Shell Pakistan posts Rs441.273mn profit after tax

RECORDER REPORT

KARACHI: Shell Pakistan Limited has posted Rs441.273 million as profit after tax in the quarter ended September 30, 2012 as compared to after tax loss of Rs284.780 million in the same quarter in 2011.

The Board of Directors of the company in its meeting held on Wednesday, declared that the company’s earning per share stood at Rs5.15 in the period under review against per share loss of Rs3.33 in the same period last year.

The company’s Chairman Omar Sheikh, in his review, said that excluding the impact of one-off items, the underlying business environment had remained challenging even though the company’s operating performance improved significantly over the same quarter last year as well as the second quarter of this year.

The factors that continue to affect the company’s performance are high interest cost for financing receivables owed by the government, corporate tax payments in the period of a net loss and low fuel margins. As a result of the above factors, the company incurred a net loss of Rs1,547 million during the nine months of 2012 as against a profit of Rs1,122 million in the same period last year.

Despite these challenges, cash generated from operational activities, increased from an outflow of Rs6,063 million in 2011, to an inflow of Rs2,684 million in 2012. This is driven by improved working capital management and the company’s successful collection of some old debts. “In a high inflation environment, we have managed to reduce overall expenses by 2 percent in the first nine months of 2012, compared to the same period last year. Our external borrowing have shrunk to Rs13,428 million at the end of September 2012 compared to Rs15,745 million at the end of December 2011,” he said.

During the first nine months of 2012, the company has made significant investments in marketing activities in both the retail and lubricants businesses leading to significant growth in motor gasoline and consumer lubricants sales. During the third quarter of this year, there has been little progress in the government releasing monies due to the company. At the end of September, the company still owed Rs7,927 million for tax refunds – delayed between 1-3 years and Rs2,601 million for fuel price subsidies – delayed between 2-9 years.

“We have with great difficulty collected Rs3,450 million during the first nine months of 2012 with cooperation from the relevant government authorities,” he said. However, the rate of progress by the government on releasing these monies was slow, causing the company to continue to bear significant financial costs on bank borrowing, required to fund these receivables, he added.

“The company’s management continues to engage relevant government authorities and we are pressing the government to pay the remaining amounts on an expedited basis, to ensure business continuity, growth and investment in this key sector,” he said.

He further said that the minimum tax on turnover continued to have negative impacts on the company. “The company has paid Corporate Income Tax at an unreasonably high rate of nearly 9 times the pre-tax income for the first nine months of 2012. This has resulted in a post tax loss and is stifling future investment and growth prospects in the industry. We continue to discuss the removal of this anomaly with the tax authorities, to bring us in line with various allowances and standard rates already given to other similarly regulated sectors in the country,” he added.

Petrol and diesel margins in Pakistan are regulated and fixed in rupees per litre. These margins are not sufficient to cover steadily rising costs of operations and high financing costs required for investment in stocks and business assets. “We are continuously engaging the government for a revision of margins to align with the increasing cost of doing business,” he said.

“We are in the midst of a challenging period in Pakistan. However, the company is committed to turning around its responsibility to position it for growth,” the chairman added.