BOSICOR PAKISTAN LIMITED

MARIAM NASIR
Manager Research

Nov 05 - 11, 2007

Bosicor which stands for "Bulk Ocean Shipping, Investments and Crude Oil Refining" was incorporated as a public limited company in 1995. The company was granted certificate of commencement of business in March 1995. The company is engaged in the production and sale of petroleum/oil products. Shares of the company are listed on Karachi Stock Exchange, Lahore Stock Exchange and Islamabad Stock Exchange. The company has witnessed tough times since its inception and managed to record profits of Rs.111m and Rs.197m in FY05 and FY06 respectively. However the same didn't result in FY07 and the resultant was a loss of Rs.681m mainly because of volatile refining margins.

REVAMP OF DISTILLATION UNIT

The company is in the process of increasing its distillation unit capacity from 18,000bpd to 30,000bpd. Although the company has projected to be completed well earlier however the same didn't result because of delay in the delivery of necessary equipment. Finally the revamp is expected to come online by the end of 2Q/FY08. This revamp will reduce the cost of the company and hence will result in better margins.

COMPETITION FOR OIL MARKETING COMPANIES

The company which planned to give head-on competition to organizations like Pakistan State Oil, Shell Pakistan and Caltex has finally entered into the oil marketing business. Although the scale of the launch is low compared to others but gradually the units would be launched. Currently the company has installed two fuel stations at Hazro Punjab and Sukkur Sindh. The target set for the next fiscal year is to add 50 more units to cater to the masses.

INCREMENTAL FACILITIES

The company has currently storage and issues hence it in the process of constructing an additional storage tank with a combined capacity of 126ktons. The project work in progressing smoothly and hence it is expected to be completed by June 2008. It will enable the company to store more which will reduce the cost of the company in terms of handling and carrying.

ASSOCIATES TO SUPPORT THE BOTTOM-LINE

The company has injected a sum of Rs.150m in two of its associated namely Bosicor Oil Pakistan Limited (BOPL) and Bosicor Chemical Pakistan Limited (BCPL). Both the entities would be roundly in the same chain of business and hence will support the Bosicor Pakistan Limited as it would bring the synergies and increase the scope of operations. BOPL will be setting up an oil refinery with a capacity of 115kbpd. On the other hand BCPL will be setting up an aromatic plant with a capacity of 17.1kbpd. Both the companies would be entering into the Sub sea pipeline project which is expected to commence very sooner before the end of current calendar year.

FINANCIAL PERFORMANCE OF THE COMPANY

Company operations remained better as it refinery operations increased to 15,355 bpd as compared 15,218 bpd. This resulted in sales revenue growth of 8% to Rs.19bn as against Rs.18bn last year. However cost rose by 12% which reduced margins of the company. The refining margins continued to remain under pressure and the company incurred a gross loss of Rs72m as compared to Rs.624m earned in the same period last year. Financial charges and other income also impacted negatively on the bottom-line. Financial charges increased by 35% whereas other income earned through return on cash balances declined by 54%. During the year under review, company's net earning dropped by 446% to a loss of Rs.681m.

(YEAR ENDING JUNE)

FY06

FY07

CHG %

Net Sales Revenue

17,929

19,329

8%

Cost of Sales

17,304

19,401

12%

Gross Profit

625

(72)

-112%

Sell & Dist Expense

123

196

60%

Operating Profit

502

(269)

-154%

Other Income

101

46

-54%

Financial & Other Charges

301

406

35%

Profit Before Taxation

301

(628)

-308%

Taxation

104

53

-49%

Profit After Taxation

197

(681)

-446%

FUTURE OUTLOOK

Projects mentioned earlier required significant loan for which the company has acquired a syndicated loan of Rs.2.6bn. Over the long term period the company will be adding an isomerization unit. This unit would be utilized for upgrading and converting Light Naphtha into environmental friendly and low Benzene Motor Gasoline. Gasoline obtained from Isomerization can be exported to neighboring countries at a price significantly higher than export Naptha consumed in local market. The company will austerely pursue its aim to deliver long term project to add value, improve and enhance supply chain advantage and come up with synergies.