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After a good year (FY22), the oil marketing companies (OMCs) earnings were expected to come under pressure during FY23 due to significant inventory losses owing to the decline in international crude oil prices along with refinery cracks for petrol particularly. This was see in 1HFY23 profitability. The industry also witnessed a decline in volumetric sales of petroleum products of around 20 percent during the six month period. However, higher prices offset this decline to result in higher revenues for the OMCs.

Attock Petroleum Limited’s (PSX: APL) revenues growth stood high at 54 percent year-on-year in 1HFY23, led by increase in average selling prices by 80 percent year-on-year! however, volumetric sales were down where the company’s sales volume of High Speed Diesel (HSD) decreased by 25 percent year-o-year, while sales volume of Motor Spirit (MS) decreased by 16 percent year-on-year and the company’s sales volume of Furnace Oil (FO) decreased by 26 percent year-on-year. Sales of jet fuel that makes up a small part of total volumetric sales recovered in 1HFY23, rising by 35 percent year-on-year due to normalization of Hajj and Umrah operations and removal of pandemic-related travel restrictions across the globe. The topline during 2QFY23 ascended by 40 percent year-on-year too amid higher product prices.

APL however announced a slight decline in gross profits for 1HFY23, with a colossal decline in gross profits for 2QFY23 unlike the 1QFY23. The gross margins shrunk due to fall in inventory gains during 1HFY23, and inventory losses in 2QFY23 amid falling ex-refinery prices. Operating expenses in 1HFY23 were up on account of exchange losses, primarily due to the 1QFY23 as the same were down by 14 percent year-on-year in 2QFY23. Also the bottomline was affected by higher finance cost in 2QFY23 as well as 1QFY23 due to higher markup charged on late payments during the periods.

The OMC’s bottomline fell by 16 percent year-on-year despite the rise in topline due to the above-mentioned factors. The decline in 2QFY23 was prominent at 70 percent year-on-year. With demand for petroleum products bleak in the ongoing year at least, and the recent bout of currency depreciation, it would be interesting to see how the profitability pans out in the coming two quarters.

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