Shell posts Rs 223.642 million loss after tax

Shell Pakistan Limited has posted Rs 223.642 million as loss after tax in the quarter ended on March 31, 2012 as compared to after tax profit of Rs 758.401 million in the corresponding quarter in 2011. The Board of Directors of the company in its meeting held on April 19, 2012 declared that the company's per share loss stood at Rs 3.27 in the period under review against earning per share of Rs 11.07 in the same period last year.
According to the financial results sent to Karachi Stock Exchange, the company's sales declined to Rs 57.837 billion in the this quarter against Rs 65.622 billion in the same quarter last year. The cost of products sold stood at Rs 47.928 billion against Rs 54.799 billion.
In his review, Chairman, Shell Pakistan Sarim Sheikh said that during the first quarter of current year the company incurred a net loss of Rs 224 million as against a net profit of Rs 758 million in the same quarter last year. "This was mainly driven by lower overall margins, continued high financing costs on account of refunds due from the government and high effective tax rate of due to incidence of minimum turnover tax", he said.
He said regulated margins for petrol and diesel in Pakistan remain one of the lowest in the region, at a time of both rising oil prices and increasing cost of doing business. In this high oil price and inflationary environment these margins allowed by the government do not provide adequate returns to fully cover the cost of operations and the high cost of financing for the required investments in costlier stocks, he added.
He pointed out that the government receivables at the end of the quarter stood in excess of Rs 12,600 million mainly related to refund of sales and indirect taxes and fuel subsidies outstanding. These are resulting in very high financing charges on the company which for the quarter alone was Rs 506 million. Since the inception of these receivables over the last three years, the delays in settlement have already cost the company in excess of Rs 5,000 million in interest costs, he added. He said that the company's management is vigorously following up with concerned government authorities for the speedy settlement of these receivables. "On the positive side, the company managed to recover Rs 1,100 million in the current quarter in this respect and we hope that the government will make payment of the remaining amount on an expedited basis", he said.
"We continue to emphasise that it is imperative for the government to urgently address the unfavourable impacts of delay in settlement of government receivables, with a longer term view to create an environment conducive to business continuity and growth in this key sector of the economy", he said.
"The company continues to bear the impact of minimum tax on turnover which has adversely impacted our bottom line", he said. "In a rising price environment as seen during this quarter, this has led to increased tax liability with no corresponding increase in margin resulting in effective rate of corporate tax of more than 600 percent and unfairly eroding our operating profit growth", he said. "We are in continuous discussions with the tax authorities to remove this anomaly for our industry and bring us in line with exemptions and allowance on turnover tax already given to other sectors with similar challenges", he added.