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From high to low, Byco Petroleum Pakistan Limited has seen its financial performance deteriorate in recent times. Improvement in earnings had been seen for Byco Petroleum Pakistan Limited since FY15 where FY17 was a year where the firm’s earnings went up staggeringly as the refinery brought back its 120,000 bpd refinery into operations. And along with better crude oil prices, the company saw growth in its volumetric sales.

However, after withstanding the challenges faced by the downstream oil and gas sector where the company continued to report profits for FY18, its profitability was axed in FY19 where the company’s earnings turned red. A key challenge that has hampered refinery segment’s earning growth has been low to nil off take of furnace oil by the power generation sector as the government announced its fuel oil curtailment plans.

During FY19, Byco’s net revenues were seen climbing by 19 percent year-on-year. However, volumetric growth component was likely subdued. Moreover, FY19 saw staggeringly high currency depreciation, which took a toll on Byco’s earnings as well. Higher cost of sales and increase in exchange losses resulted in lower gross refining margins and net margins.  What further affected the earnings for FY19 was higher selling and distribution expenses and lower other income. Overall, the company’s unconsolidated earnings fell from a profit of over Rs5 billion in FY18 to a loss of over Rs1.6 billion.

The refining segment has performed poorly in FY19. And apart from their concerns over the decline in furnace oil off take by the power sector, the refineries are also to blame for their current state. They have stalled up gradation plans and capacity additions needed to match rising demand (largely met through imports currently) and increasing fuel specifications as per global standards.