Being part of the Attock Oil Group, the Attock Petroleum Limited (PSX: APL) is an oil marketing company involved in the downstream petroleum sector; 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. It also has a huge storage, transportation and retail outlet network. 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, which 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 APL is largely held by the Attock Group's Attock Refinery, Pakistan Oilfields Limited, and Attock oil Company. However, the largest shareholder of APL 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. A breakdown of the shareholding pattern is given in the illustration.
APL's past performance The OMC sector came in the limelight in FY14 driven largely by volumetric growth in retail fuels. This 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 growth in revenues came from volumetric growth in fuels. However, rising inventory losses kept margins in check.
Continuing with the growth trend in FY15, OMC sales remained robust amid historic lows for oil prices. However, the industry became more turbulent as declining oil price in the global market significantly affected the financial performance of the downstream oil marketing companies. However, APL was able to achieve 8 percent year-on-year increase in sales volume; it continued to focus on retail fuels that include HSD and petrol, and surpassed its 500th retail outlet. APL's market share increased from 10.1 percent in FY14 to 10.4 percent in FY15. However, again the higher inventory losses axed the revenues. 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 due to steep decline in oil prices, the reduction in HSD volumes, petroleum prices, and decline in other income.
A significant feature on FY16 was inventory gains, and gross margins improvement for APL. Moreover, the retail drive continued in FY16, APL was able to add 35 new outlets to its retail presence. While motor gasoline margins and volumes have been a source of support for the firm's revenue mix, the phasing out of furnace oil has been affecting the OMC sector's volumes. This could be seen APL's decline in market share in an attempt to reduce exposure in furnace oil due to unattractive margins with increased focus on fixed margin retail segment evident from its growing retail outlets.
IN FY17, APL's financial performance saw higher sales revenues; 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
APL in FY18 and beyond FY18 was a volatile year for oil prices where oil prices increased. 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. A look at the net margins shows these changes. The reversal pertains WWF provision for prior years after High Courts' decision in favour of tax payers.
The liquidity in FY18 was affected by the increase in trade debts and corresponding trade payable in FY18 due to supply of products to IPPs and increase in stock and corresponding liabilities.
OMC sector has seen marvelous growth in retail volumes in the last few years due to increased demand, which has pushed the OMCs to expand their retail network. APL too has been focusing on retail fuels and increasing retail outlets. APL is also increasing 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.
These capital expenditures explain the decline in the company's payout lately. However, these additional storages by the company should support retail outlet expansions, while petrol and diesel sales growth will continue to support APL's profitability.
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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, 6.69
THEIR SPOUSES & MINOR CHILDREN
ASSOCIATED COMPANIES, UNDERTAKINGS 72.51
AND RELATED PARTIES
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 & 0.06
INDUSTRIAL CORPORATION OF PAKISTAN
BANKS, DEVELOPMENT FINANCE INSTITUTIONS, 4.04
NON-BANKING FINANCIAL INSTITUTIONS
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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