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SNGPL: Profits shrink 36% in FY19, as financial cost led by late payment surcharge heightens

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July 22, 2020 (MLN): Sui Northern Gas Pipelines Limited (SNGPL) has unveiled its the financial performance today for the FY19, as per which the net profits of the company have deteriorated by 36.38% YoY to Rs 7 billion, compared to the profits of Rs 11.12 billion earned in FY18.

Accordingly, the earnings per share dropped to Rs 11.16 from Rs 17.54 in FY18.

The decline in profitability was mainly due to significant rise in cost of gas sales and financial charges.

According the report by Arif Habib Limited, the rise in finance cost by 2.4x to Rs 25.7 billion in FY19 led primarily by recognition of late payment surcharge (LPS), expected at Rs18 billion in FY19.

To recall, the company had recognized late payment surcharge (LPS) of PKR 12mn as per 9MFY19 accounts. Albeit, as indicated in the DERR for FY21, LPS on account of state owned entities is a matter of circular debt and should be taken up with the Ministry of Energy, which gives enough reason to believe that it may have been disallowed in the FY19 FRR as well. Although, it appears that the company has decided to book it and may have given disclosure in contingencies for FY19, the report added.

According to the financial results issued by the company, its Gas sales improved by 53% YoY in FY19 which  according to report was due to 26% YoY volumetric growth in RLNG as well as hike in natural gas tariff during said year (after a hiatus of 5 years imposed by the prior government) and impact  of  higher oil  prices  and  PKR depreciation on imported  RLNG  prices.  However, this was slightly offset by lower domestic gas sales volumes (11% decline YoY expected).

In the finacial statement of the company, the auditor has also drawn attention to note 26.3 of the financial statement which explains that the “settlement of amount receivable from and payable to Government and certain government owned and other entities is dependent upon the resolution of inter-corporate circular debt and increase in gas prices by GoP. Hence, the audit report of the company is not modified in respect of the above-mentioned matter,” the Company's financial statement highlighted.

The report further stated that operating profit of the company witnessed a noteworthy growth of 40.5% in FY19 as the company has recognized an expected PKR 18 billion in allowable LPS; excluding this amount, the company would have posted a massive loss in FY19 due to higher unaccounted for gas (UFG) losses and less than anticipated addition in gross assets.

According to estimates mentioned in the report, the UFG losses are expected to have gone up from 10.9% in FY18 to nearly 11.9% in FY19 (UFG in 3QFY19 was set at 10.44%) while the weighted average cost of gas may have undergone a jump of up to 35%YoYduring FY19 (PKR 354/mmbtu in FY18) owed to higher oil prices and PKR depreciation.

This alongside hit of Rs1.5 billion in lieu of expected credit loss, are the main culprits behind loss of PKR 1.17/share booked by the company in 4QFY19.

Moreover, variable UFG can be assumed at similar levels to last year, assuming achievement of around 75% of Key Monitoring Indicators (total at 6.9%, including 5% fixed), the report cited.

With regards to taxes, the company booked effective taxation at 37% in FY19, compared to 28% in FY18.

Alongside financial results, the company also announced a final cash dividend of Rs 2.00 per share i.e. 20% for FY19. This was in addition to interim cash dividend already paid at Rs 1.5 per share i.e. 15% for the 1Q ended September 2018.

 

Financial Results for the year ended June 30th, 2019, ('000 Rupees)

 

2019

2018

% Change

Gas Sales

 684,625,881

 446,765,837

53.24%

Differential margins

 69,912,443

 57,016,553

22.62%

Cost of gas sales

 (718,742,315)

 (476,785,651)

50.75%

Gross profit

 35,796,009

 26,996,739

32.59%

Other operating income

 18,512,175

 14,159,487

30.74%

Selling cost

 (5,526,850)

 (5,282,717)

4.62%

Administrative expenses

 (7,306,251)

 (6,965,835)

4.89%

Other operating expenses

 (3,043,140)

 (2,626,118)

15.88%

Expected Credit Loss

 (1,505,879)

 –  

 

Operating profit

 36,926,064

 26,281,556

40.50%

Finance cost

 (25,776,847)

 (10,806,155)

138.54%

Profit before taxation

 11,149,217

 15,475,401

-27.96%

Taxation

 (4,073,383)

 (4,353,926)

-6.44%

Profit for the period

 7,075,834

 11,121,475

-36.38%

Earnings per share – basic and diluted (in Rs.)

 11.16

 17.54

-36.37%

 

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Posted on: 2020-07-22T18:23:00+05:00

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