Hascol raises Rs7.91b from corporate, retail shareholders

Move aimed at improving working capital, buying oil products

Salman Siddiqui January 16, 2020

KARACHI: Cash-strapped Hascol Petroleum has raised Rs7.91 billion from corporate and retail shareholders to improve working capital and procure products in a bid to revive oil sales operations at a time when the country is poised to step up economic activities.

“The funds raised will be used for working capital requirements of the company,” Hascol General Manager Legal and Company Secretary Zeeshanul Haq said in a recent statement sent to the Pakistan Stock Exchange (PSX).

“A more conservative approach has been taken in the import of products and higher reliance has been allocated to local availability of products from the refineries and less on imports,” CEO Saleem Butt said in the quarterly report issued in November 2019.

During the day, Hascol’s share price dropped 1.57%, or Rs0.41, and closed at Rs25.67 with trading in 1.36 million shares at the PSX.

To recall, a massive depreciation of the rupee against the dollar resulted in notable losses on the import of petroleum products by the oil marketing firms. Apart from that, the economic slowdown squeezed volumetric sales of these companies.

The two developments led to a significant contraction in the working capital of the companies, including Hascol.

The company reported a net loss of Rs13.87 billion in the nine-month period ended September 30, 2019 compared to a net profit of Rs1.50 billion in the same period of 2018.

The CEO said the shortage of working capital to procure products badly impacted volumetric sales. The third quarter (Jul-Sept) of 2019 presented a challenging pattern to the firm, which began in January 2019 and continued till the quarter under review.

Volumetric sales dropped sharply to 210,000 tons in the third quarter compared to 646,000 tons in the corresponding quarter of 2018, according to the report.

“The management expects that by the end of Q1 (Jan-Mar) 2020, the company will regain its market share, which once stood at 12%,” Butt said.

Earlier, Hascol Petroleum relied on the import of petroleum products and allocated a minor share to the local refineries.

“The exchange losses and the inventory losses combined with the unperformed cargoes in Q1 2019 have badly affected the working capital cycle, which resulted in short-term borrowing of Rs43 billion at the end of the period, resulting in huge financial charges of…Rs4.9 billion for overall nine months (Jan-Sept),” he said.

The short-term borrowing stood at Rs18.87 billion as of December 31, 2018.

The listed firm reported to the PSX on Wednesday that it issued 800 million right shares (more shares at a discounted price of Rs10 per share to the existing shareholders) to raise a total of Rs8 billion. It, however, appeared Rs86.63 million short of the target as of January 3.

The board of the company has approved a capital reorganisation programme and also approved medium and long-term plans for the company to overcome the challenges, Butt said in the report. 

Published in The Express Tribune, January 16th, 2020.

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