Unlike stellars performance in FY11, things are definitely not going in National Refinerys favour. The companys financials for 9MFY12 show that the refinerys profitability was axed by 55 percent, a sharp decline from 9MFY11. Amid the pitiless debt spiral still looming over the energy sector with economic climate worsening, the companys performance has not been able to show optimism for the remaining part of the year. During FY12 so far, the refineries have been facing tougher times. A lot of the times, refinery sector produces negative margins which mean that the petroleum products produced, sell for less than the cost of the raw material - crude oil prices. As a result, National Refinery posted a cut in sales volumes by around 2 percent during 8MFY12 compared to similar period FY11. Moreover, the depreciating rupee and extraordinary exchange losses continued to weigh heavy on the profitability of the refinery. On a comparative basis, 3QFY12 has been the worst so far for the company as the EPS dropped by 9 percent and 24 percent QoQ for 2QFY12 and 3QFY12 respectively. Another reason for a sharp dip in fuel margins for NRL is the weakening position of the base oil market - a core competency of the company. A reduction in lube base oil prices and hike in feed cost during 9MFY12 is reflected by truncated growth in the top line and a sizeable drop in the bottom line. To offset the losses in the lube segment to some extent, the company raised the base oil prices in January FY12 by 4 to 6 percent as base oil and lube segment sales contribute the maximum to the overall revenues of the company. The other segment of the refinery - fuel segment - also echoes the decline in the bottom line. This is primarily due to the inability of the petroleum products to earn better spreads which resulted in under utilization of capacity. The gross margin for 9MFY12 fell to a meager 3.08 percent compared to 6.73 percent during the corresponding period of FY11 partly due to a rise in the cost of sale by 23 percent, which eats up more than 90 percent on average of the total refinery turnover. The net margin witnessed a substantial sever from 4.55 percent in 9MFY11 to 1.71 percent during 9MFY12. Financial charges swelled by more than 7 times on account of exacerbated exchange losses amid a falling rupee value. Moreover, the net profit was also trimmed during the said period due to torpid growth in other operating income, which is otherwise a fine push to the profitability. On a macro level, oil sales for 9MFY12 have witnessed a decline of 2 percent. This is a consequence of oil consumption clocking in a decline of 11 percent YoY during March FY12. This was mainly due to a decrease in furnace oil consumption on account of circular debt crisis and JP due to suspension of NATO supply routes.
========================================================================= National Refinery Limited ========================================================================= (Rs mn) 9MFY12 9MFY11 chg 3QFY12 3QFY11 chg ========================================================================= Net sales 126,158 106,517 18% 44,492 38,789 15% Gross profit 3,892 7,174 -46% 958 2,555 -62% Operating profit 4,218 7,398 -43% 1,048 2,604 -60% PAT 2,163 4,846 -55% 579 1,710 -66% EPS (Rs) 27.05 60.60 -55% 7.23 21.38 -66% Gross margin 3.08% 6.73% 2.15% 6.59% Operating margin 3.34% 6.95% 2.36% 6.71% Net margin 1.71% 4.55% 1.30% 4.41% =========================================================================
Source: KSE Notice
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