Attock Refinery registers 28.7% decline in earnings

Slump in global crude prices takes its toll on company during FY15

KARACHI: The fallout of the slump in international oil price on Pakistan’s corporate sector was felt on Thursday as two key listed companies, both part of the vertically integrated hydrocarbon mammoth Attock Group, posted declines in their profits.

Unpredictable crude oil price took its toll on Attock Refinery Limited (ARL), which saw a 28.67% decline in net profit in fiscal 2014-15. This would have been worse if not for cushion received from its investments in associated companies, according to the result release sent to the Karachi Stock Exchange.

ARL’s profit dropped to Rs1.8 billion from the Rs2.5 billion it netted in the previous year despite a 300% rise in its gross profit, which is mainly the result of better gross refining margin.

Refining margin is the difference between price of crude oil and refined petroleum products - both are linked to international markets, which leaves domestic refineries at mercy of regional demand and supply scenario.

But a significant jump in finance cost, which came to around Rs413 million against previous year’s paltry Rs1.7 million drained that gross profit, leaving it with an operational loss of Rs481 million.

While its other income of Rs1.44 billion, which is basically the return it earns on bank deposits, interest on late payment surcharge and a few other heads, helped stabilise the bottom line, it was still short of last year’s Rs1.76 billion.

ARL also received support through non-refinery income of Rs1.4 billion, which comes from investment in sister concerns like National Refinery Limited and Attock Petroleum Limited.

Pakistan Oilfields

Pakistan Oilfields, which brings in billions in cash for Attock Group, saw a 34% decline in its net profit that came to Rs8.45 billion from last year’s Rs12.88 billion.

POL’s fate is also closely linked to global oil price as government has benchmarked locally produced oil and gas with foreign markets.

While a drop in sales and subsequently the hit on net profit was expected, the company also shows unusual increase in exploration cost, which jumped to Rs4.7 billion from last year’s Rs1.7 billion.

The exploration cost includes the money spent on geological surveys and the expense of wells that have turned up dry. Details of this account will be shared once complete financial statements along with notes are released. 

Published in The Express Tribune, August 14^th, 2015.

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