Refineries continue to pile on losses

KARACHI: Refineries continue to suffer from the impact of the inter-corporate circular debt in the energy sector.

This was evident in the earnings announcements of two of the four refineries listed on the Karachi Stock Exchange, with Attock Refinery’s core operations showing a loss though Pakistan Refinery managed to curb its losses. Pakistan Refinery’s losses fell to Rs11.6 million for the first quarter of the calendar year, down from Rs197 million a year ago.

For the first nine months of the fiscal year ending June 30, 2010 the company’s losses narrowed to Rs1.87 billion, much smaller than the Rs3.67 billion during the comparable period last year.

The reduction in losses was attributed largely to lower inventory losses, as oil prices stabilised during the course of the current fiscal year. In addition, the company also had lower interest costs on the inter-corporate circular debt, though the company was able to achieve that reduction largely by reducing its sales.

Total revenues declined by 8.8% to Rs70.2 billion ($836 million) for the first three quarters of the current fiscal year. Attock Refinery, although managing to declare an overall profit, also suffered from a Rs72 million loss from its core refinery operations for the first quarter of the calendar year.

This is despite the fact that revenues jumped by nearly 78% to Rs23.4 billion ($278 million). For the first nine months of the fiscal year ending June 30 2010, however, the firm’s revenues increased by a relatively meagre 2.6% to Rs62.9 billion ($748 million). The firm was able to declare positive net income largely owing to the interest earned on its bank deposits.

According to its financial statements dated December 31 2009, the firm has over Rs9.6 billion ($115 million) in cash which has been placed in term deposits at commercial banks across the country.

In addition, the company earns interest on its share of the inter- corporate circular debt. Attock Refinery’s stock closed at Rs117.43 on Wednesday, down Rs2.86 or 2.4% in trading on the Karachi Stock Exchange.

Pakistan Refinery’s stock was up 0.26% to close at Rs108.15. In the coming week National Refinery, the largest refinery in the country, is expected to announce its earnings. Analysts expect its net income to rise by 98% to Rs1.7 billion, largely on the back of its lubricant sales. Byco Petroleum, the smallest refinery in the country, is expected to declare its quarterly financial results later in the month.