Attock Petroleum Ltd (APL) has posted a NPAT of PKR138mn (EPS PKR1.38), better than a loss of PKR710mn in 3QFY20 (nearly complete earnings erosion yoy). This is also better than our expectation of an LPS of PKR3.50. This takes FY20 earnings to PKR1.0bn (EPS PKR10.13), down 75% yoy, which is the worst profitability since FY05. APL also announced a final dividend of PKR4.0/sh (full year PKR9.0/sh) against our expectation of no payout.
Major deviations from our expectations emanated from: (i) evidently lower inventory losses, (ii) higher other income, and (iii) an impairment on holdings of group refineries.
Key Highlights for 4QFY20:
Net Sales fell 31% qoq, because of both lower volumes amid lockdown (in April-May) and up to 25% price cuts during the quarter (as international prices collapsed). The latter is also partly attributed for lower volumes because APL might have foregone some sales amid steep price reductions (to contain inventory losses). Hence its market share in HSD fell 4ppt from 11% to 7% during the quarter.
We were expecting a gross profit of PKR205mn with estimated inventory losses of PKR1.2bn, while the company has booked a GP of PKR955mn indicating lower-than-expected inventory losses. Note that, unlike in case of SHEL’s result, inventory losses have come in lower than expected. This could be because of much lower imports in case of APL.
Other income, up 29% qoq and 42% yoy, has come in better than expected potentially due to better cash generation. Note that until end-March 2020, APL had significantly depleted in cash and investments amid an aggressive capex program. We await the detailed accounts for more color on this.
APL has booked an impairment of c.PKR300mn on its holdings in group refineries, Attock Refinery and National Refinery.
This is a weak result but better than expected. Future quarters will likely show better profitability as the impact of Covid-19 on sales and prices have normalized to a great extent. We expect APL to improve on its market share in the coming months and await the detailed accounts to shed more light on the cash-flow trends. We are Neutral on APL with a June 2021 TP of PKR341/sh. (Intermarket Securities Limited)