ATRL 9MFY17 EPS Clocked in at PKR 39.74, up by 1.6x
Financial Performance 3QFY17
3QFY17 EPS of the company clocked in at PKR 7.63/share taking 9MFY17 EPS to PKR 39.74 against PKR 14.98/share in 9MFY16 (up by 1.65x), Increase in earnings was driven by higher volumetric sales on the back of the ARL upgradation project, recovery in crude oil prices and increased income from associated firms. Company also enjoyed tax credit relating to purchase of plant and machinery having an impact of PKR 9.77/share. The company has three major associated companies contributing a significant portion (51% of Net income) to company’s non-refinery earnings and stability to the bottom line (EPS impact PKR 20.10). Income from non refinery operations comprise of 51% of the total earnings in 9MFY17 (116% in SPLY) whereas, income from refinery operations is 49% of the total earnings (-16% in SPLY). The refinery throughput/sales was 12.77/12.50 mn barrels up by 39%/40% in 9MFY17 compared to 9MFY16. The finance cost surged to PKR 407.9 mn, up by 45% QoQ due to financial charges on debt acquired for the up-gradation project. Dividends distributed among shareholders have been maintained at PKR 5/share for last two years. ATRL is currently trading at a FY17 PER of 12.87x which makes it seem undervalued compared to industry’s PER of 14.68x.
About the company
Attock refinery, the oldest refinery in Pakistan, was incorporated on 8th November 1978 to take over the business of Attock oil company limited (AOL) relating to refining of crude oil and supplying of refined petroleum products. It got listed on PSX on 26th June, 1979. The company is the subsidiary of AOL (61% shareholding), and its ultimate parent is Bay View International group S.A.
The sales mix of the company consists of exports and local sales. Where Naphtha (flammable liquid mixture of hydrocarbons) accounts for 100% of exports by ATRL. The products of ARL include; Liquified Petroleum gas, Solvent oil, Naphtha, Premium motor gasoline, Mineral Turpentine tar, Jet fuel, Kerosene oil, High speed diesel, Light diesel oil, Jute batching oil, Furnace fuel oil, cutback asphalts, polymer modified bitumen and paving grade asphalts.
What’s more? Future outlook
Up-gradation of projects comprising of Pre-flash, Isomerization, DHDS unit, related ancillary units and expansion of captive power plant has been completed successfully in 1HYFY17. Company envisages to maintain smooth supply of increased volumes of value added and environmentally friendly products.
ATRL Synopsis ATRL: Future shaky due to PM policy despite operational excellence
Attock Refinery Limited, incorporated in Pakistan on November, 1978 is involved in the business of refining crude oil. The company’s product portfolio includes LPG, Solvent oil, Naphtha, Premium Motor Gasoline, and a few other products. After finally completing its greatest ever expansion/up-gradation on November 2016, the company now has a refining capacity of 53,400 bpd, a Diesel Hydro Desulphurization unit which has reduced Sulphur content in High Speed Diesel to meet Euro II specification, a captive power plant of 25.5 MW and other state of the art technology. The paid-up capital of the company is PKR 852.93 mn, with a current price of PKR 312.73, and a 52-week high and low of PKR 508.16 and PKR 312.73, respectively.
During FY17, PAT clocked in at PKR 5,413mn (EPS: PKR 63.47), an increase by 563% YoY, against PAT of PKR 816.35mn (EPS: PKR 9.57) primarily due to (i) an increase in revenue by 52%YoY, (ii) an improvement in GP margin by ~6.05pps where it recovered from a gross loss of PKR 901.8mn to a gross profit of PKR 4,332.9mn, (iii) an increase in other income by 54.65% and (iv) an non-refinery income increasing by 12.83%. Revenues of the company mainly improved due to an increase in Refinery’s production from supplying 1.584 mn tons of various petroleum products in FY16 to 2.162 mn tons in FY17, as capacity increased owing to the successful completion of the up-gradation projects. GP margins improved due to the upward trend in the international prices of petroleum products during the year, coupled with an improved efficiency of the plant as indicated by percentage of crude oil consumption to net sales, which decreased from 95.04% to 86.59%. Other income of the company increased mainly on account of an increase in income from bank deposits by 68.82% and due to rise in dividend income from associated companies by 12.83%. The finance cost of the company by increase 705.16% as a result of the cessation in capitalization of the finance cost upon completion of ARL Up-gradation Project and charging it to P&L. The amount capitalized this year was a mere PKR 265.04mn as compared to PKR 1,054.34 mn capitalized in FY16. The Company is currently trading at a P/E of 4.93x.
To further improve the product specifications and enhance value added products volume installation of other process units are being explored in order for the company to being able to produce 92 RON gasoline and diesel of Euro III and of Euro IV quality. A major challenge for the refinery industry came after the PM’s announcement to close down oil-based plants to facilitate maximum utilization of liquefied natural gas, which create the uncertainties in the industry as a whole. ATRL reported serious operational difficulties that would not only widespread shortages of petroleum products in the entire northern region but could also lead to forced closure of oil fields in Khyber Pakhtunkhwa and Pothwar region. ARL is currently running at a throughput of 70% handling around 40,000 barrels per day instead of 54,000 barrels per day, and same is the case with other refineries which have been forced to reduce their throughput to 70% of their capacity. ARL is claiming to shut-down if a favorable decision is not reached not only will the product availability be affected as for the other refineries but JP-1 supplies to Islamabad Airport will totally stop. Moreover, oil E&P companies would need to make other arrangements for their oil disposals.