Shell suffers Rs224 million loses
Saturday, April 21, 2012: Shell petroleum’s transpired from making profits to a loss in the first quarter of 2012 amid swelling government dues and lower profit margins.
The government does not provide adequate returns to fully cover the cost of operations and financing, Shell Pakistan Chairman Sarim Sheikh wrote in a post-result review note sent to the Karachi Stock Exchange (KSE-100 index) on
Saturday. Margins of diesel and petrol are regulated and fixed by the government.
Shell, which is the country’s second largest oil marketing company posted a net loss of Rs224 million in January to March 2012 against net profit of Rs758 million in the same period a year ago.
Government receivables decreased during the quarter but still stood at a massive Rs12.6 billion on account of tax refunds and outstanding fuel subsidies. The company recovered Rs1.1 billion during the period under review.
“Since the inception of these receivables over the last three years, the delay in settlement have cost the company more than Rs5 billion in interest costs,” said Sheikh.
The government had issued term finance certificates of Rs136 billion to clear the outstanding debt of power companies at the start of the quarter, however, these have quickly piled up once again.
The country’s largest oil marketing company Pakistan State Oil earlier this week also sought Rs40 billion to make payments, showing the dire situation of the industry.
Sales declined 11% to Rs57.8 billion in the three months ended March 31.
The company also cited minimum tax on turnover as another reason for the poor performance. The current rising price environment has led to increased tax liability with no corresponding increase in margin resulting in effective
rate of corporate tax of more than 600% and unfairly eroding profit growth, said Sheikh.