Corporate results: Byco’s loss reduces, clocks in at Rs1.4 billion during Oct-Dec 2014

Records 34% reduction over the same period of previous year.

KARACHI:

Better management of cash flows and quick crude-to-petrol conversion seems to be working for Byco Petroleum, which reported on Tuesday improvement in consolidated financial results for October-December 2014 quarter.

Even though the integrated downstream company booked a loss of Rs1.4 billion, that was a 34% reduction in what it incurred in the same period a year ago.

Result could have been better if not for high financial charges and exchange loss, which scarred the bottom line for the period.

Byco is one of the casualties of the global financial turmoil of 2008 that wiped off the entire equity and plunged it into a quagmire of debt and accumulated losses.



Analysts say that Byco has been able to enhance the throughput of its 35,000 barrels per day (BPD) refinery in the past year.

“But while sales might have improved, the costs have also gone up,” said Yawaruz Zaman, head of research at Shajar Capital.

“This is especially evident in the high cost of sales. Byco seems to have inefficiencies in plant and equipment relative to other refineries and they need to fix that.”

Byco Petroleum’s financial statements also include the sales and earnings of its petroleum marketing business, which has over 250 retail outlets and an oil terminal.

The company does not give a breakup of revenue and income on the basis of its operations with quarterly results but as per financial results of last year refining operations makes up for at least 55% of the revenue.

Byco had accumulated losses of Rs27 billion up till September 2014 while its long-term debt was Rs21 billion.

In the backdrop of such a situation, auditors have raised doubt about the company’s ability to continue as a going concern. But management feels that a host of initiatives like increase in throughput of the refinery and fuel supply arrangements in various sectors will help it cut cost.

Byco’s share, which was down 1.2% to Rs9.29 on Tuesday, still lures investors, Zaman says.

“The potential for an upside in stock price is great. Look at the price of all the other oil and gas shares and you’ll see this is the cheapest.”

Together with its 120,000 bpd refinery, which is not listed, Byco has Pakistan’s largest refining capacity.

It took a severe financial hit in 2008-09 as crude oil price plunged after hitting a historic high. Thousands of tons oil stock which it carried in tanks lost value within days.

It has taken more than four years for Byco to come out of the shock.

Byco International Incorporated (BII) Chairman Amir Abbasscisy told The Express Tribune in an interview last year that management now follows a strict policy of keeping inventory of both crude oil and petroleum products at a minimum.

“We don’t keep stock of more than five days. Our philosophy for the last one-and-a-half years has been to churn out as quickly as we can sell,” he said.

Shifting oil business dynamics has brought new challenges for refiners especially when it comes to predicting price oil. Similarly, they don’t want to overextend credit with sale of petroleum products.

What a refiner can do is run a plant efficiently and that is possible only when he collects cash on time, Abbasscisy has said.

Published in The Express Tribune, February 25^th,  2015.

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