CY12 was a bad year for Shell Pakistan (SPL). But a glance at the companys latest financial performance for CY13 shows good improvement. The rebound in the earnings of oil marketing company has a lot to do with the firms efforts to increase market share and operational efficiencies.
The company says it gained market share in motor gasoline and diesel and significantly improved the profitability of its aviation and jet fuel segment. This is visible in revenue acceleration, which saw a 17 percent year-on-year growth in CY13.
While SPLs gross margins remained more or less the same in CY13 as in CY12, a significant improvement in operating profit margins is a proof of SPLs cost savings in major heads like storage and transportation.
Despite the companys investment in new products and promotions like Shell Rimula R4X and Shell Helix Ferrari, the increase in distribution and marketing expenses was merely 4 percent year on year in CY13. In fact as a percentage of sales, it saw an improvement of about 17 basis points. Moreover, Shells net margins saw impressive progress as the cost to finance receivables declined by 67 percent year on year.
The company says it was able to collect some of its receivables from the government during the year; albeit the firm is still owed more than 70 percent of the receivables, some of which have been pending for as long as ten years.
And while the loss turned into profit, the company does not see the financial performance as satisfactory. SPL plans to continue working on improving its operational performance. However, improvement in tax and regulatory environment and the repayment of government receivables are critical to the overall performance of the company.
Regulated margins on petrol and diesel have also been a concern for Shell Pakistan and other OMCs. However, this issue might just been answered, with the government and the OMCs reaching a middle ground regarding the deregulation of petrol margins.
=================================================================
Shell Pakistan Limited
=================================================================
Rs(mn) CY13 CY12 YoY
=================================================================
Net sales 249,214 212,801 17%
Gross profit 11,377 9,279 23%
Distribution and Marketing exp 3,368 3,229 4%
Administrative expenses 4,139 4,171 -1%
Other operating expenses 1,767 1,331 33%
Other income 300 371 -19%
Operating profits 2,402 919 161%
Finance costs 532 1,634 -67%
Profit after tax 1,061 (1,935) -
EPS (Rs/share) 12.40 (22.60) -
Gross margin 4.56% 4.36%
Operating margin 0.96% 0.43%
Net margin 0.43% -0.91%
=================================================================