Shell Pakistan Limited, a key player in the oil marketing sector and a subsidiary of the global energy giant Shell Petroleum Company Limited, showcased a remarkable financial performance in 2023. The company overturned its previous year’s losses to post a significant profit after tax of Rs6.21 billion, marking a dramatic improvement from a loss of Rs82.31 million in 2022.
Shell is currently trading in the Pakistan Stock Market at Rs 151.57 with a gain of over 4% for the day at 3:00 pm (PST).
FINANCIAL PERFORMANCE AT A GLANCE
The transformation in SHELL’s fortunes is primarily attributed to a notable surge in its other income, as detailed in a recent announcement to the Pakistan Stock Exchange (PSX). Despite facing a challenging economic environment, Shell Pakistan not only improved its profitability but also managed to report an earnings per share (EPS) of Rs27.34 in 2023, a stark contrast to a loss per share of Re0.34 in the same period last year.
| Description | Dec 23 | Dec 22 | % Change |
|---|---|---|---|
| Sales – Net | 431,650,228 | 412,699,059 | 4.59% |
| Cost of sales | (400,881,843) | (379,106,173) | 5.74% |
| Gross Profit / (Loss) | 30,768,385 | 33,592,886 | -8.41% |
| Distribution and marketing expenses | (11,372,968) | (10,281,744) | 10.61% |
| Administrative expenses | (9,917,545) | (7,390,232) | 34.20% |
| Share of profit of associate – net of tax | 718,867 | 998,905 | -28.03% |
| Other Income | 13,338,912 | 1,739,760 | 666.71% |
| Other Expenses | (13,789,957) | (14,386,220) | -4.14% |
| Finance Cost | (2,499,147) | (1,358,252) | 84.00% |
| Profit before taxation | 7,246,547 | 2,915,103 | 148.59% |
| Taxation | (1,395,154) | (2,987,416) | -53.30% |
| Net profit / (loss) for the period | 5,851,393 | (72,313) | – |
| Basic earnings/ (loss) per share | 27.34 | (0.34) | – |
DIVIDENDS AND REVENUE GROWTH
Amidst its financial turnaround, SHELL announced a nil final cash dividend, maintaining an interim cash dividend of Rs5 per share for the nine months ended September 30, 2023. This decision reflects the company’s strategic approach towards capital allocation and shareholder value enhancement.
The company witnessed a modest increase in net revenue, rising to Rs431.65 billion, up nearly 5% from Rs412.69 billion in the same period last year. This revenue growth, however, was offset by an over 8% decline in gross profit, which totaled Rs30.77 billion in 2023, down from Rs33.59 billion previously.
COSTS AND OTHER INCOME EXPANSION
The decrease in gross profit was largely due to an increase in the cost of products sold, which rose by 6% year-on-year to Rs400.88 billion. On the brighter side, Shell Pakistan’s ‘other income’ experienced an extraordinary 666% increase, reaching Rs9.03 billion in 2023 compared to Rs3.27 billion in the same period last year.
This surge in other income significantly contributed to the company posting an operating profit of Rs9.03 billion in 2023, reversing the loss of Rs3.27 billion recorded in the previous year.
FINANCIAL STRATEGY AND MARKET CHALLENGES
The period also saw Shell Pakistan’s finance costs escalate to Rs2.5 billion, up by over 84% from Rs1.36 billion, reflecting the impact of rising interest rates on the company’s financial expenses. This increase underscores the broader economic challenges and the need for strategic financial management in navigating the volatile market conditions.
LOOKING AHEAD
The announcement last July about Shell’s parent company’s intention to sell its shareholding in SPL adds another layer of intrigue to the company’s future direction and strategy in Pakistan’s energy market. As SPL navigates through these changes, its recent financial performance signals resilience and a potential for sustained growth amidst evolving market dynamics.
Shell Pakistan Limited’s turnaround from a loss to a substantial profit in 2023 highlights the company’s robust operational and financial management strategies. As SPL continues to adapt and thrive, its journey offers valuable insights into resilience and strategic adaptation in the competitive energy sector.
