Shell FY09 Review

Earnings tremendously boosted during FY09


Shell Pakistan (SHELL) has recently disclosed its result for the period of FY09. The company posted the NPAT of PKR 3.91 Billion during the period comparing to the NLAT of PKR 1.73 Billion during the same period last year where the EPS during the period stood at PKR 37.42 comparing to LPS of PKR 25.20 during the corresponding period last year mainly at the back of higher exchange and inventory losses during last year.

Higher margins squeezed the Cost of Sales

The company made the sale of PKR 156 Billion during the period comparing to PKR 163.15 Billion during the same period last year which translated 4%YoY decrease during the period. Conversely, the cost of sales nose-dived by 9%YoY to PKR 143.10 Billion during the period due to the drastic surge in crude oil as well refined product prices specially the HSD which permitted the company to incur higher inventory gains. Moreover, the gross profit enlarged by 100%YoY to PKR 12.9 Billion resulting higher margins during the period.

Other income surged by 28%YoY

The further support to the outshine performance was given by other income which surged by 28%YoY to PKR 917 Million against PKR 719 Million during the same period last year chiefly due to distribution of higher profits from Pak Arab Pipeline company Limited (PAPCO) to its associated companies.

TFC issuance led lower financial charges

The distribution and administrative expenses of the company upped during the period by 21%YoY to PKR 7.22 Billion comparing to PKR 5.98 Billion during the same period last year while the financial charges of the company turned down by 53%YoY to PKR 1.29 Billion from PKR 2.71 Billion during the same period last year mainly at the back decrease in interest rates. Moreover, the issuance of TFC of worth PKR 85 Billion by the GoP for resolving the circular debt also supported the decrease in financial charges during the period.

Looking Forward

I currently maintain ‘buy’ stance for the SHELL scrip by considering its current trading at FY10E of 7.50x where my target price for FY10 is PKR 390 per share.