Attock Group – the sole vertically integrated oil conglomerate of the country – posted hefty earnings on Monday, with all the four subsidiaries – exploration, petroleum, refining and cement production – all growing across the board.
Attock Group posted a total profit of Rs22.7 billion for the financial year ended 2012 excluding its privately-owned companies – Attock Hospital, Attock Information Technologies Services and Attock Gen. The results were accompanied by dividends for all the listed subsidiaries – Rs32.5 per share for Attock Petroleum, Attock Refinery Rs6 per share, National Refinery Rs 15 per share, Pakistan Oilfields Rs35 per share and Rs6 per share for Attock Cement.
The petroleum wing
Attock Petroleum‘s profits declined 3% to Rs4.12 billion for the year, attributable to a 77% increase in financial charges and decline in the company’s gross margins to 3% against 4.3% last year on the back of higher inventory losses.
Sales of the oil marketing company grew by 40% to Rs177 billion during the outgoing fiscal year. The growth was supported, in part, by an increase in volume and due to higher oil prices of Arab crude which surged 19% in the year under review, said a Global Capital report.
Volumes of high speed diesel, petrol and furnace oil have witnessed a climbing trend in the country since the government’s decision to increase oil marketing companies’ margins which resulted in diesel and petrol margins to rise by 12% and 4%, respectively.
On the other hand, finance costs were the major reason for the earnings to remain subdued as the company’s late payment charges to its refining counterpart – Attock Refinery – swelled by 77% to Rs1.2 billion.
The refinery wing
Attock Refinery profits were boosted 25% to Rs2.7 billion for the full year on the back of climbing non-refining income supported by the tweak of its product mix giving its profitable products petrol and diesel a higher weight-age.
Company’s earnings from its refining operation surged 3% to Rs1.1 billion attributable to a 53% increase in other operating income – higher dividend payout from its associate companies Attock Refinery and National Refinery – while performance of its core-refinery operation remained weak, according to a Topline Securities analyst report.
Gross profit witnessed an increase of 35% to Rs2 billion due to higher oil prices, however, the impact of healthy gross profit was diluted by a 22-times increase in its finance costs to Rs949 billion.
On the other side, National Refinery sales grew by 17% to Rs208 billion against Rs178 billion in the preceding year. However, the company was not able to sustain its healthy growth in sales and posted a profit of Rs2.6 billion, shrinking 60% from last year’s Rs6.6 billion.
The massive decline in earnings arose from reduction in refining margins to 2.7% against 6.7% previous year as its gross profits dipped 53% to Rs4.7 billion. Subdued performance in the company’s lubricant business because of stretched margins dented the overall refining margins.
Decline in performance quadrupled as the refiner faced further pressure from unbearably higher financial costs which jumped almost 800% to Rs1.3 billion in the outgoing fiscal year, attributable to rupee depreciation.
Attock Refinerty and National Refinery have been gaining market share in the industry, gaining the ground lost by their biggest competitor and market leader Pak Arab Refinery. National Refinery increased its market share from 18% to 21% while Attock Refinery’s share grew to from 18% to 19%.
The exploration wing
Pakistan Oilfields financial statement witnessed a 10% increase in profits to Rs11.9 billion. Higher sales were the major contributor to profits rising by 15% to Rs30.8 billion on the back of higher international oil prices. Moreover, exploration costs for the company posted a decline as no dry well was announced and healthy increase in other income arising from higher payout from its associate companies supported the growth in earnings.
There was also an increase in oil and gas production; up by 3% and 2% respectively, due to greater activity at the explorer’s Tal oil and gas block in Khyber-Pakhtunkhwa that compensated for its weak production figures from its current operating block.
The cement wing
Attock Cement’s profits solidified at Rs1.4 billion, climbing 110% from Rs0.7 billion posted in the preceding year. Sales provided the major boost surging 23% to Rs10.6 billion, the primary reason for this increase was massive rise in export retention prices up by 19% to Rs445 per bag. Other contributors included cost reduction due to lower coal prices in the international market coupled with new cost efficient plants resulting in stronger profit margins, persistent decline of 52% in financing costs supported the company in posting a profit, according to Summit Capital analyst report.
Published in The Express Tribune, September 18th, 2012.