Petroleum products sale declines 6.1pc

LAHORE - Petroleum product sales have depicted a decline by 6.1% YoY for 5MFY09 mainly due to a decrease in Gasoline, Kerosene, LDO and Lube consumption, recording a decrease of 11.8%, 23.3%, 36.3% and 23.7%, respectively.
According to the latest official data released by the Oil Companies Advisory Committee (OCAC), all other POL products including High Speed Diesel and Furnace Oil recorded declines in consumption mainly on account of higher retail prices while, JP-1 volume increased by 1.2% YoY while other product volumes decreased by 18.0% YoY.
According to data, PSO outperformed the industry in terms of sales growth, posting a decrease of 4.9% YoY compared to the industry decline of 6.1% YoY. Its volume sales were 5.1mn tons for 5MFY09 compared to 5.4mn tons for the same period last year. Overall market share for PSO increased from 68.4% to 69.3%.
Shell under-performed the industry in volume sales. Volume growth posted by the company in 5MFY09 was -7.6% YoY, mainly due to decrease in its HSD and Mogas sales. Shell has gained market share in jet fuel substantially from 29.9% in 5MFY08 to 36.7% in 5MFY09.
Its markets shares increased in HSD, Kerosene and Lubes however, overall market share decreased marginally from 13.6% to 13.4%.
APL continues to under-perform the industry amidst increased competition in the OMC sector. APL experienced volume decrease of 11.6%YoY for 5MFY09 to 0.476mn tons from 0.538mn tons in 5MFY08. The company has seen excellent growth in its HSD and Kerosene segment, increasing by 43.0% and 22.2% YoY, respectively. However, its FO sales which represent more than 35% of the top line declined by 23.5% YoY, owing to increased competition. That is why FO market share also decreased from 7.4% to 5.9% leading to a decline in overall market share from 6.8% in 5MFY08 to 6.4% in 5MFY09.
It is worth mentioning that in a recent move, the government has increased OMC margins on Mogas and Kerosene from 3.5% to 4.0% and also increased HSD margins, putting a range of PKR1.35-1.50/liter derived from crude oil prices ranging from USD45 to USD 80/bbl.
Analysts from BMA Capital said that at current levels, they have a market-weight stance on the sector as fundamentals have weakened due to the circular debt issue which is estimated to be as high as PKR200bn. This has resulted in higher financial costs and cash flow problems, not to mention a slowdown in consumption patterns. They said that their top pick in the sector is APL with a fair value of PKR297 and potential upside of 78.2%.