SHEL conducted its analyst briefing recently to brief investors about 1HCY24 results and shed light on the future outlook:

·         Company’s NPAT stood at PkR1.5bn (EPS: PkR6.16) during 1HCY24, down by 64%YoY, while revenues stood modestly higher by 4%YoY, respectively. Management attributed the significant drop in profitability on a YoY basis to a one-time exchange gain on a credit note payable to its parent company, Shell plc.

·         Shell Pakistan Ltd, 77.42% owned by Shell plc, has been in the subcontinent since the pre-partition era as Bumrah Shell stations. The company operates over 640 retail sites nationwide, a dedicated lubricant blending plant, and holds a 26% stake in the white-oil pipeline operated by PAPCO.

·         Management stated that there has been relative stability in the domestic exchange rate, as opposed to the volatile movements witnessed in CY23, alongside receding inflationary pressures. Consequently, these improvements have provided relief to the OMC sector.

· Regarding the potential share purchase agreement by Wafi Energy, management clarified that Wafi Energy is acquiring SPL’s entire footprint in the country, including physical assets (outlets and lubricant plant), alongside 26% shareholding in the white-oil pipeline.

· The company’s brand name, i.e. SHELL, would remain in existence through brand licensing agreements. Wafi Energy already operates a similar license-market arrangement with Shell in KSA, hence they have a background of experience in this area.

·         Regarding recent industry volume trends, management stated that the sharp decline in sales observed during CY23 has largely been arrested in CY24. However, a recent drop in fuel prices may support the recovery of volumes moving forward.

·         Management mentioned that the anticipated CPI-based indexation on OMC margins for FY24 remains due.

· Regarding the company’s higher-than-average trade payables owed to the parent company, management clarified that the figures on the financial statements are related to other group overheads and do not pertain to fuel purchases.

AKD Research