The changing dynamics of the oil industry from volatility in global crude oil prices to changing fuel mix and demand at home to increased competition within the local industry to changing policy have all been the key features that the oil and gas companies are trying to keep up with. And the downstream oil and gas sector - the oil marketing companies have been at the forefront.
The OMC sales volumes, a good proxy of how the sector is doing, have been increasing primarily on the back of retail expansion; motor spirit (petrol) and highs speed diesel have been the growth drivers for the OMCs, while furnace oil – a third key fuel – has been on curtailment given its high cost for power generation especially with LNG making into the power mix, and the government’s recent decision to shut down furnace oil based power generation – though the fuel might be seen coming back to generation mix at least temporarily as the government has allowed imports on need basis amid rising temperatures and circular debt. The motor lubricant sales volumes for FY17 are also reportedly on a rise, which again highlights the rising demand for retail fuels like petrol. And APL is one firm that seems to be benefiting from this growth though its share in total lubricant market is only around 1 percent.
According to an AKD Securities’ research note, there has been around 47.9 percent increase in lubricant sales volumes for FY17, where Attock Petroleum Limited (PSX: APL) saw 21.5 percent year-on-year growth on the back of 73 percent year-on-year growth in passenger motor car lubricant sales. With similar retail growth trend in FY18 as well, it wouldn’t be wrong to assume that the firm has continued to see growth in lubricant sales in the ongoing year as well as the firm’s overall volume of petroleum products for 9MFY18 were up by 4 percent year-on-year with motor spirit and HSD growth of 11 and 5 percent, year-on-year respectively.
During the same time period i.e. 9MFY18, APL sales revenues as per its financial results announced yesterday, increased by 26 percent, which was a mix of both higher sales volumes as well as higher petroleum product prices.
However, the firm’s bottom-line was down by a little over two percent, year-on-year. This was due higher cost of sales in the rising oil price environment, as well as higher operating expenses due to exchange losses from Rupee depreciation versus the US Dollar recently.
While the firm might have seen a dent in its earnings recently, APL’s rising retail presence and increased capital expenditure linked to storage expansions makes a case for growth in the coming times. Also, a significant advantage that the company enjoys is its unleveled balance sheet and hence low sensitivity to the circular debt, giving it more room for capital expansion. Of its recent ventures include the country’s largest and most advanced fuel farm facility at the new Islamabad airport developed jointly with PSO.
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