1HCY19 financial performance of Shell Pakistan Limited (PSX: SHEL) pointed towards a loss ridden CY19 - maybe worse than CY18. But the oil marketing company’s financial performance in the latest quarter announced recently at the bourses has changed the outlook. SHEL portrayed a 71 percent year-on-year improvement in its earnings for 3QCY19, which reduced the losses incurred in 1HCY19 by almost half. The growth in 3QCY19 profits came primarily from lower exchange losses during the quarter unlike the previous quarters and CY18 where earnings bled due to massive currency depreciation. However, where the increase in interest rates during the year helped the company earn better return on its financial assets supporting the bottom-line, the rise in the interest rate environment also resulted three times increase in finance cost for Shell Pakistan in 3QCY19.
Overall, the 9MCY19 financial position of the OMC continued to be dragged by weaker previous quarterly earnings. The company posted a loss after tax in 9MCY19 versus a profit in 9MCY18. A concern for the company is the slow economic growth, which continues to inflict adverse impact on the financials; revenues for 3QCY19 were down by 1 percent year-on-year, while 9MCY19 revenues grew by 8 percent due to some volumetric growth during the summer months. Apart from weaker macroeconomic outlook and currency depreciation in 2018 and 2019, profitability at SHEL has also been affected by the volatility in international crude oil prices and changing fuel mix in the country.
However, during these adverse times the OMC has been able to sustain its volumes (increase of around 1 percent) market share for 1QFY20 at 8 percent.