SHEL conducted its analyst briefing today to brief investors about 9MCY23 results and shed light on the future outlook:

· To note, the company’s EPS and revenues stood at PkR30.14 and PkR321bn, higher by 125%YoY and 6%YoY, respectively. The company acclaimed major reasons for the said rise in profitability due to higher product margins alongside waiver of technical service fees (and other costs) by Shell PLC during the period.

· With regards to the potential share purchase agreement by Wafi group, management clarified that Wafi group is acquiring the entire SPL’s footprint in the country, including physical assets (outlets and lubricant plant) alongside 26% shareholding in Pak-Arab Pipeline Company.

· The company’s brand name, i.e. SHELL, would remain in existence through brand licensing agreements. Shell Plc’s (parent) decision to divest is consistent with its business strategy to simplify its portfolio.

· Wafi is a sub-group of Asyad Holding’s private equity division based in Saudi Arabia. The potential acquirer has several subsidiaries and JVs operating across diverse sectors. Management expects the SPA to be completed by 4QCY24 after all regulatory approvals.

· Management stated that there has been some stability in the domestic exchange rate, as opposed to the highly volatile movements witnessed pre-1QCY23, alongside slightly receding inflationary pressures. Consequently, the modest improvements in macros have relieved players in the OMC sector.

· Management expects a recovery in industry volumes during the current fiscal year; however, it is still below levels witnessed pre-COVID. Sales of lubricants in the industry declined in line with the fall seen in the fuel segment. However, management refused to share any specifics. Despite challenges, the company remains the market leader in the lubricant business.

· Regarding exchange losses, management stated that stakeholders, including OGRA, are engaged in discussions for a better mechanism (reimbursement of PSO’s FX loss exposure). Management hopes FX loss adjustment exposures will be extended over the 30-day LC period (PSO’s standard) to mitigate currency volatility impacts in the future.

Courtesy – AKD Research