventory turnover 33.36 26.99 19.88 21.76 17.02
Debtor turnover 19.32 16.18 15.32 16.46 13
Creditor turnover 11.42 9.47 6.64 7.2 7.1
Total asset turnover 6.39 5.37 3.61 4.03 4.2
Fixed asset turnover 108.16 78.50 40.04 37.73 32.97
No. of retail outlets 468 516 563 604 629
FY14 FY15 FY16 FY17 FY18
Investment/Market
EPS 52.16 39.62 46.16 63.89 68.19
P/E 11.31 14.32 9.48 9.81 8.65
Dividend yield 9.01% 6.26% 8.32% 6.94% 6.68%
Dividend pay-out 91.06% 87.07% 86.66% 66.52% 58.66
Dividend cover 1.1 1.15 1.15 1.5 1.7
Dividend per share 47.5 34.5 40 42.5 40
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Source: Company accounts
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Attock Petroleum Limited
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Rs(mn) 2QFY19 2QFY18 YoY 1HFY19 1HFY18 YoY
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Net sales 57,721 33,064 51.6% 115,527 76,595 50.8%
Cost of sales 56,275 35,636 57.9% 111,519 72,197 54.5%
Gross profit 1,446 2,428 -40.5% 4,008 4,399 -8.9%
Other income 242 208 16.4% 471 414 13.8%
Operating expenses 955 674 41.8% 1,645 1,216 35.2%
Operating profit 732 1,962 -62.7% 2,834 3,596 -21.2%
Finance Income 369 309 19.5% 686 654 4.9%
Finance cost 216 136 58.3% 393 259 53.9%
PAT 556 1,480 -62.5% 2,103 2,810 -25.2%
EPS (Rs/share) 5.58 14.87 -62.5% 21.13 28.24 -25.2%
Gross margin 2.50% 6.38% 3.47% 5.74%
Operating margin 1.27% 5.16% 2.45% 4.70%
Net margin 0.96% 3.89% 1.82% 3.67%
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Source: PSX
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