Karachi May 2 2023: Cnergyico PK Limited management is in active discussions with its lenders to reach a solution to minimize the burden of high financial cost for better performance in ensuing periods.
The Company has done away with purchasing crude oil on deferred credit basis and is now striving hard to settle crude oil payment immediately upon crude cargo discharge. Also, the Management is in active discussions with its lenders to reach a solution to minimize the burden of high financial cost. With these steps, we are confident that the Company will start performing better in ensuing periods.
The factors which have caused a significant deterioration in Company’s performance in current period are exchange losses, highest ever policy rate and non availability of working capital.
A free fall of PKR against US$ which not only caused significant exchange losses but also affected the crude oil procurement capacity Vis-à-Vis refining throughput. Oil is the only sector in Pakistan which is not allowed to hedge against the currency fluctuations. The fast and continuous PKR depreciation and the Government’s inability to pass on the exchange impact on timely basis through product pricing have caused a major dent to every oil Company’s financial position. The current pricing formula of linking the exchange loss to Pakistan State Oil’s (PSO) actual exchange loss is not workable rather discriminatory as every Company has a different procurement and cash flow cycle and it is not possible for the industry to exactly replicate PSO’s procurement and sales process. As a result, most of the oil companies have been unable to get back the exchange losses incurred since the new formula has been introduced. Hence the Government should seriously look into this and provide a new mechanism which ensures both fair as well as timely recovery of exchange losses.
The highest ever policy rate by the central bank has also resulted in unbearable amount of finance cost to operate the business.
Non availability of additional working capital lines which are required to maintain reasonable production levels, due to the increased PKR / US$ parity. The Company requires working capital to procure about four parcels of crude oil in order to operate its refining on consistent basis. However, the current working capital facilities only allows procurement of less than two parcels of crude oil hence this non-availability affects the refining operations.
Due to the above mentioned factors, the Company incurred a Gross Loss of PKR 10 billion as compared to Gross Profit of PKR 5 billion in the same period last year and loss after tax of PKR 10 billion with basic I diluted loss per share of PKR 1.97 and PKR 1.91 respectively as compared to profit after tax of PKR 562 million with basic | diluted profit per share of PKR 0.11 and PKR 0.10 respectively in the same period last year.
The current period had remained extremely challenging for the Company’s financial position however, the Management is making strenuous efforts in multiple directions not only to contain the losses but also to minimize the operating costs thereby bringing the refinery throughputs back to the sustainable levels.
