ARL expected to barely break even

Non-refining operations likely to lift earnings.

KARACHI:

Attock Refinery Limited is expected to barely break even during the third quarter of the current fiscal year, with earnings per share of Rs1.7 from non-refining operations.

According to an Elixir Securities research note, weekly pricing on local crude procurement and a steep rise in oil prices during the quarter will negatively affect Attock Refinery’s earnings. Additionally, removal of incidentals could take the negative impact to Rs4.3 per share on full-year earnings.

Even an optimistic assumption of break even in refining operations yields Rs1.74 as earnings per share for the third quarter, primarily from half-yearly dividends announced by Attock Petroleum Limited, which shall be booked in the quarter.

In the second quarter, oil prices jumped 14 per cent, compared with three per cent in the first quarter. The refinery’s inventory gains are more unpredictable than its peers, since it refines local crude, priced weekly, resulting in up to five price revisions in a month.

Attock Refinery’s earnings for the first half of the fiscal year magnified significantly to Rs1.5 billion, representing earnings per share of Rs17.61, from a loss of Rs209 million in the corresponding period of the preceding year. Earnings per share in the second quarter jumped 58 per cent compared with the previous quarter, being recorded at Rs10.78, mainly propelled by strong non-refinery income.

Even though the company reported profit after tax of Rs918 million in the second quarter, earnings per share from refining operations fell 61 per cent to Rs1.79. A decline in the second quarter refining earning could be attributed to the absence of inventory gain, which had propelled earnings in the first quarter, the note added.

Published in The Express Tribune, April 6^th,  2011.