BOPL now has 86.98 percent ownership in the company. Byco Petroleum has one wholly owned subsidiary, Byco Terminals Pakistan Limited. Byco Petroleum Pakistan's operational refinery has the capacity of 35,000 barrels of crude oil per day to various petroleum products such as LPG, naphtha, motor gasoline, kerosene, jet fuel, HSD, furnace oil, HOBC.
FY12 Highlights Byco Petroleum (BPPL) primarily focuses on its two core activities of refining oil and marketing petroleum. FY12 was yet another year where the company was fraught with the financial crisis. During FY12, the company's refinery throughput was down massively by 72 percent due to working capital hold-ups. This occurred because of the inherent volatility of the crude oil prices and the depreciating currency. As a result, the refinery operating days were axed down drastically from 232 stream days in FY11 to only 58 in FY12, where only 0.95 million barrels of crude oil was processed compared to 3.48 million barrels in FY11.
During the period under review, some lift was received from the petroleum marketing business of the company where sale and margins increased during the latter half of FY12. Additionally, 219 new retail outlets were established all around the country.
Profitability FY12 It seems that suppressed margins have become a fate of the refining businesses in the country. This is one of the causes behind the dwindling profitability of Byco Petroleum Pakistan Limited as well.
During FY12, growth in revenues plunged and net sales nose-dived by almost 50 percent YoY. This was primarily due working capital issues that resulted in poor throughput, limited supplies and bumpy operations. The contraction in the top line amid supply constraints and working capital issues made gross profit enter the red zone once again during FY12, after two years of profits. The decline in selling and distribution and administrative expenses was thus a result of narrowing operational activity.
Though the company incurred lower costs and higher other income, the bottom line of the company shrank further, and Byco Petroleum Pakistan Limited suffered a net loss of Rs 1.7 billion, a sharp increase of 55 percent year on year. Financial charges continued to eat away the bottom line; they represent a 15 percent of the net revenues in FY12. Due to financial constraints, the company did not declare any dividends in FY12 or previously.
Profitability 1QFY13 FY13 started off a bit positively for Byco Petroleum Pakistan Limited as the top line gained its lost momentum once again. However, where net sales surged by 108 percent YoY during 1QFY13, the company's earnings could not turn green.
Although selling, distribution and administrative expenses remained significantly lower in 1QFY13 than similar period last year, and the throughput improved considerably by 189 percent YoY, the financial and working capital constraints eroded all the revenue gains.
Leverage and financial constraints During the fiscal year, the company continued to wrestle with working capital requirements. Overall the refining operations had remained under-utilised due to cash flow problems, for which the company had been negotiating with various lenders.
Byco Petroleum Pakistan Limited went under restructuring and deferment of its major lenders and creditors. During the period under review, it converted its Forced Payment Against Documents (FPAD) into running finance to overcome short term financing issues. The company has also approached various banks for a syndicate loans for working capital requirements and import of oil.
Up till FY11, the company had been bearing the entire burden of the transportation cost which should otherwise have been reimbursed to the company from the inland freight equalisation margin (IFEM) pool or the government. But the recent decision by the Ministry of Petroleum and Natural Resources for the recovery of crude transportation cost through IFEM pool should bode well for the financial position of the company. Meanwhile, the receivables from KESC and PSO totalling Rs 9.435 billion as at June 30, 2012, continue to stress the financial position of the company, making payments by the refinery unpredictable, and many at times delayed.
Outlook As for the overall environment of the refinery sector, the declining trend in refinery production and margins has been seen lately, owing to the volatility in the international oil market. The main reason behind depressed capacity utilisation and liquidity problems by the refineries is the shrinking gross refining margins and the inter-corporate circular debt.
As a result and owing to the southward trend in throughput, market shares of many refineries during FY12 receded. According to analysts, Byco's capacity utilisation during the current fiscal year has gone down by more than half of what it was similar period last year, due to which it has lost its market share significantly. With ambitious goal to become the largest oil company in the country, Byco has plans to list two more of its companies, Byco Oil Pakistan and Byco Terminal Pakistan, on KSE.
Besides setting up a petrochemical complex, the group has also embarked upon its plan to expand its production capacity through constructing what will be the single largest refinery in the country, being able to refine 120,000 barrels of oil per day. But financial hurdles have slowed the company's progress. The company has plans for restructuring of its existing syndicate bank liabilities into long term debt. Also, Byco has plans to further strengthen its petroleum marketing business by increasing focus on industrial consumer base that generally provides a cushion to the circular debt situation.
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BYCO PETROLEUM PAKISTAN LIMITED
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FY10 FY11 FY12
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Profitability
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Gross margin 1.6% 1.7% -8.8%
Operating margin -3.6% -4.8% -13.6%
Net margin -3.9% -5.1% -15.8%
ROE 38.4% -79.3% 270.0%
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Liquidity & Leverage
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Current Ratio 0.52 0.43 0.39
Quick/Acid Test 0.32 0.28 0.31
Interest Coverage 0.51 0.12 (0.08)
D/E (1.30) 1.42 (2.21)
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Activity/Turnover
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Inventory turnover 8.34 9.47 6.58
Debtors turnover 5.99 5.85 1.96
Creditors turnover 1.82 1.41 0.82
Total Assets turnover 1.28 1.09 0.5
Fixed Assets turnover 2.22 1.68 0.81
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Market
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EPS ( Rs per share) (4.12) (4.91) (3.15)
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Source: Company accounts