Petroleum: ATTOCK PETROLEUM LIMITED (APL) - Financial Statements Analysis Financial Year 2004 -2001 Q 2010
OVERVIEW (November 06 2009): The 4th company to be granted marketing license in Pakistan, Attock Petroleum Limited (APL) is the 3rd largest Oil Marketing Company of Pakistan with a market share of 6.6 % in FY'09. APL is part of the first fully integrated Oil Company of the sub-continent. APL's sponsors include Pharaon Commercial Investment Group Limited (PCIGL) and Attock Group of Companies.
Pharaon Group is engaged internationally in diversified entrepreneurial activities, including Hotels, Oil Exploration, Production and Refining, Manufacturing of Petroleum Products, Chemicals, Manufacturing and Trading of Cement, Real Estate etc on the other hand, the Attock Group of companies consist of The Attock Oil Company Limited (AOC), Pakistan Oilfields Limited (POL), Attock Refinery Limited (ARL), Attock Petroleum Limited (APL), Attock Information Technology Services (Pvt) Limited (AITSL), Attock Cement Pakistan Limited (ACPL) etc thus, the strong backward and forward linkages give APL a strong competitive advantage.
APL generates the bulk of its sales revenue via sale of a variety of POL products to consumers, including both, direct end-users and through distribution channels. These products include asphalt, furnace oil and light diesel oil. 2009 saw furnace oil sales plunging, along with 10% decline in exports in FY'09 compared to FY'08 owing to the deteriorating law and order situation.1
RECENT RESULTS 1Q'10:
Company's profit after tax increased by 33% to Rs 2,218 million as against the profit of Rs 1,665 million during the corresponding period last year translated into earnings per share of Rs 38.51 against Rs 28.91 during same period last year. Net sales declined by 9.8% to be Rs 11.9 billion on account of reduced local prices in wake of reduced international prices. Gross margins improved from 4.6% in 1Q'09 to 5.7%. Operating profit declined by 2.3%, however increase in income from deposits and investments showed a significant increase of 202%, thus bringing an increase in the PAT.
Following the fall in the global prices of the commodities, average crude oil prices announced by the Organisation of the Petroleum Exporting Countries' (Opec) also came down to US $45/bbl in March 2009 from US $128/bbl in June 2008. Consequently, the subsidy given by the GoP in the form of Price Differential Claim (PDC) on Diesel was reduced to zero in October 2008. Nevertheless, an amount of Rs 720 million was still receivable from GoP as at March 31, 2009 on account of PDC related to prior period. However, the problem is being resolved on an urgent basis by the government by issuance of TFCs.
In FY'09, APL experienced a number of significant improvements as briefly highlighted below1: Setting up a bulk Oil Terminal at Machike at a total cost of approximately Rs 300 mln. The terminal is functional and is providing smooth and prompt supplies of POL products to its valued customers. After the year end, APL signed a deal with Pak Arab Refinery Limited (PARCO) and Pak Arab Pipeline Company Limited ( PAPCO) for supplying its petroleum products through the White Oil Pipe Line (WOPP) and the Mehmoodkot- Faisalabad- Machike (MFM) Pipeline to facilitate the mid country supply for customers.
Filling capacity increased at the Rawalpindi Bulk Oil Terminal by addition of two new filling point, one for petrol and diesel each. In order to bolster its country-wise network of retail outlets, APL commissioned an additional 37 outlets bringing the number to a current total of 246 nation wide retail outlets as at June 2009. The total investment in the retail network amounts to Rs 427 mln, with another 42 pumps under construction and an additional 130 in the pipeline.
APL OVERVIEW -FY'091
Despite the global recession and huge declines in Global oil prices, APL managed to post positive financial results and growth indicators. Opec announced a 47% decline in international crude prices from $128 per bb l in June 2008 to $68 per bbl in June 2009. As a result the subsidy from Government of Pakistan under the head of Petroleum Development Levy (PDC) was reduced to 0% in June 2008. The global slowdown took its toll on the domestic economy leading to a decline in domestic energy consumption.
The sales volume of White Oil fell by 4% in FY'09 compared to FY'08 on account of two major factors: firstly, the economic slowdown and secondly ,escalation in retail prices. Despite this adversity, APL managed to increase its market share in White Oil from 3.4% in FY'08 to 4.3% in FY'09. The market share for Black Oil also posted a 5% YoY increase.
