APL – volumes churning growth

Despite the recent surge in petroleum prices, demand for petroleum products in the country has been on an up-climb. Recent quarterly growth (1QFY22) for petroleum product sales by the oil marketing companies stood around 24 percent year-on-year; in line with the trend, oil sales for Attock Petroleum LImited (PSX: APL) was also up by 23 percent year-on-year during the quarter. For APL, the volumetric growth was led by the retail fuels, motor gasoline and high-speed diesel, while after a weak month (July-21), furnace oil sales also grew staggeringly during the two latter months to lift the overall share of the fuel.

As a result of higher petroleum product prices as well as higher volumetric sales, APL’s revenues during 1QFY22 were up by a massive 61 percent year-on-year. Previously, the OMC’s financial performance in FY21 was also driven mostly by the fourth quarterly improvement versus weak base of 4QFY20 when Covid-19 lockdown was imposed in the country. The most significant improvement was seen in demand. and the same trend was witnessed in APL’s performance in 1QFY22.

Where APL’s volumes increased by 23 percent for 1QFY22, against 24 percent growth for the industry, the retail fuel growth was over 30 percent for the OMC against the 20 percent growth witnessed by the industry. This also resulted in a stability in APL’s market share for 1QFY22 at 10 percent.

And while gross margins slipped slightly, the growth in gross profits of over 53 percent year-on-year also came from higher petroleum product prices in the shape of inventory gains - particularly of higher margin product, the furnace oil. Other operating expenses saw a jump in 1QFY22, which was offset by an increase in other income, decline in finance cost, and an impairment reversal on financial assets versus a loss during 1QFY22.

The last quarter of FY21 as well as 1QFY22 have seen a revival in volumes for the OMC sector including APL with a rebound in economic activity including car sales, industrial activity, agriculture output, along with continued restrictions on cross-border smuggling. Overall, APL’s bottom-line was also seen expanding by 61 percent year-on-year in 1QFY22 and net profit margin remaining stable year-on-year - thanks to APL’s falling finance cost as well as share of profits from associates. It is in a better position as the OMC was able to sustain market share during the quarter led by growth in all three key petroleum products.