HASCOL’s losses keep mounting

2021 was a better year for Hascol Petroleum Limited (PSX: HASCOL) as the company had witnessed slowdown in losses. However, 2022 has been lethal for the oil marketing company, as its losses increased staggeringly. With 90 percent year-on-year rise, the company incurred over Rs14 billion unconsolidated loss after tax in CY22, though the losses in 2022 were less than the all-time high loss for HASCOL in 2020 of Rs23 billion.

The oil marketing industry faces an extremely challenging time amid steep devaluation of the currency and diminishing reserves, curtailment of imports, skyrocketing inflation, and demand destruction due to weak economy and floods of 2022. During 2022, the company’s net sales depicted a growth of 13 percent year-on-year, while gross revenue was flat. Volumetric sales were down by 42 percent year-on-year.

Due to currency devaluation during the year along with limited LC lines, HASCOL incurred realized exchange loss of over Rs2 billion in 2022, up by 187 percent year-on-year. And along with 25 percent increase in finance cost amid higher interest rate environment, the OMC’s earnings slipped further into the negative zone. The management report mentions depreciation and amortization of over Rs1.9 billion as another factor dragging profitability.

The volatility in the OMC sector has seen major announcements recently. The multinational OMC – Shell is divesting its shareholding from Shell Pakistan. And recently, Taj Gasoline Limited, a private oil marketing company operating 61 retail sites in Sindh, has submitted a public announcement of intention to buy at least 41 percent shareholding of Hascol Petroleum Limited; HASCOL too has okayed due diligence.