Hascol Petroleum Limited (PSX: HASCOL) has only recently announced its financial performance for the first quarter of 2020 (1QCY20). Not only the company blames the delay in announcement but also its weak financial performance to Covid-19, which started rearing its head in March 2020.

HASCOL’s revenues went down by 30 percent year-on-year in 1QCY20. According to the management, the first quarter was a dampener as demand collapsed and crude oil prices also tanked globally to historic lows. It further blames the Covid-19 induced lockdown effects as well as the massive currency depreciation for the OMC’s weak financial performance. Decline in revenues lead to inventory losses for HASCOL in 1QCY20 that saw the gross profit turning into gross loss.

And despite fall in revenue, distribution and marketing expenditure continued to rise that added to the operating losses. Loss for the period (1QCY20) was accentuated by close to three times increase in finance cost.

While it is usually unwise to decipher the direction the company’s financials would take with only 1Q performance at hand, it is quite obvious that HASCOL is in trouble. Firstly, the first three months of 2020 will follow more than a quarter of much weaker macro-economic conditions when the lockdown was imposed, and demand restricted further as the country went through its peak of Covid-19 cases. So 1HCY20 for HASCOL will definitely be bruised.

And secondly, HASCOL was already in a mess in CY19. In the last six months of 2019, the company’s market share in total POL products stood at 6 percent - half of what it was in the similar period a year before (13 percent during July-Dec 2018).The decline in HASCOL’s market share has been going on since 2018, showing HASCOL’s falling volumetric sales – the largest decline has been witnessed in furnace oil, but the company has faced lower high speed diesel and motor gasoline sales as well. Moreover, apart from the industry-wide contraction in volumes due to slower economic activity in 2019, drastic decline in volumes for HASCOL has been due to shortage of working capital to procure the product. HASCOL’s losses were colossal in CY19 – from Rs215 million in 2018 to over Rs25 billion loss in 2019.

However, HASCOL’s financial health in 2020 according to the management of the company might have improved its liquidity and working capital constraints due to successful closure of equity of Rs8 billion in January 2020,and partial conversion of short term debt to 7-year long term debt - with more restructuring of short term loans under consideration.

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