Being part of the only integrated oil and gas group - Attock Oil Group - Attock Petroleum Limited (PSX: APL) is an oil marketing company involved in the downstream petroleum business. It was incorporated in 1998, and its portfolio consists of lubricants, 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. its key commercial and industrial fuels include high speed diesel, motor spirit, jet fuel, kerosene oil, asphalt, furnace oil, light diesel oil and lubricants. It also offers a range of lubricants, which include both automotive and industrial grades blended with base oils and additives.
Apart from facilitating export of naphtha to the Middle East, Far East and South Asia, APL also exports petroleum products to Afghanistan. APL has a huge storage and retail outlet network and it is working on to expand further.
Shareholding pattern
The oil-marketing segment has seen significant volumetric growth in recent years due to increased petroleum product consumption, and this is widely being led by the retail fuels. APL has also witnessed growth in the retail segment. The company is largely held by Pharaon Investment Group Limited Holding s.a.l., a Lebanese holding Initially R. Pharaon. & Fils, the company was established in 1868 in Beirut, Lebanon, 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.
Attock Refinery Limited, Pakistan Oilfields Limited and Employee Welfare Fund are among shareholders holding more than 5 percent of the voting rights.
Past performance
OMCs are led my volumetric sales now. But the recent growth in petroleum products did not start till after FY13. It was when the oil prices crashed that the domestic sales of petroleum products started peaking up. In FY13, the domestic OMC sector saw only three percent increase in overall petroleum trade in the country. The came from the decrease in furnace oil, while petrol sales started growing.
APL witnessed an amazing growth in the number of retail outlet in FY13, which came from rising retail fuel demand. The firm's core revenues were up by eight percent year-on-year, but the earnings slipped due to cost overrun, particularly administrative expenses and finance cost.
FY14 was a better year for the OMC sector, driven largely by volumetric growth in retail fuels; 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, APL did fine in FY14. The firm's net revenue rose by 25 percent due to increase in volumes sold. However, growing inventory losses restricted firm's gross margins. Overall, there was a decline in margins in FY14 due to decrease in average profit margins on petroleum products and increase in operating expenses due to stiff competition.
In FY15, oil-marketing segment remained eventful as prices plunged to historic lows before recovering. However, the industry became more turbulent profitability wise as declining oil price in the global market significantly affected financial performance of downstream oil marketing companies. APL's overall sales volumes increased by eight parent, year-on-year.
The firm's market share increased slightly from 10.1 percent in FY14 to 10.4 percent in FY15 due to its better product sales. However, APL like other OMCs saw a fall in its revenues and earnings due to inventory losses, a reduction in HSD volumes, petroleum prices, and decline in other income.
APL in recent years
In FY16, APL saw an improvement in gross margins due to inventory gains even though there was a decline in volumes due to lower furnace oil sales. The firm's sales mix has tilted towards retail fuels: HSD and petrol whereas furnace oil volumes have slowed down (an industry-wide trend).
APL's latest financial performance (FY17) has been upbeat; the firm saw higher sales revenues after a year of falling top line; net revenues for APL were up by almost 27 percent year-on-year; HSD and Motor Gasoline (petrol) grew by around 17 percent and 38 percent, respectively on a year-on-year basis.
However, gross margins shrunk as the cost of sales rose in tandem. Nonetheless, effective inventory management, increased storage capacities and cost control measures resulted in higher PAT for APL in FY17 - up by 38 percent year-on-year.
APL's focus in FY18 continues to be retail. The oil marketing company has been concentrating its efforts and investments in the retail fuel segment, which is the right approach because of rising demand for petrol and diesel, and a high probability of furnace oil losing market share over next few years as new plants based on coal and gas come online in FY19/20.
In 1QFY18, company recorded net sales revenue growth of 22 percent year-on-year, while the volumes of the products sold increased by 11 percent year-on-year. Declining price trend during the quarter resulted in inventory losses that decreased the gross profits. The firm's net profit also decreased by 15 percent in the quarter.
Outlook
OMC sector has seen wonderful growth in retail volumes due to increased demand, which has pushed these companies to expand their retail network.
APL's improving profitability over the last three to four years also speaks volumes about the OMC's rising retail presence and growing network. Increasing volumetric sales too have been of High Speed Diesel and Petrol, which has promoted the OMC to expand its retail network, capacity and storage infrastructure. A key factor that gives APL an edge over its competitors is its relatively leaner balance sheet and convenient receivables turnover, and hence low sensitivity to the circular debt. It gives APL more room for expansion.
The firm has grown its retail network at around 50 outlets per annum over the past five years. It has also entered into some long term contracts with the government and the Pakistan Army for jet fuel and HOBC, respectively.
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Attock Petroleum Limited - Shareholding Pattern (June 30, 2017)
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Categories Percentage
DIRECTORS, CHIEF EXECUTIVE OFFICER, held (%)
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THEIR SPOUSES & MINOR CHILDREN 6.69
ASSOCIATED COMPANIES, UNDERTAKINGS
AND RELATED PARTIES 72.51
NATIONAL INVESTMENT TRUST & INDUSTRIAL
CORPORATION OF PAKISTAN 0.06
BANKS, DEVELOPMENT FINANCE INSTITUTIONS,
NON-BANKING FINANCIAL INSTITUTIONS 2.05
INSURANCE COMPANIES 3.46
MODARABAS & MUTUAL FUNDS 3.19
FOREIGN COMPANIES 1.32
TRUSTS AND FUNDS 1.87
JOINT STOCK COMPANIES 0.52
GENERAL PUBLIC (LOCAL) 6.92
GENERAL PUBLIC (FOREIGN) 0.02
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Source: Company Accounts
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Attock Petroleum Limited
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Rs (mn) IQFYI8 IQFYI7 V0Y
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let sales 38,531 31502 22.3%
Cost of sales 36,561 29,211 25.2%
Gross profit 1,970 2,291 -14.0%
Other income 206 225 -8.4%
Operating expenses 543 420 29.2%
Operating profit 1,634 2,096 -22.0%
Finance Income 345 279 23.6%
Finance cost 122 62 98.9%
Share of profit from assc. 67 45 50.3%
Other charges 94 159 -40.8%
PAT 1,330 1,563 -14.9%
EPS (Rs/share) 16.04 18.85 -14.9%
Gross margin 5.11% 7.27%
Operating margin 4.24% 6.65%
Net margin 3.45% 4.96%
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