Total inland annual sales of the industry declined by 8% for Diesel and rose by 5% for Petrol. Notwithstanding , APL managed to increase its sales volume by 35% and 44% for diesel and petrol, respectively, leading to an increase in diesel market share from 2.4% to 3.5% and an increase from 2.4% to 3.3% for petrol. These positive metrics were posted on the back of a strong national coverage and commissioning of additional pumps to enhance service to customers. On the other hand, receivables from various Government bodies stood at a consolidated total of Rs 5.3 bln as at June'09 owing to large circular debt, liquidity crunch and deteriorating economic situation.
APL-FINANCIAL ANALYSIS FY'09
The gross profit in FY'09 stood at Rs 3.29 bln as against Rs 2.75 bln in FY'08, posting a 17% YoY increase. Gross profit margin rose from 4.57% to 4.66 % due to higher international oil prices and improved product mix. The Net Profit recorded for FY'09 was Rs 3.08 bln compared to Rs 2.64 bln in FY'08. Net Profit Margin slightly declined from 4.39% to 4.36%. Return on Assets (ROA) and Return on Equity (ROE) both saw a drop , with ROA falling from 17.03% in FY'08 to 16.87% in FY'09 and ROE declining by 8.8% from 47.7% in FY'08 to 43.5% in the current year.
ROE fell due to a 28% increase in share capital as the number of issued shares rose from 48,000,000 to 57,600,000 shares. However, the minor reduction in ROA despite the rise in Net Profit may be attributed to an increase in the Total Assets with the commissioning of new retail outlets. Inventory turnover fell from 1.82 days in FY'08 to 0.73 days in FY'09, displaying efficient inventory management. Day Sales Outstanding (DSO) on the other hand rose from 34.8 in FY'08 to 39.8 in FY'09 attributed to a 34.5% increase in the Trade Debts indicating a slight decrease in the efficiency with which APL converts credit sales into cash sales. As cited earlier, this is a standard problem with all OMC's on account of piling and circular debt with various GoP entities.
The operating cycle rose from 36.7 days in FY'08 to 40.6 days in FY'09 due to the rising DSO. Total Asset Turnover shrank from 4.35 to 3.66 times. Sales to Equity Ratio fell from 10.86 times in FY'08 to 9.99 times in FY'09 due to a 28% increase in share capital with a 17% concomitant increase in Sales due to the downturn in the economy. APL experienced a rise in it's Current Ratio from 1.41 in FY'08 to 1.5 in FY'09, demonstrating a comfortable liquidity posture. An 18% increase in current assets against 11% increase in current liabilities explains this increase. Current Assets rose largely on account of a 34% rise in outstanding trade debts. APL also maintained comfortable Cash and Bank balances which stood at Rs 7345 mln in FY'09 allowing for spare liquidity.
Analysis of APL's debt management calibre shows a slight decline in the Debt to Asset ratio which fell from 64.3% in FY'08 to 61.2% in FY'09. This is a positive indicator showing that the company's assets grew faster than it's debt. Debt to Equity ratio declined from 1.8 to 1.58 due to the increase in share capital from Rs 5.5 bln in FY'08 to Rs 7.08 bln in FY'09 as APL increased it issued , paid up capital. However, the Long Term Debt to Equity ratio rose from a previous 2.44% to 3.55 % in FY'09 as there was a sizeable 86% increase in APL's Long Term Debt. The major increase in Long term debt is contributed by the increase in deferred tax liability due to accelerated tax depreciation.
The 17% increase in Net Profit from Rs 2642 mln in FY'08 to Rs 3082 mln in FY'09 enhanced the Earnings Per Share (EPS) and Dividend Per Share (DPS). EPS rose by 16% from Rs 45.86 in FY'08 to Rs 53.51 in FY'09 whereas, the DPS rose to Rs 25 from Rs 20 in FY'08. Book value per share rose from Rs 115.33 in FY'08 to Rs 122.96 in FY'09. The market value, however, showed greater volatility as it tapered by 26%, falling from Rs 432.28 in FY'08 to Rs 318.51 in FY'09. For the most part, the market value of APL posted a rising trend in FY'09.