Shell Pakistan Limited (SPL), a subsidiary of Shell Petroleum Company Limited, announced an 86% decline in profits for the second quarter ending June 30. They reported earnings of Rs1.13 billion as opposed to over Rs8.3 billion recorded for last year’s similar period.
EARNINGS PER SHARE SLUMP RADICALLY
SHEL PAKISTAN reported an earnings per share (EPS) for its latest quarter at Rs4.69 compared with an EPS of Rs38.79 during the corresponding period in 2012 (SPLY). This significant decline is evidence of their difficult financial conditions during this timeframe.
REVENUE INCREASES WHILE GROSS PROFIT DECLINES
SHEL PAKISTAN saw net revenue increase nearly 9 percent year-on-year to Rs112.45 billion from Rs103.46 billion during SPLY; however, its gross profit saw a modest decrease from this figure (Rs5.95 billion vs R5.99 billion respectively), likely due to an over 10% rise in costs that offset any revenue gains.
REDUCE OPERATING EXPENSES AND GENERATE INCOME.
SHEL PAKISTAN successfully reduced its operating expenses by 12% during Q2 FY24, amounting to Rs6.42 billion, due largely to a significant decrease in other expenses which decreased by 74% year-on-year compared with Rs1.81 billion reported for SPLY. Unfortunately, however, other income fell significantly to Rs2.79 billion from Rs11.74 billion reported previously.
OPERATING PROFIT AND SHARE PRICE IMPACT ANALYSIS
Operating profit suffered, falling to Rs2.32 billion for Q2 FY24 from Rs10.4 billion during the same quarter last year. Following these financial results being released, SHEL PAKISTAN share prices experienced a minor dip of Re0.63, or 0.44% and settled at Rs143.52 per share.
PARENT COMPANY DIVESTMENT PLAN
Shell Pakistan announced in July 2015 that Shell Petroleum Company Limited intended to divest its shareholdings in SHEL PAKISTAN. This decision has altered market perception of the company and continues to shape expectations about its future direction.
LAST YEAR
On June 14, 2023, Shell Pakistan Limited (SPL) announced that its parent company, Shell Petroleum Company Limited (SPCo), had intended to sell its shareholding in SPL. This significant development was communicated through a notice to the Pakistan Stock Exchange (PSX).
NOTICE TO PSX CONFIRMED DIVESTMENT PLANS
The official notice from SPL stated, “We hereby inform you that the Board of Directors of Shell Pakistan Limited (SPL), in a meeting of its Board held on June 14, 2023, had been notified by The Shell Petroleum Company Limited (SPCo) of its intent to sell its shareholding in SPL.” The sale was subject to a targeted sales process, execution of binding documentation, and the necessary regulatory approvals.
NO IMPACT ON CURRENT OPERATIONS
Despite the announcement, SPL had assured that this development would not affect its ongoing business operations. The company emphasized, “SPL remains committed to continuing to deliver safe and reliable operations for our customers and partners.”
SPL’S POSITION IN THE GLOBAL ENERGY SECTOR
SPL was a subsidiary of Shell Petroleum Company Limited, UK, which in turn was a subsidiary of Royal Dutch Shell Plc, one of the world’s leading energy and petrochemical giants. SPL was engaged in marketing petroleum products, compressed natural gas (CNG), and various lubricating oils in Pakistan.
RECENT FINANCIAL STRUGGLES
The announcement had come on the heels of a challenging financial quarter for SPL. In the first quarter of 2023, SPL reported a loss of Rs4.6 billion, a stark contrast to the Rs2 billion profit in the same period the previous year. The financial downturn was attributed to the severe devaluation of the Pakistani Rupee, rising inflation, and macroeconomic instability.
