Hascol Petroleum Limited has gained a lot of prominence in the downstream oil and gas sector in no time by capitalising on the growth in POL demand in recent years with a focus on retail side. The company recently became the largest oil marketing company in the private sector in terms of oil storage capacity in the country, and second after the public sector giant PSO. The investment in the storage side came at the right time where the company in collaboration with its international sponsor Vitol has added 232,000 cubic metres of oil storage capacity at Port Qasim, taking it to 28 days from 16 days previously.
However, the company’s financial performance for 2018 has not been bright in terms of earnings. The company announced its annual result for 2018 earlier this week where its profits fell by 85 percent, year-on-year, and the one main factor behind the decline in earnings has been the exchange losses as a result of the currency depreciation. However, other factors too contributed to the dismal performance of the company.
Revenues for Hascol increased by a healthy 35 percent; however, the increase came from higher prices of retail fuels and not growth in volumes. Hascol that initially had seen record growth in volumetric sales has been witnessing a drop in volumes in the last 4-6 months primarily because of a general downtrend in the consumption patterns in the country as well as increasing competition. This can be seen from the nine-month volumes for the company in the ongoing fiscal year FY19 dropping by 20, 27, and 28 percent for MS, HSD and FO, respectively. For 2018, the nine-month quarterly report highlights a growth in volumes, which means that the culprit has been the 4QCY18 for lower volumes.
Higher margins earned on retail fuels resulted in gross profit increase for Hascol by 39 percent, year-on-year in 2018. However, the company’s higher exchange losses along with finance cost due to increased borrowings for capex as well as working capital needs eroded the growth in earnings.
The company did not announce any cash dividend for the year ended December 31, 2018, but announced a bonus share issue of 10 percent.
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