OMCs see 39% YoY profit surge

KARACHI:

Pakistan’s Oil Marketing Companies (OMC) sector recorded a 39% year-on-year (YoY) increase in earnings, reaching Rs18.2 billion in the first half of fiscal year 2025 (1HFY25), compared to Rs13.2 billion in the same period last year. This growth was driven by a reduction in finance costs and lower effective taxation.

However, sector sales declined by 11% YoY to Rs2.1 trillion, largely due to a drop in motor spirit (MS), commonly known as petrol, and high-speed diesel (HSD), also known as diesel, retail prices by 10% and 9% YoY, respectively. Despite the revenue dip, OMC sales volumes grew by 4% YoY, with notable increases in MS (+5%) and HSD (+10%) dispatches.

In terms of individual company performance, Pakistan State Oil (PSO)’s earnings tripled YoY, while Attock Petroleum Limited (APL) and WAFI (formerly Shell Pakistan Limited) saw a decline in profitability. Hi-Tech Lubricants Limited (HTL) reduced its losses significantly, supported by strong lubricant and petroleum sales growth.

Looking ahead, the government is expected to revise OMC margins, potentially boosting sector earnings. Additionally, falling international petroleum prices and improving macroeconomic conditions are likely to sustain demand in the coming months.

“The OMC sector recorded a 39% YoY surge in earnings during 1HFY25, reaching Rs18.2 billion compared to Rs13.2 billion in SPLY,” reported Muhammad Iqbal Jawaid and Menka Kirpalani of AHL in a research report.

The OMC sector recorded a 39% YoY increase in earnings during 1HFY25, reaching Rs18.2 billion compared to Rs13.2 billion in the same period last year. However, sector sales declined by 11% YoY to Rs2.1 trillion due to a reduction in fuel prices, but OMC sales volumes increased, said the report.

HTL’s lubricant segment exhibited strong growth, increasing by 41% YoY in 1HFY25. Meanwhile, PSO’s re-gasified liquefied natural gas (RLNG) revenue grew 5% YoY, supported by an 11% YoY rise in cargo handling (55 cargoes versus 49 in the same period last year). The sector’s gross margins declined slightly to 3.4% in 1HFY25 from 3.5% in SPLY, mainly due to inventory losses resulting from lower ex-refinery prices. However, the finance cost of the sector dropped by 22% YoY, driven by lower interest rates and a reduction in short-term borrowings by PSO and HTL. The sector also benefited from a lower effective tax rate of 53% in 1HFY25 compared to 67% in 1HFY24.

In terms of market share, PSO’s share in petroleum sales shrank to 41% in February 2025 (from 51% in February 2024), while its 8MFY25 market share stood at 45%. Meanwhile, Gas and Oil Pakistan Limited’s share increased to 13% in February 2025, up from 3% in February 2024, reflecting an expanding footprint in the sector.

Among individual company performances, PSO’s earnings tripled YoY, settling at Rs23.81 per share in 1HFY25, mainly due to lower finance costs and reduced short-term borrowings. However, its total petroleum sales declined by 4% YoY, with MS, HSD, and furnace oil (FO) sales falling by 5%, 5%, and 29% YoY, respectively. APL’s profitability dropped by 34% YoY, with its earnings reaching Rs41.18 per share, as its petroleum sales declined by 15% YoY due to a 2% and 60% YoY reduction in MS and FO dispatches, respectively. Additionally, APL’s finance costs increased by 29% YoY due to higher unwinding of lease liabilities.

WAFI reported profitability of Rs9.25 per share in 1HFY25, a 51% YoY decline, despite a 4% and 2% YoY increase in MS and HSD dispatches, respectively. The company’s other income grew by 35% YoY, supported by higher cash balances, but a taxation charge of Rs1.7 billion (compared to a tax reversal of Rs1.1 billion in SPLY) impacted its bottom line. Meanwhile, HTL reduced its losses, reporting a loss of Rs0.3 per share in 1HFY25, compared to a loss of Rs2.5 per share in SPLY. The company’s revenues surged by 74% YoY, driven by growth in its lubricant and petroleum product portfolio, while localised blending of raw materials improved its operating profits.

Looking ahead, international petroleum prices are expected to decline further, which could lead to lower domestic fuel prices in the coming quarters. Additionally, PSO’s trade debt from Sui Northern Gas Pipelines Limited (SNGPL) stood at Rs262 billion in December 2024, down from Rs275 billion in September 2024, as the government explores measures to resolve the circular debt issue. The government is also expected to revise OMC margins, which could boost sector earnings. Moreover, improving macroeconomic conditions and rising consumer car financing are likely to drive higher demand for petroleum products, while further declines in MS and HSD prices could sustain market momentum in the near future.