Corporate results: Shell Pakistan suffers loss of Rs753m

Inventory loss main reason for earnings dilution.

KARACHI: The impact of persistent depression in the oil market and the commercial need to keep pumps running took its toll on Shell Pakistan Limited (SPL) as it announced a net loss of Rs753 million in the first three months of 2015.

The results of the third (January-March) quarter, released on Thursday, are a far cry from a profit of Rs511 million it reported in the same period of last year.

SPL – Pakistan’s second largest petroleum marketing company – faced a similar dilemma in the previous quarter when most of its earnings for the year were diluted by inventory losses.

Inventory loss occurs when the value of petroleum products stored in tanks erodes in tandem with a dip in the international crude oil price.

While SPL’s gross profit was down 39% mainly due to inventory loss, increase in distribution and marketing expenses added to the erosion of bottom-line.

SPL has launched a new lubricant and has been spending money on its promotion.

The company has around 786 retail outlets. Its main business is import and distribution of petroleum products, primarily high speed diesel and petrol. The fixed margin of marketing companies on the sale of petroleum products is deemed too low by the industry.

Published in The Express Tribune, April 24^th,  2015.

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