Byco Petroleum Limited’s (PSX: BYCO) overall losses took a further dive in FY20 - 44 percent year-on-year to be precise from Rs1.68 billion in FY19 to Rs2.43 billion in FY20. The refinery’s profitability has been on a roller coaster ride in FY20; from weak FY19 to a strong 1QFY20; colossal loss in second and third quarters; and then some recovery in 4QFY20.
From 1QFY20 where earning more than doubled on a year-on-year basis, the company reported losses in 2Q and 3Q of FY20 followed by meagre profits in 4Q. Furnace oil offtake by the power sector continued to tank for three straight years; and hence, rising inventories with the refineries that do not have any other option but to continue producing furnace oil due to their age old technology. Macro-economic challenges like interest rates, currency depreciation, and oil price crash were additional burden in FY20 for refining segment including BYCO. And then finally, the global pandemic was another shock that not only was a demand destructor for petroleum products but also resulted in halting of operations for an already debilitating downstream oil sector.
BYCO’s revenues in FY20 slipped by 20 percent year-on-year as country’s oil consumption was further depressed due to COVID related lockdown. Though the refinery continued to operate till March end, it had to slowdown and eventually put the refinery on cold circulation due to very lean demand in local market in the subsequent months of FY20.
Reduced operations also resulted in reduced cost of sales and hence an increase in gross profits for FY20 by 48 percent year-on-year despite higher exchange and inventory losses during the year. Operating profits also witnessed a growth of 84 percent year-on-year due to growth in other income, however the net earnings went further into the negative on a year-on-year basis due to higher finance cost.