Hascol Petroleum (HASCOL) after obtaining its OMC license in 2005, massively expanded its storage capacity and retail network becoming the second largest OMC Company in 2018. However, domestic macroeconomic environment and challenges relating to COVID-19 held back the progress of the company.

• The company had a network of 667 retail sites as at Dec 2021 out of which 19 are owned and operated by the company. Due to a challenging macro environment, company opened a total of 28 new pumps in FY19 and FY20 as compared to 100 new sites a year opened during FY16 to FY18.
• The company has initiated the revival program of the sites as around 50% of the sites has been revived and during the next few months operational issues of major number of sites will completely be addressed.
• To complete the 2021 annual accounts, tagging of the assets was completed by up to 91% with only few sites left.
• The management of the company is confident about HASCOL’s future outlook as it has an un-parallel credit support from its supplier VITOL which also has shareholding of 40% in the company. Further, restructuring plan of the company has been approved by board of directors of the company and has been offered to the banks and shall be implemented through a Scheme of Arrangement to be filed in Honorable High Court of Sindh.
• Since the formal agreement with the banks is yet to be signed, Auditors have expressed an adverse opinion on the going concern of the company in its 2021 accounts due to net equity being negative. However, 85% of the balance sheet has been cleared by external auditor and disclaimers have been removed.
• HASCOL reported operating profits of Rs1.2bn in 2021 as against operating loss of Rs13bn in 2020 due to lower provisions for impairment on financial assets, cost saving measures by the company and gross profits recorded during the year (vs. loss last year). Loss after tax stood at Rs7.6bn in 2021 vs. Rs23bn loss last year. This loss was due to huge finance and exchange losses incurred during the year. Post restructuring, management expects finance cost to subside going ahead.
• In 2021, sale volumes of the company were down 53% YoY due to shortage of working capital.
• Key points of restructuring plan proposed by the company includes 1) conversion of Rs20bn into long term loan with a grace period & waiver of interest charges, 2) reinstatement of Rs20bn of working capital lines to support oil imports, 3) Settlement of Rs14-15bn worth of banking loans at Net Present Value of the long term Loan option with upfront payments, and 4) Timely repayments of various finance leases.

Courtesy – Topline Securities