Shell Pakistan Limited (PSX: SHEL) ann-ounced its financial performance for the first half of 2023 where the earnings of the company declined by 53 percent year-on-year with a profit of Rs3.5 billion versus Rs7.5 billion. The earnings for 1HFCY23 are better as the company’s 2QCY23 was able to post earnings growth of 53 percent year-on-year, versus 1QCY23 loss after tax.
Though the revenue growth for SHEL was 31 percent the due to rising prices and growth in of the lubricant segment, the decline in earnings in 1QCY23 came on the back of unprecedented devaluation of the Rupee, rising inflation and macroeconomic uncertainty. The currency lost its value by 27 percent in 1QCY23 that brought massive exchange losses for the SHEL – this can be seen from the rise in other expenses by more than four times during the first quarter on a year-on-year basis. Also affecting the profitability was the finance cost that grew by over three times in 1QCY23.
Though the topline in 2QCY23 was down by around 8 percent year-on-year due to some decline n prices as well as weakness in industry wide OMC sales volumes, the growth in earnings during the quarter was propelled by a significant decline in other expenses (71%YoY), and a massive growth in other income (over 12x).
What the future holds? Shell Petroleum Company – the parent company - has decided to sell its 77 percent stake in Shell Pakistan, which means that the MNC is exiting the domestic OMC market for good. The company’s current operation will continue as they will be taken over by the buyers. State-owned Pakistan Refinery Limited, and Air Link Communication, a local firm, are seeking to buy a stake in Shell Pakistan, and the companies announced this last month in a notice to the stock exchange. The news about Shell’s exit has been rife for years as the global oil giant has been making efforts effort to streamline its portfolio; and the current economic climate served the right time for the MNC to announce its divestment.
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