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Shell Pakistan records net profit of Rs1.39bn in quarter ended March 2017

Shell is the number one worldwide lubricant supplier, delivering market-leading lubricants to clients in over 100 states. Shell Lubricants brings world-class technological insights to its products, offering customers the best formulations for their vehicles.

In Pakistan, Shell is the second largest OMC and employs 400 plus people directly and over 12,000 indirectly. Shell’s presence in the region dates back to 1899 when kerosene oil was imported from Azerbaijan into the subcontinent. Maintaining its legacy of 116 years with a portfolio of robust businesses and global product offering.

Shell Pakistan Limited (SPL) continues to meet the energy needs of Pakistan serving over a million clients across the country daily. Shell Pakistan is committed to making business plans that demonstrate economic, social and environmental responsibility. Over the eras, SPL has built a diverse Social Investment portfolio aligned with its business activities in the country and focused in four thematic regions- road safety, access to energy, enterprise generation and education.

The company experts calculated that the year 2016 has been a strong year in terms of presentation; with shell Pakistan delivering a reported profit after tax (PAT) of Rs6,764 million as against to Rs911 million of the corresponding period previous year. The management planned to recommend a final cash dividend of Rs28 per share, which is in addition to the earlier interim dividend of Rs6 per share.

Oil prices continued to fluctuate last year and the Company was constantly exposed to inventory losses driven by the price volatility and compliance to the requirement of sustaining strategic stock cover.

Shell Pakistan introduced Shell V-Power, the most technologically advanced fuel in Shell’s worldwide portfolio, for the Pakistani customer. During 2016, the company also launched Shell Advance Ultra, one of its top tier lubricants for motorcycles.

The management is confident that it would continue to use its worldwide technology leadership to bring higher quality and cleaner energy solutions to Pakistan along with improving customer experience across its network by superior customer service and value added propositions. Creating and sustaining a culture that focuses on its commitment to business principles, safety of people and protection of the environment is integral in 2016.

Shell Pakistan also drove excellence in operations while keeping costs at a manageable level also making important investments in both infrastructure and brand building to sustain competitive advantage.

The results of Shell Pakistan continue to be affected through the financial burden resulting from overdue ‘receivables’ from the Government of Pakistan. The Company did make some further recoveries of these dues in 2016; however, the company continues to incur financing cost on bank borrowings required to fund these receivables. As at 31st December 2016, total outstanding receivables reach at Rs 4,733 million. Main grade motor gasoline and diesel margins are fixed in Rupees per litre by the Government of Pakistan, and the recent initiative by the Government to revise margins based on CPI is a positive and welcome change.

In line with this, there was a small increase announced in July 2016; however, comparing the margins in the country with the available margins in the region, the management continues to advocate for an extra favorable revision.

Lower margin environment has a pessimistic impact on Company’s profitability. Shell Pakistan continues to advocate and push for further deregulation of the downstream value chain in the country to drive for more investments in the downstream sector.

The Government of Pakistan made it possible for the Oil Marketing Companies (OMCs) to enhance main grade motor gasoline RON specifications from 87 to 92, and the forthcoming upgradation of Diesel to EURO II specifications are optimistic steps towards offering Pakistani customers with better quality fuels.

Presently SPL has recorded a net profit of Rs1.39 billion in the quarter ended March 2017 as against to just Rs21 million in the corresponding period of last year. Earnings per share (EPS) grew to Rs13.05 in the January to March quarter as against to Rs0.20 in the same period of previous year. The KSE 100-share Index ended at 48,743, up 1,140 points or 2.39 percent.

Shell Pakistan’s share price ended at Rs634.69, up 3 percent. As of March 31, 2017, total outstanding receivables of Shell Pakistan reached at Rs4.64 billion.

Shell is working to empower women in the rural agricultural belt of the country by offering them with much needed sustainable livelihood generation opportunities, while meeting some domestic energy needs also. One thousand women across rural Punjab and Sindh have been identified as potential entrepreneurs through Shell Tameer’s partnership with CARE International. These women will be trained over 3 years in 300 nontraditional enterprises, which include an alternative energy access stream of enterprises counting fuel supply chain micro enterprises and solar product distributors.

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