Attock Petroleum Limited (APL) announced its first quarter 2010 results on Tuesday showing a slight drop in earnings for the first time in five years, owing to lower FO sales volume and a reduction in selling prices. The companys top line fell 16 percent due to a decline in retail product prices which eased by 16 percent on year-on-year basis, whereas its petroleum product sales volume remained flat.
The reason behind stagnant product sales was a 25 percent decline in furnace oil sales where the company lost its market share by 5 percent. It is important to mention that the industry furnace oil sales during the same period shored up by the same magnitude but APL failed to pounce on the opportunity created in the peak demand season as PSO penetrated the market with Fuel Supply Agreement with major FO consumers. The circular debt also played its part in limiting the firms ability to engage excessively in FO business.
The respite was brought by petrol and diesel volume sales which picked up 32 and 27 percent respectively as the company managed to increase its retail fuels market share by 43 percent. Inventory gains owing to 16 percent increase in oil price during the quarter made up for the gross margins which would have been much lower due to 40 percent lesser FO sales price.
Going forward, things are shaping well for the company as it is likely to have gone through the lean patch. APL should do well enough in the remaining quarters on sales front especially that of furnace oil as the circular debt issue has been resolved at large as evident by the latest balance sheet numbers reflecting a sizeable reduction of Rs 2.2billion in trade debts.
Moreover, owing to the rapid growth of its retail outlets network, the firms market share in retail fuels has now gone up to 4 percent from 2.8 percent in the same period last year. Given the saturated nature of the largest player ie PSO, APL should continue making rapid strides in the segment. Furthermore, international oil price are expected to follow a rather stable trend with limited risk of a downside - which ensures healthy margins and inventory gains in the days to come.
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APL P&L
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Rs (mn) 1QFY10 1QFY09 % chg
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Sales 16,538 19,744 -16%
Cost of Sales 15,779 18,863 -16%
Gross profit 759 881 -14%
Gross margins (%) 4.59% 4.46% 3%
Other income 186 300 -38%
Income on deposits 253 164 54%
PAT 734 785 -7%
EPS (Rs) 12.74 13.63 -7%
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Source: KSE announcement