Byco branched out into the petroleum marketing business in 2008 and the segment has grown phenomenally over the past six years. Now the company enjoys presence in both mid-stream and downstream sector of the oil business. In addition, a new company Byco Oil Pakistan Limited was set up in 2008 for setting up 120,000 barrels a day refinery. This new refinery was completed in December 2012 and is the largest refinery in the country.
The private equity group Abraaj Capital has also invested in the company after realising the potential the company offers. In 2012, Byco completed the single point mooring project. This floating port is the first of its kind in the country and has a capacity to handle very large petroleum cargo vessels.
Currently the following companies come under the Byco umbrella: Byco Oil Pakistan Limited (BOPL), Byco Petroleum Pakistan Limited (BPPL) and Byco Terminals Pakistan Limited (BTPL). BPPL also approved a potential merger of the company and its wholly owned subsidiary, Byco Terminals Pakistan Limited, with and into Byco Oil Pakistan Limited (BOPL) which has been given the go ahead by the shareholders as well the Sindh High Court (SHC) with the written order pending.
Historical performance The past two years have been extremely difficult for the entire oil sector, particularly refineries which have been impacted by a sharp decline and crude and product prices. FY15 saw oil prices drop by roughly 55 percent amidst the global supply glut in the oil markets. Therefore, although Byco managed to increase sales volume by an impressive 49 percent, the company suffered at the expense of low oil prices.
During the year Byco also focused on expanding its oil marketing business by establishing 11 new retail outlets at strategic locations and has now more than 260 retail outlets in Pakistan. The government also revised margins for Oil Marketing Companies (OMCs) which improved the profitability of this segment of BYCO.
Net sales for the year amounted to Rs 94.8 billion, 2 percent higher from last year despite a 55 percent fall in prices because of the focus on high margin products. Byco earned a gross profit of Rs 4.9 billion in FY15 as compared to a gross profit of Rs 409 million last year. This substantial increase in gross profit could be attributed to remarkable increase in sales volume coupled with increased level of production which resulted in high absorption rate of manufacturing overheads and improved marketing margins. Overall it was a good year given the past lacklustre performance and the company is expected to build upon this year of growth.
Moving to FY16, oil prices further dipped roughly 23 percent which saw domestic fuel consumption increase considerably with 22 percent growth s recorded in the consumption of Motor Spirit (MS) and 4 percent Growth in High Speed Diesel (HSD). So although the company increased sales volume by 27 percent during FY16 it was offset by the dip in oil prices. According to the Director's report the company pursued growth in higher margin products by making products available to the customers through its own refinery as well as product import via its Single Point Mooring (SPM) which aided in effective cost and time management.
Byco Terminals Pakistan Limited (BPTL) The Single Point Mooring (SPM) project of Byco Petroleum Limited's subsidiary company, Byco Terminals Pakistan Limited (BTPL), saw 41 vessels berthed on SPM compared to 29 vessels last year which demonstrate contribution of SPM in facilitating the quickest and economical oil import.
One reason is that the company has started importing all petroleum products through the SPM facility for eventual supply to marketing company. BTPL incurred a net loss of Rs 280 million as compared to 480 million in 2015 which could be chiefly attributable to charges on long term loan. The company expects to recover these losses in the future with the increased utilisation of SPM facility and storage terminals. The Oil and Gas Regulatory Authority (OGRA) has also provided its formal approval for import of white oil petroleum products through SPM.
Byco Isomerisation Pakistan (Private) Limited The Isomerisation unit operated for a short period during FY16 of the year and remained closed for the major part due to the fire at the parent company's refinery. BIPL incurred a net loss of Rs 913 million in FY16 primarily due to the depreciation charge of Rs 868 million on fixed assets according to the Director's report.
Snapshot 1HFY17
The company registered a 9 percent increase in sales revenue during the period primarily due to the improved margin between petroleum products and crude oil cost. BPPL also emphasised on import and sale of better margin products such as light and middle distillate variants. The administrative expense of the company was effectively managed and selling expenses decreased by 37 percent on account of reduction in volumetric sales on delivered basis. Overall the company saw an almost 400 percent increase in its profit after tax as compared to 1HFY16.
Stock performance BPPL underperformed the benchmark KSE-100 index throughout the past year with the greatest divergence occurring in the past 3 months which comes on the back of the persistent pressure on crude oil prices in the global markets. The stock saw a 52-week high of Rs 25.70 and a 52-week low of 16.18 with 977.86 million shares outstanding.
Future Outlook
The proposed merger is expected to bring some positive synergies which include a larger asset base, economies of scale and increase in risk absorption capacity. The larger asset bases will allow the company to undertake larger investments and expand growth prospects with a potentially lower cost of fund raising. The merger will strengthen BOPL's activities by integrating upstream and midstream segments allowing for expansion after consolidation and improving economics of scale. The larger size of the merged entity as well as the integration is expected to increase the merged entity's risk absorption capacity, thereby enhancing the capacity to manage the potential risks arising out of adverse and uncertain operating environments.
The amalgamations will make single corporate and tax reporting possible for the merged entity and avoid duplication of work and higher costs. Last year, in order to improve the capital structure of the company, the company had approved the proposal to sell Isomerisation unit to a wholly owned subsidiary company namely Byco Isomerisation Pakistan (Private) Limited (BIPL).
Now, with the inauguration of Byco Oil Pakistan Limited's refinery, the company hopes the Isomerisation unit will bring substantial increase in margin and saving in transportation and storage cost of naphtha. Byco has diversified its portfolio from mid-stream to downstream and is on a path to financial recovery. With the imminent merger, it is likely that profitable times for the company are on the horizon.
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Byco Petroleum Limited: Pattern of shareholding Percentage share held
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Directors, CEO & their spouse/minor children 0
Associated Companies and Related Parties 80.84
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Of which
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Byco Oil Pakistan Limited 80.84
Banks, DFI's, NBFIs, insurance/takaful firms, modarabas & pension Fund 0.25
Mutual Funds 0.12
General public 17.25
Others 1.53
Total 100
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Source: Company accounts
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BYCO PETROLEUM PAKISTAN LIMITED
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Rs (Bn) 2011 2012 2013 2014 2015 2016
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Net sales 38.9 19.5 66.2 92.5 94.8 79.4
Cost of sales 38.2 21.2 66.1 92.1 89.9 73.4
Gross profit/(loss) 0.8 -1.7 0.1 0.4 4.9 6.0
Operating profit/(loss) 0.2 -0.2 0.8 -2.7 2.9 3.3
Financial charges 2.1 3.0 2.6 2.8 2.8 2.3
Profit before taxation -1.9 -3.2 -2.1 -6.3 -0.2 0.7
Profit after taxation -2.0 -3.1 -2.3 -5.9 0.1 1.4
(Loss)/earnings per share (Rs) (4.91) (3.15) (2.31) (6.07) 0.07 1.40
Gross profit margin (%) 1.99 -8.82 0.12 0.45 5.13 7.57
Net profit margin (%) -5.10 -15.82 -3.41 -6.42 0.08 1.72
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Source: Company accounts.
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