SSGC’s financial performance for the nine months ending March 2025 (9MFY25) presents a mixed picture, characterized by stable gross margins but significantly lower bottom-line profitability due to regulatory adjustments and a challenging macroeconomic environment. Net sales for 9MFY25 remained virtually flat at PKR 347.95bn, a negligible 0.2% increase from PKR 347.14bn in 9MFY24. Despite flat sales, the cost of sales was controlled effectively, leading to a 5% YoY increase in Gross Profit to PKR 8.05bn (from PKR 7.68bn).
PBT witnessed a sharp decline of 28% YoY, falling to PKR 8.56bn from PKR 11.87bn. This decline is primarily attributed to two key factors: Other Income decreased significantly by 17% (PKR 3.87bn) to PKR 19bn from PKR 22.87bn. This is a major drag on profitability. The company absorbed a UFG disallowance of PKR 10.94bn (a 30% increase from PKR 8.41bn in the prior period), directly impacting the bottom line as per OGRA’s determination.
PAT saw a milder decline of 4% YoY to PKR 7.49bn. This was due to a 74% reduction in the taxation charge to PKR 1.07bn (from PKR 4.05bn), a result of lower taxable profits. The Q3FY25 results highlight accelerating challenges. Net profit nosedived 67% YoY to PKR 437mn, with EPS falling to PKR 0.50 from PKR 1.49.
Revenue Requirement & Regulatory Framework
SSGC’s profitability is intrinsically linked to the regulatory framework established by OGRA.
The company’s revenue is based on a guaranteed return on its asset base. The Return on Average Net Operating Fixed Assets was set at 20.97% for this period, a reduction from 23.45% in March 2024. This lower approved return rate directly curtails revenue potential.
The bottom line is severely impacted by OGRA’s efficiency benchmarks:
UFG Disallowance: The single largest hit, amounting to PKR 10.94bn.
IFRS-9 Provisioning: An additional disallowance of PKR 0.393mn for impaired debt provisions under international accounting standards, which differ from OGRA’s methodology.
Cost Inflation Pressure: The Weighted Average Cost of Gas (WACOG), a pass-through cost, increased by 10.87% to Rs. 1,107.18 per MMBTU, exacerbating the company’s cash flow challenges in a high-inflation environment.
Capital Expenditures & Infrastructure Development
SSGC is executing a robust capital expenditure program of PKR 16bn focused on network integrity, expansion, and efficiency. SSGC’s financial performance for the nine months ending March 2025 (9MFY25) shows stable gross margins but a significant drop in profitability. Net sales remained flat at PKR 347.95bn, a slight 0.2% increase from PKR 347.14bn in 9MFY24. Gross profit rose by 5% YoY to PKR 8.05bn, but profit before tax (PBT) declined 28% to PKR 8.56bn, largely due to a 17% drop in other income and a UFG disallowance of PKR 10.94bn.
Profit after tax (PAT) fell 4% YoY to PKR 7.49bn, aided by a reduction in the taxation charge. Q3FY25 saw net profit plummet 67% YoY to PKR 437mn, with EPS falling to PKR 0.50 from PKR 1.49.
Regulatory challenges, such as a lower approved return on assets and cost inflation, are impacting profitability. SSGC is executing a PKR 16bn capital expenditure program focused on network integrity and efficiency. Key projects include the Jhal Magsi Gas Pipeline and ambitious network rehabilitation efforts.
Operationally, SSGC is addressing inefficiencies through focused UFG reduction, improved performance in specific regions, and anti-theft measures. Despite strong operational initiatives, profitability is hindered by regulatory disallowances and declining income, emphasizing the need for favorable regulatory outcomes.
Jhal Magsi Gas Pipeline (Work in Progress): This key project involves the construction of a 98.5 km pipeline to inject ~15 MMSCFD of indigenous gas. As of March 31, 2025, 82 km (83% of the total length) has been completed, demonstrating strong project execution.
Network Rehabilitation: The company has set an ambitious annual target to rehabilitate 2,500 km of its distribution network. By the end of Q3FY25, it has successfully rehabilitated 1,625 km, achieving 65% of its yearly goal. This is a critical investment for reducing UFG and improving safety.
Technological Investments: The installation of meters at all Town Border Stations (TBSs) has been completed, enabling granular UFG analysis. Furthermore, the deployment of a state-of-the-art SCADA system across 50 TBS sites represents a significant technological leap for remote operational control.
Operational Performance & Key Strengths
SSGC’s operational metrics reveal a company actively combating inefficiencies and strengthening its core business.
Focused UFG Reduction Efforts: While the overall UFG percentage increased to 12.86% (from 11.29%), this was due to a decline in gas purchase volumes. Crucially, the absolute volume of UFG lost decreased to 23.69 BCF from 24.43 BCF.
More importantly, regional performance shows remarkable improvement:
Karachi: UFG consistently maintained in single digits at 8.79%.
Sindh (ex-Karachi): UFG maintained at approximately 10.01%.
Balochistan: A dramatic ~800 basis points reduction to 30.78% from 38.75% last year.
Anti-Theft Measures: A rigorous campaign led to 72,830 theft disconnections, impacting 148,578 households using unauthorized gas. This directly protects revenue and improves system safety.
Load Management Efficiency: Through technical pressure management, SSGC is sparing 30-35 MMSCFD of gas in Karachi, which is being redirected to the high-value industrial sector, optimizing revenue and supporting the national economy.
SSGC is demonstrating strong operational execution in network management, theft control, and strategic projects. However, its financial performance is being overshadowed by substantial regulatory disallowances and a decline in other income. The company’s ability to translate its operational improvements into sustained financial growth is contingent upon supportive regulatory outcomes, particularly a resolution to the Balochistan UFG situation and a stable macroeconomic environment. The management’s focus on technological enhancement and cost efficiency is a critical strength that will serve the company well in navigating these challenges.
Courtesy- AHCML Research
