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Attock Petroleum Limited (PSX: APL) was Incorporated in 1998 an oil marketing company It has a has a strong retail network with over 700 retail outlets nationwide and is engaged in the marketing and distribution of numerous petroleum products including High Speed Diesel, Premier Motor Gasoline, Furnace Oil, Bitumen, Kerosene and Lubricants etc. along with a range of automotive and industrial grades lubricants. APL is part of the vertically integrated Attock Oil Group. Its sponsor, Pharaon Investment Group Limited Holding s.a.l holds the largest shareholding at 34 percent, whereas other key shareholders include Attock Refinery, Pakistan Oilfields Limited, and Attock Oil Company as shown in the illustration.

APL– Operational & financial performance

In FY16, Attock Petroleum Limited’s overall volumes were adversely affected by the phasing out of furnace oil. As a result, APL lost market share in attempt to reduce exposure in furnace oil due to unattractive margins. However, revenue growth for APL was strong in FY17 due to growth in volumes, which translated into a heavy bottomline. Overall, APL’s earnings were up by 38 percent year-on-year in FY17.

Revenues continued to grow in FY18 as petroleum prices remained high and volumes grew as well. Increase in sales volume and inventory gains due to rising price trend of petroleum products during the year resulted in higher gross margins. However, APL’s profits grew meagerly by seven percent year-on-year due to reversal of provision of other charges and higher exchange losses due significant currency depreciation during the year.

FY19 volumetric growth slowed down due to falling crude oil prices and domestic currency nosediving. Moreover, the effects of monetary and fiscal tightening adversely affected the OMC sector in FY19. Where the falling crude oil prices resulted in significant inventory losses for the OMCs, the depreciating rupee brought in large exchange losses. APL’s topline grew by around 26 percent year-on-year, which was entirely due to higher petroleum product prices, because voluemtric growth remained subdued in FY19. APL’s volumes declined by 11 percent year-on-year led by furnace oil and high speed diesel sales while earnings were down by 30 percent.

FY20 was a difficult year due to demand destruction brought by the COVID pandemic. APL’s earnings plummeted to only Rs1 billion. Weakness in earnings was due to inventory losses from lower prices of petroleum product in the country versus international prices, along with decline in volumes. During FY20, APL’s volumes sold registered a decline of around 11 percent year-on-year, which was highest for diesel followed by petrol and then furnace oil. Apart from the weakness in the topline and higher inventory losses, jump in finance cost amid high interest rates, relatively lower other income, decline in profits from associated further added to the bottomline decline.

FY21 was a recovery for APL as its bottomline jumped by 4.9 times where the 4QFY21 earnings surged by more than nine times. Though the overall topline growth remained subdued with a decline of 6 percent year-on-year, revenues for APL grew by 52 percent year-on-year in 4QFY21. The primary reason for growth in revenues was 20 percent increase in volumes in 4QFY21 led by furnace oil recovery in the fuel mix. At the same time, the oil price recovery after the international price crash in 2020 supported the revenue growth for the quarter. APL’s gross margins grew astoundingly due to significant inventory gains against heavy inventory losses in the corresponding period. This was due to increase in oil prices as well as due to modification in the domestic petroleum pricing format to fortnightly basis that reduced the volatility from the lag. The operating and net profits got a further lift from net impairment reversals on financial assets in FY21 as well as a decline in finance cost.

APL announced over 3.5 times increase in bottomline for FY22. The growth in earnings during the fiscal year came from the top where the OMC’s revenues were seen posting a growth of 96 percent year-on-year. Increase in supply of petroleum products to retail and industrial consumers due to increased economic activities led to growth in volumes sold. The sales volume increased 22 percent as compared to 14 percent increase witnessed by the overall industry. Product –wise, HSD posted the highest rise by 36 percent year-on-year, followed by 19 percent rise in motor gasoline and 15 percent growth in furnace oil volumes. Besides increase in sales volume, 47 percent increase in average selling prices of products as compared to last year also led to increase in sales revenue of the company. APL’s market share for FY22 stood at 10 percent versus 9.4 percent in FY21 with 63 newly commissioned retail outlets during the outgoing year. Earnings for the fiscal year were also supported massively by inventory gains, which is evident from 4 times jump in gross margins. APL also witnessed growth in finance income during the period due to higher interest rate. However there was also significant growth in operating expenses and other charges. Exchange loss caused were by a massive 30 percent devaluation of PKR against USD.

APL – 1QFY23

After a good FY22, the oil marketing companies’ (OMCs) earnings were expected to come under pressure during the first quarter of FY23 due to significant inventory losses owing to the decline in international crude oil prices along with refinery cracks for petrol particularly. Also, the decline in volumetric sales of petroleum products of around 23 percent during the quarter was likely to affect the overall profitability As a result, the gross margins were expected to slide down significantly.

Attock Petroleum Limited however announced almost 80 percent rise in bottomline for 1QFY23 along with a gross profit of 8 percent versus 6.4 percent in 1QFY22. The result for the OMC’s performance was not even close to what the market was expecting. The growth in earnings started at the top with the rise in net sales recorded at 70 percent year-on-year due to higher petroleum product prices. On the volumes side, APL’s sales of petrol, diesel and furnace oil declined by 14, 18 and 40 percent year-on-year during the quarter. APL’s gross profit increased not only due to higher revenue growth but also inventory gains instead of inventory losses.

The OMC’s bottomline grew despite the two times increase in other expenses most likely due to exchange losses. The growth in APL’s earnings is a continuation of the high growth achieved in FY22 where bottomline grew by more than 3.5 times due to higher petroleum product prices, volumetric growth, and massive inventory gains. Decline in volumes in recent months is likely to continue, and hence demand with remain tepid due to higher prices, winter season and weak economy.


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