First it was gas levels and now its profitability, Sui Southern Gas Company has announced a drop of 27% in net profit for the first six months of fiscal 2012.
Net profit plummeted to Rs1.54 billion during July to December 2011 against Rs2.11 billion in the same period a year ago despite net sales growing, data sent to the Karachi Stock Exchange on Wednesday shows.
The massive decline in profitability is expected on the back of massive increase in unaccounted-for-gas losses coupled with higher average cost of gas by 12% and 50% rise in financial cost, says an InvestCap research note.
Finance cost jumped to Rs3.6 billion as the gas provider is relying more on the short-term borrowing to fund its working capital requirements.
Gas theft and wastage losses, formally known as unaccounted-for-gas, have more than doubled Rs1.99 billion, however, the company is working on decreasing this expense.
SSGC is working on a $200 million efficiency programme with the support of the World Bank, which will bring down gas theft and leakage to seven per cent of production from the current 8.4 per cent. Under the five-year programme, aging gas pipelines spread over 5,000 kilometres will be rehabilitated.
Similarly, other income fell by 24% to Rs1.5 billion as interest income of the company must have fallen on the back of declining cash levels placed in banks.
The company’s stock rose Rs0.01 to close at Rs18.84 during trade at the Karachi Stock Exchange following the announcement of a result that was in line with market expectations.
Published in The Express Tribune, March 1st, 2012.