APL - rising volumes

Attock Petroleum Limited’s (PSX: APL) financial performance in FY17 has been upbeat largely on account of higher revenues – a pleasant occurrence after a year of falling top-line; in FY16 net sales were down by a massive 36 percent year-on-year as the declining international oil prices took the country in its fold; at the same time, volumes decreased by 14 percent year-on-year in FY16. On the other hand, FY17 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.

Overall, the OMC sector has remained upbeat in terms of continuously increasing retail product sales. However, the effects of increase in the top-line for APL were not seen in gross margins as the cost of sales rose in tandem.

Apart from the top-line, effective inventory management, increased storage capacities and cost control measures resulted in profit after tax of Rs63.89 million in FY17 versus Rs46.16 million in FY16 – up by 38 percent year-on-year. Here, reversal in other charges was also seen in FY17 that lifted the bottom-line.

OMC sector has seen its retail volumes increase significantly over the last year due to increased demand, which has propelled these companies to expand their retail network. APL too has been focusing on retail fuels, working on increasing the number of retail fuel pumps. According to the firm’s 9MFY17 Director’s Report, APL has relied on both local and import channels to cater to the growing demand of Premier Motor Gasoline (PMG) in the country, which has increased APL’s market share in PMG from 6.5 percent to 9.1 percent recently. It also enjoys market leadership position in non-energy products like Asphalt.

APL is also increasing its storage facilities at tactical points in the country, for which the firm has acquired land in Sahiwal and Tarujabba. APL is also in the process of establishing various bulk oil terminals and depots throughout the country. These capital expenditures somewhat explain the decline in FY17’s payout; APL announced a final cash dividend of Rs27.50 per share in addition to Rs42.50 per share, suggesting a payout of 67 percent, which is lower than APL’s historical payout ratio.