November 16, 2021 (MLN): Hascol Petroleum Limited (HASCOL)’s net losses during CY20 shrank by 28.22% YoY to clock in at Rs25.24 billion (LPS: Rs25.39) compared to Rs35.17bn (LPS: Rs93.15) incurred in the same period last year.
Despite the notable decline of Rs10bn in losses throughout the year, the company is still incurring significant losses on the back of extreme volatility in international oil prices and demand shocks. Pakistan's petroleum sector also had to contend with large foreign exchange risks.
To note, Vitol, Hascol's major shareholder, increased its equity stake from 25% to 40% in order to support the company through this difficult period in 2020.
Going by the financial statement sent to PSX, the net revenue of the company dropped by 26.20% in CY2020 to stand at Rs114bn, compared to Rs155.68bn in 2019. The decline in revenues primarily due to lower sales volume amid lockdown imposed by the government to tackle the covid-19 situation during the period.
On the back of lower sales volume, the cost of sales plunged by around 31% during the period which led the gross losses of the company to clock in at Rs1.25bn, down by almost 90% YoY.
On the other side, the impairment losses on financial assets soared by 3.5x YoY to stand at Rs7.37bn, compared to Rs2.10bn in CY19.
Drilling further, the company witnessed a 62% YoY drop in exchange losses to Rs1.05bn and a 9.51% YoY dip in financial charges, which kept a lid on further addition of the losses.
On the expense side, the distribution and marketing expense of the company was reduced by 18.24% YoY in CY20. Meanwhile, the administrative expenses remained relatively flat during the year to record at Rs966 million.
Hascol paid Rs850.77mn in terms of taxation during 2020, up by 4% YoY, compared to Rs817.61mn paid in 2019.
It is pertinent to mention that company discovered inaccurate entries in its 2019 accounts and immediately reported these to its national regulators. It is subsequently restating its results from 2018 through 2020; the restated accounts show that Hascol posted a loss of Rs25.0 billion for CY20, a loss of Rs35.2 billion for CY19 (restated), and a loss of Rs3.4 billion for CY18 (restated).
In an effort to turn Hascol around and get it back on track to profitability, a new Chairman and CEO were appointed in 2020. Much of the management was replaced and the Board was reconstituted, as per Alan Duncan, Chairman of the company.
With regards to Covid-19, he said the collapse in demand caused by COVID-19 hit Hascol very hard. As a result in 2021, the company entered into negotiations with its banks to comprehensively restructure and refinance its liabilities, appointing leading global advisors, Alvarez & Marsal, to advise on the restructuring.
The Company has been in detailed discussions with the major banks on the restructuring in close coordination with the Board.
“We think that we are now in a position where we can soon announce a restructuring agreement which would include the restructuring of bank debt to long-term debt, additional equity being injected and the selling of non-core assets,” he said.
The aim of this restructuring is to provide the company the required liquidity to reach its potential and ensure that the liabilities are managed and paid down over a reasonable time period, thus restoring investor confidence.
Despite this loss and uncertainty, Vitol has continued to support Hascol through this turbulent period, on the understanding that HPL's other significant stakeholders, especially the banks, will restructure the company's liabilities, he added.
|
Consolidated Profit and Loss Account for the year ended December 31, 2020 ('000 Rupees) |
|||
|---|---|---|---|
|
|
Dec-20 |
Dec-19 |
% Change |
|
Sales – net |
134,030,080 |
181,658,808 |
-26.22% |
|
Sales tax |
(20,008,964) |
(26,139,174) |
-23.45% |
|
Net sales |
114,021,116 |
155,519,634 |
-26.68% |
|
Other revenue |
877,129 |
160,364 |
446.96% |
|
Net revenue |
114,898,245 |
155,679,998 |
-26.20% |
|
Cost of products sold |
(116,148,147) |
(167,974,976) |
-30.85% |
|
Gross loss |
(1,249,902) |
(12,294,978) |
-89.83% |
|
Distribution and marketing |
(2,971,604) |
(3,634,359) |
-18.24% |
|
Administrative |
(966,737) |
(974,683) |
-0.82% |
|
Impairment losses on financial asset |
(7,371,571) |
(2,099,444) |
251.12% |
|
Other expenses |
(2,841,284) |
(3,615,230) |
-21.41% |
|
Other income |
731,178 |
513,703 |
42.33% |
|
Operating (loss) / profit |
(14,669,920) |
(22,104,991) |
-33.64% |
|
Finance cost |
(8,648,810) |
(9,558,279) |
-9.51% |
|
Exchange loss – net |
(1,048,965) |
(2,745,743) |
-61.80% |
|
Share of profit from associates |
(22,121) |
61,062 |
-136.23% |
|
(Loss) / Profit before taxation |
(24,389,816) |
(34,347,951) |
-28.99% |
|
Taxation |
(850,771) |
(817,611) |
4.06% |
|
(Loss) / Profit for the period |
(25,240,587) |
(35,165,562) |
-28.22% |
|
(Loss) / Earnings per share – basic and diluted (Rupees) |
(25.39) |
(93.15) |
-72.74% |
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