It is either expansion or dividends, and equity investors know it. This is why Attock Petroleum Limiteds (APL) share price has not shown positive movement since the companys bid to acquire Chevrons assets and the likely hold back of dividends further.
If APLs plans of backward integration through the acquisition of Chevron Pakistan Limiteds gems work out, its balance sheet will be adorned with Chevrons 500 plus retail outlets, not to mention the increase in market share from six percent to nine percent.
However, its not as simple as it sounds. Recall that FY13 has been relatively dull for APL; its earnings receded by six percent during the nine months of FY13. And with no dividend announced for FY13 so far, it will likely have to make some hefty payouts if the plans of the oil marketing company (OMC) do not go through well.
Despite the muted volumetric growth, the revenues of the OMC expanded by six percent year-on-year during 9MFY13 on account of improvement in the petroleum product margins. Most of it came from the inventory gains of 1QFY13 and better product prices particularly during 1HFY13.
APL should have seen better asphalt sales since infrastructural activities gain traction in the election year. However, lower demand of the product due to excess imported inventory adversely affected the top line of the company.
Higher operating expenses were a strain on APLs bottom line during 9MFY13, which would intensify further if and when APL acquires Chevrons retail network. On the whole, the bottom line of APL contracted by six percent year-on-year during 9MFY13.
Going forward, sentiments about the company depend upon the outcome of its expansion plans. On the bright side, if the acquisition of Chevron is completed successfully, APL could get away with no dividends for FY13 along with an uptick in earning prospects.
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Attock Petroleum Limited
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Rs (mn) 3QFY13 3QFY12 Chg 9MFY13 9MFY12 chg
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Net sales 39,096 36,234 8% 117,237 110,755 6%
Gross profit 1,017 1,146 -11% 3,931 3,639 8%
Operating expenses 325 228 43% 1,126 595 89%
Finance cost 443 344 29% 1,221 919 33%
Profit for the year 790 930 -15% 2,945 3,148 -6%
EPS (Rs/share) 11.42 13.45 -15% 42.6 45.54 -6%
Gross margin 2.6% 3.2% 3.4% 3.3%
Operating margin 3.7% 4.5% 4.2% 4.5%
Net margin 2.0% 2.6% 2.5% 2.8%
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Source: KSE Announcement
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