Earnings Report /
Pakistan

Attock Petroleum: 1QFY23 Review - Strong earnings despite tough macro environment

  • APL posted strong earnings for 1QFY23 despite of poor volumetric sales and high inventory losses compared to 4QFY22

  • Effective tax rate dropped significantly to 34% in 1Q due to lower super tax as compared to 4QFY22.

  • Deregulation of POL prices in the long run bodes well for APL as it will shield the company from inventory losses.

Intermarket Securities
25 October 2022

APL announced a PAT of PKR4.29bn (EPS: PKR 34.48) in the first quarter of FY23. The earnings are down 41% QoQ owing to inventory losses to the tune of PKR1.5bn, (IMS estimate). Continuous decline in ex-refinery prices of petroleum products have led to weaker operating earnings during 1QFY23.

Key highlights:

  • Topline fell by a mere 4% QoQ as petroleum product prices remained higher during the quarter, despite weak volumetric sales.

  • During this quarter sales fell by 25.8% to 436ktons where major decline was seen in FO sales (-36% QoQ to 121k tons) followed by HSD (-31% QoQ to 138k tons) and MS (-16% QoQ to 160k tons).

  • Gross profitability was cut in half QoQ to PKR 10.0bn owing to inventory losses during the period.

  • The higher cost of doing business due to persistent inflation has started to manifest itself in the admin expenses that have grown by 124% YoY to PKR 3.7bn

  • Net financial income for the quarter jumped 166% YoY because of higher interest rates compared to last year.

  • Significant loss from NRL was overcome by ATRL’s contribution to associate earnings during the quarter. Earnings from associates declined by 75% QoQ, owing NRL's loss in 1QFY23.

  • Effective tax rate dropped significantly to 34% in 1Q owing to lower super tax as compared to 4QFY22.

APL has been able to post a strong result despite the challenging environment, as volumetric sales have contracted due to high POL prices. Also, the decline in ex-refinery prices have resulted in inventory losses. In the long-run, the deregulation of POL product prices is likely to bode well for the OMC’s as it will shield the sector from inventory losses. We reiterate our liking for APL based on our TP of PKR363/share.