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Starting afresh after a weak show in FY19 has not been possible for Attock Petroleum Limited (PSX:APL). The oil marketing company continued to be weighed down by lower inventory gains as a result of falling prices. At the same time, lower volumetric sales also played a role in constraining the company’s earning capability.

Revenues for the company for 1QFY20 registered a tepid growth of a little over two percent year-on-year. This was mainly on account of lower volumes of high-margin products sold during the quarter. This primarily includes lower volumes of retail fuels like motor gasoline and high-speed diesel. On the other hand, there were relatively higher sales of low-margin product, the furnace oil, due to growth in its demand in summer months. But it could not give the required boost to the top-line.

Amid sluggish revenues, gross profits witnessed a decline, with gross margins shrinking from 4.4 percent in 1QFY19 to 3.5 percent in 1QFY20 due to sales of low margin products. However, APL did not witness significant exchange losses that had really marred the company’s FY19 financial performance.

Attock Petroleum Limited 
Rs (mn)  1QFY20 1QFY19 YoY
Net sales 59,208 57,651 2.7%
Cost of sales 57,108 55,089 3.7%
Gross profit 2,100 2,562 -18.0%
Net impairment losses on financial assets 74 0
Other income 293 229 28.0%
Operating expenses 558 689 -19.1%
Operating profit 1,762 2,102 -16.2%
Finance Income 516 317 63.0%
Finance cost 290 182 59.2%
share of profit from assc. -134 2
Other charges 99 113 -12.2%
PAT 1,225 1,548 -20.8%
EPS (Rs/share) 12.31 15.55 -20.8%
Gross margin 3.55% 4.44%
Operating margin 2.98% 3.65%
Net margin 2.07% 2.68%
Source: PSX 

Despite the support from the ‘other income’, what dented the OMC’s earnings further were the higher ‘finance cost’ amid high interest rate environment and ‘share of losses from associates’ in 1QFY20. The latter is likely to have come from losses incurred by the Attock Refinery and the National Refinery during the same period.

APL’s bottom-line witnessed a decline of over 20 percent year-on-year in 1QFY20. However, despite the decline in volumes, the company did not see attrition in its market share, which stood at 11 percent for 1QFY20 as well as in 1QFY19. But there might not be a reversal in volumes any time soon. Slower economic growth and subdued industrial activity, along with OMC margins under duress and slow retail outlet additions, are all the factors that will be inhibiting any spur.

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