Sui Northern Gas Pipelines Limited (PSX: SNGP) has recently announced its financial performance for the nine months of FY22 ending on 31, March. Where the gas utility saw its earnings increase by hefty 59 percent, growth in profits for 9MFY22 remained tepid at 6 percent year-on-year.

Growth in earnings in the first three quarters of FY22 was driven by growth in RLNG prices due to record prices of international crude oil. Growth in international crude oil price was around 70 percent for the period, while RLNG prices shot up by80 percent year-on-year in 9MFY22.

On the volumetric sales front however, RNLG imports were down by around 4-5 percent during the nine-month period due to the port as well as availability issues. Overall sales volumes for SNGP are also likely to be lower during the period. Decline in domestic gas volumes sold was likely due to shortage of gas and depleting gas reserves in the country.

Despite the significant growth in gross profits of about 30 percent year-on-year, gross margins of SNGP came down from 6.8 percent in 9MFY21 to 5.5 percent in 9MFY22 due to higher base.

SNGP incurred expected credit loss of Rs792 million in 9MFY2, which has been a frequent occurrence since FY19, when the company incurred a loss of Rs1.5 billion. Operating profits still grew by 20 percent, and this growth came from primarily two factors: lower unaccounted for gas UFG and weaker domestic sales volumes ‘that countered the impact of higher weighted average cost of gases as per AHL Research Note.

The botomline of SNGP was dragged by 24 percent year-on-year rise in finance cost in 9MFY22 on account of higher interest rate during the period. The company also booked higher tax during the period, which pulled net earnings down.