The oil marketing segment in the country has been in difficult times recently. Besides the phasing out of furnace oil, declining oil prices in the last few months and dwindling local consumption amid weaker economic growth and rising interest rate scenario have been expected to taint the OMC sector’s financial performance.
Attock Petroleum Limited (PSX: APL) announced a disappointing financial performance for 9MFY19 due to the challenges that the sector is generally facing. The company’s earnings for the nine-month period fell by 44 percent, year-on-year, while those in 3QFY19 were down by 80 percent, year-on-year.
A key reason for lower profitability for APL has been the high cost of sales due higher inventory losses. And as a result, the gross margins nosedived. Besides higher inventory losses, volumetric sales also declined by around 9 percent in 3QFY19 and by around 25 percent in 9MFY19 – on a year-on-year basis.
The bottom-line was also affected by higher exchange losses depicted in the increase in operating costs; and higher finance cost amid higher interest rate environment. Nonetheless, APL is forging ahead with increasing its retail network and storage capacity, which will help its profitability in the future.
Also, the company is better off in exposure to the circular debt as it relatively has guaranteed procurement of petroleum products via Attock Refinery. And despite lower volumes and increased inventory losses, the company has been able to increase its market share to 10.7 percent by 2.4 percentage points in 9MFY19. The company commissioned Shikarpur Bulk Oil Terminal in the ongoing fiscal year, and plans to further invest in development of bulk terminals across the country. Construction of its bulk oil terminals at Sahiwal and Daulatpur are expected to complete soon, whereas it has acquired the land at Tarujabba and Gatti, Faisalabad to develop terminals.
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