Byco Petroleum Pakistan Limited has named reasons that influenced its refinery sector. According to the Company quarterly detailed report released today, the current quarter (July – Sept) witnessed severe Pak Rupee depreciation of 8.5%, resulting in exchange losses to all the import-based industries and refineries are no exception.

Although the exchange movement is included in the government’s ex-refinery price, the significant Rupee depreciation and rising oil prices created substantial stress on the working capital requirements. The free fall of the rupee is continuing to date, and however, we expect this will come to a rest subject to the IMF package.

Besides, through Finance Act, 2021, the government has imposed a sales tax @17% on crude oil, whereas sales tax on regulated finished products (i.e. Motor Spirit and High-Speed Diesel) has been reduced to 6% 10%, respectively. This anomaly has put additional cash flow stress on the refineries by creating significant sales tax refunds. Along with all other refineries, we have highlighted this with the government and look forward to an early correction to the same, directors pointed out in the report.

However, the margin realisation remained low due to the reduction in our refineries throughput on account of the severe monsoon witnessed during the quarter.

The Company recorded net sales of PKR 34.4 billion compared to PKR 33.4 billion in the same period last year and earned a gross profit of PKR 751 million during the quarter compared to PKR 1.7 billion last year. Operating expenses remained in line. However, due to the lower gross profit realisation, the Company incurred a loss after tax of PKR 673 million with a basic loss per share of Rs. 0.13 (Diluted: 0.12) as compared to profit after tax of PKR 453 million with basic/diluted earnings per share of Rs. 0.09 in the same period last year.

While the overall consumption of petroleum products picked up locally and internationally, which led to improved margins on MS and HSD, the reason for incurring loss is primarily attributed to lower refineries throughput due to the severity of monsoon in the current quarter, significant Rupee devaluation as explained above, and the anomaly of sales tax refunds. The situation is expected to improve from next quarter as we expect healthy refinery margins with consistent product demand, including Furnace Oil.