Hascol Reports Massive Losses of Over Rs. 25 Billion in 2019

Hascol Petroleum has finally announced its financial results for the year that ended December 31st, 2019.

The oil marketing company has incurred a whopping loss of Rs. 25.87 billion. The losses of the company increased by 117.66 times. The company had booked a loss of Rs. 218.37 million in 2018.

A.A.H Soomro, managing director at Khadim Ali Shah Bukhari Securities told ProPakistani,

The company was excessively leveraged, operationally, and financially. The FX volatility coupled with oil price volatility had distorted the shape of financial accounts altogether. With higher fixed costs and receding market share – to re-strategize – the losses were inevitable.

The economic downtrend and reduction in the overall market size have impacted the company’s profitability. During the period under review, the overall oil industry remained under pressure amid high-interest costs and low demand during the year.

The company’s net sales saw a massive decline of 33.32% to Rs. 156.33 billion as compared to Rs. 234.44 billion in 2018. As sales went low, the cost of sales was reduced by 32.35% to Rs. 157.95 billion as compared with Rs. 223.47 billion in 2018. Hascol reported a gross loss of Rs. 1.62 billion in 2019 as compared with a gross profit of Rs. 10.96 billion in 2018.

One of the major reasons for this decline in volumes was the shortage of working capital to procure the product.

The operating expenses of the company increased by 10.20% to Rs. 5.30 billion. The company reported an operating loss of Rs. 15.19 billion as compared to the operating profit of Rs. 5.58 billion.

Suban Iqbal, a Financial Analayst told ProPakistani,

Despite the change management in Hascol, the worst is not over yet as this loss is for 2019 and we have even witnessed plummet prices of Brent in 2020. I am expecting more losses in the upcoming quarters in form of exchange losses.

Another Right Issue?

Hascol has a reliance on the import of petroleum products and has a very minor allocation of local refineries. The exchange losses and inventory losses combined with the unperformed cargoes badly affected the working capital cycle of the company which resulted in short term borrowings, resulting in huge financial charges of Rs. 7.46 billion for 2019. The finance cost had increased by 4.6x as compared with 2018.

Major contributors to this extraordinary loss were lower gross profit due to dip in sales volume, inventory losses, and the substantial increase in finance cost due to a sharp rise in the discount rate by SBP in 2019, and higher average borrowing levels compared to the same period in 2018.

A.A.H Soomro said

There has been a massive change in the ownership structure also. With such erosion of equity, expect another rights issue.

The company booked exchange losses worth Rs. 2.39 billion as compared to Rs. 4.20 billion as the Rupee-US Dollar parity remained somehow stable in the fourth quarter of 2019.

Hascol had announced to issue the right shares during the last quarter of 2019. According to the details, it had raised Rs. 7.913 billion from corporate and individual shareholders against the issue size of Rs. 8 billion through a rights issue of shares.

It has reported a loss per share of Rs. 129.96 as compared to a loss per share of Rs. 1.10.

However, Hascol’s share at the PSX closed at Rs. 14.08, up by Rs. 0.22 or 1.59% with a turnover of 87.25 million shares on Friday.

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