National Refinery’s profits hurt by lube business
National Refinery – part of the refinery wing of the sole vertically integrated oil conglomerate of the country Attock Group – posted a profit of Rs802 million for the first quarter of the fiscal year 2012-13, down 3% compared to Rs828 million in the corresponding quarter of the preceding year.
The company’s net sales, however, jumped 17.1% to Rs44 billion.
Despite higher oil prices, gross margins remained stagnant at 4%, while gross profits rose to Rs1.6 billion, according to Topline Securities analyst Nauman Khan.
The refinery’s healthy volumes, impact of increase in its fuel segment margins on the back of strong gross refinery margins and inventory gains supported profitability.
However, the company was not able to sustain the healthy growth in sales as profitability was diluted by decrease in lubricant segment’s profitability. Subdued performance in the company’s lubricant business because of stretched margins dented overall refining margins.
The lubricant segment faced adverse operating environment due to subdued international lube margins and suppressed demand for the derivative as well of asphalt locally.
Analysts estimated lube profits to dive 60-65% to Rs400 million from Rs1.1 billion last year whereas fuel refinery, which registered a loss of Rs297 million previous year, was likely to post a profit of Rs400 million.
Other major factor which pulled down earnings was a 34% decline in other income to Rs313 million.
Attock Refinery 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% in fiscal 2012.
Published in The Express Tribune, October 20th, 2012.
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