Improvement in earnings has been seen for Byco Petroleum Pakistan Limited since FY15, with FY17 a year where the firm’s earnings went up staggeringly and brought back its 120,000 bpd refinery into operations. FY17 changed the market dynamics for the company as well as the low crude oil prices started recovering, which added charm to BYCO’s increasing sales volumes.
BYCO’s growth has come at rough times in the industry, especially the downstream refinery segment; the government’s decision to shut down furnace oil based power plants hampered the refineries’ activity including BYCO’s where they had to decrease their throughput. Despite lower throughput in the last couple of months, the BYCO’s financial performance continues to show stunning improvement in FY18 as well. BYCO’s unconsolidated earnings for 1HFY18 stood at Rs2.287 billion versus only Rs19 million in 1HFY17.
The company posted net sales growth of 60 percent year-on-year in 1HFY18, which came primarily from the commencement of the operations of its large refinery back 2017, improved oil prices, plus the improvement in refining margins as well as increased volumetric sales by the company’s marketing business. These factors amid a check on costs were the key reason behind the phenomenal growth of the company’s profits.
The growth in volumes is only going to get better in the coming quarters as BYCO successfully commissioned a catalytic reformer at its larger oil refinery earlier this year (2018), enabling the company convert 24,000 barrels per day of heavy naphtha into motor gasoline, which is a great opportunity in times of insufficient refining capacity. Currently, the reformer is converting 12,000 barrels per day.
Meanwhile, the threat of furnace oil closure isn’t over. The government provided a temporary relief to the refining and the OMC sector by allowing furnace oil consumption in the power sector once again. However, the long term plan is to completely phase out the expensive fuel as new coal and RLNG based power plants come online, which means that the downstream refinery segment has to brace for this change sooner or later.
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