Favourable international oil prices, relatively stable currency against a dollar bill and the bullish trend in the international petroleum product prices during the period 1QFY13 should portend better profitability of the local refinery sector.
Where stable rupee translating into lower exchange losses, is likely to lift the bottom line, gain in the international oil is expected to bring inventory gains for the refineries. Hence, analysts have been gushing about higher gross refining margins during 1QFY13.
Unluckily, National Refinery Limited of Attock Group did not seem to benefit even when it registered a fall of 24 percent YoY in finance cost. This was primarily because of the sluggish lube margins in 1QFY13 that underplayed the profitability of the only lube refinery.
The gains from a modest increase in the top line and a six percent step in the gross profits YoY during 1QFY13 did not translate well to the bottom line and the earnings for the period contracted by three percent over comparable period. With the EPS for the first quarter FY13 stagnant at Rs10, gross and net margins were a tad short of similar period last year.
Fuel segment profits went from red to green due to favourable refinery environment, underscored by healthy gross refinery margins and higher inventory gains. However, the overall profitability crumbled under the lube segments dull performance.
Both, the local demand for lubes an international lube market are responsible for the poor performance of the lubes and base oils. The final pinch came from extra-ordinarily low other income that always provides a buffer in times of need.
In contrast, Attock Refinery Limited, the other refinery of Attock Group seemed to have benefited from the encouraging fundamentals. Similar factors lead to increased profitability of ATRL: improved gross refining margins, favourable pricing scenario, higher cash balances and lower financial charges lifted the profits by a whopping 65 percent YoY.
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NATIONAL REFINERY LIMITED
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RS (mn) 1QFY13 1QFY12 chg
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Net sales 44,036 37,608 17%
Gross profit 1,600 1,515 6%
Other op.income 313 478 -34%
Operating profit 1,421 1,520 -7%
Finance cost 149 196 -24%
Profit after tax 802 828 -3%
EPS (Rs/share) 10.03 10.36 -3%
Gross margin 3.6% 4.0%
Operating margin 3.2% 4.0%
Net profit margin 1.8% 2.2%
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Source: KSE Notice.
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