APL FY23 – price versus volumes

The oil marketing sector had a destructive FY23 as the volumes due to slowing economy, weak demand and rising prices. This came as a stark contrast to FY22, which was a good year for the sector and economy in general. Oil sales by the OMCs declined by 27 percent year-on-year in FY23, which was a record low since FY06 barring FY20 – the year of the global COIVD pandemic.

However, prices of petroleum products saved the oil marketing companies, as their topline growth was completely due to the price factor and not the volumes. Attock Petroleum Limited’s (PSX: APL) revenues growth stood at 28 percent year-on-year in FY23, led by increase in average selling prices. However, volumetric sales were down by 24 percent year-on-year where the company’s sales volume of High Speed Diesel (HSD) decreased by 27 percent year-on-year, while sales volume of Motor Spirit (MS) decreased by 14percent year-on-year and the company’s sales volume of Furnace Oil (FO) decreased by 37 percent year-on-year. on a quarterly basis, the topline during 4QFY23 was down by 5 percentyear-on-year, while the volumes reported a fall of 28 percent year-on-year with MS, FO and HSD volumes down by 17, 33 and 51 percent year-on-year, respectively.

APL however announced a sharp decline in gross profits for FY23 due to significant inventory losses. Gross margins shrunk from 11 percent in FY22 to 5.5 percent in FY23.

However, operating expenses fell in FY23 on account of lower exchange losses during the period versus similar period last year. Yet a further dent to the OMC’s bottomline came from the finance cost that grew by 44 percent year-on-year due to increased interest rates and higher markup charged on late payments.

APL’s earnings were down by 33 percent in FY23 and by 64 percent year-on-year in 4QFY23. The company announced a final cash dividend of Rs15 per share. With demand for petroleum products bleak in the ongoing year amid record inflation and ongoing price hikes, and the continued weakening of the currency, the sector has been in a tough spot. Unfortunately, not much is likely to change in the coming quarters either as the currency continues to lose value, prices continue to rise, and economy remains at a standstill with no demand recovery in sight in the coming months.