Shell Pakistan Ltd. 1HCY09 Review

Shell logs PKR 1.01 Billion profits for 1HCY09
Shell Pakistan Limited (SHELL) has announced its 1HCY09 result on August 19, 2009. The company posted its NPAT of PKR 1.01 Billion a decline of 71%YoY from PKR 3.45 Billion last year during the same period. The Sales were PKR 82 Billion in 1HCY09 compare to PKR 88.06 Billion in 1HCY08 which again represented a decline by 7%YoY compare to the corresponding year. The EPS were again low by 71% to PKR 14.80 per share compare to the same period last year. The foremost issues who impaired the company’s performance were decline in POL products volume, higher financing cost and lower inventory gains.
Better Picture in 1HCY08
The company had better outlook in 1HCY08 compare to 1HCY09. This was mainly in result of a huge inventory gain due to sharp increase in oil prices in the global market last year, the reason why we have seen a decline in Gross Profit Margin from 10.67% to 6.35% comparing to 1HCY08. The profit before tax also shrank by 82% to PKR 962 Million against the PKR 5,380 Million during the same period last year in return of the same reason.
Apart from the above mentioned reasoning, it should be pertinent to note that on a normalized basis after excluding the impact of inventory gains of 2008, the company’s performance shown improvement in terms of profitability regardless of the economic and security challenges faced by the country. Moreover, the company still has unsettled government receivables of approximately PKR 4 Billion including PDC and Sales Tax refunds which allowed the company to soar its short term financing by 65.5% to PKR 902 Million in 1HCY09 from PKR 545 Million in the corresponding period so that it should complete its business cycle. Additionally, one of the elements which supported earnings was chiefly due to the tax reversal of PKR 51.75 Million for the period under review.
Looking Forward
Since the oil prices are moving up on global basis and the Board of Directors has approved an interim dividend for the year ending December 31, 2009 at the rate of PKR 8 per share so we recommend buying its stock.