Oil sales down in April 2011

LAHORE: During 10MFY11, oils sales in Pakistan posted a decline of 4% mainly due to lower consumption of High Speed Diesel (HSD) and Furnace Oil (FO) which together contributes 85% of overall oil consumption in Pakistan. This is primarily attributed to the devastating floods that reduced trade activity culminating into 8% decline in diesel sales while temporary closure of few big IPPs reduced FO consumption by 3%.

On MoM basis, April 2011 numbers witness a decline of 11% as compared to March primarily on account of decline in FO sales by 12% MoM. Liquidity crunch created supply constrain as the sector opted out to avoid imports. Subsequently, country’s reliance on imported fuel declined by a massive 16pps to only 59% in April as compared to 75% in March.

Lesser availability of FO on account of subdued imports by the sector rendered into decline in FO sales in April 2011 as compared to the pervious month. During Apr-11, FO sales stood at 733k tons showing a decline of 12% as against Mar-11. Petrol sales decline by 1% MoM, but witness a massive uptick of 16% YoY to stand at 196k tons in Apr-11. HSD, primarily used in transportation activities, sales declined by 3% to stand at 569k tons in April.

During 10MFY11, impact of floods continued to reflect on consumption number. For the period volumetric sales declined by 4% to stand at 16.0mn tons as compared to 16.7mn tons in the same period last year. FO and HSD sales declined by 3% and 9%, respectively, while Petrol sales surged by 18% on account of prevalent gas curtailment which reduced CNG consumption.

Company wise data shows that PSO (Pakistan State Oil) was the only OMCs to be adversely affected by the floods, while SHELL (Shell Pakistan) and APL (Attock Petroleum) showed improved performance. PSO sales decline by 12%, while SHELL and APL surged by 15% each.

With partial clearance of circular debt, roping-in this debt to approx. Rs90bn, have eased the liquidity pressure particularly for PSO. Therefore, going forward we expect an up-tick in volumetric sales. However, we maintain Market-weight stance on OMCs but have now liking towards PSO. The scrip is currently trading at FY11F and FY12E PE of 6.4x and 4.3x, respectively.

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