In Focus: Result Review of ATRL (01122008)

ATRL has revealed depressing performance during its first quarter of FY09. Major reasons behind decline in bottom line earnings attributed due to increase in exchange loss coupled with substantial decline in net refinery margins during the period. In 1Q09 company has posted LAT of Rs870mn (LPS: Rs10.2) against PAT of Rs1,241mn (EPS: Rs14.55) in corresponding period last year.
Net refinery margins decline
Net refinery margins of the company declined to 0.6% from 7.4% during the period under review, owing to massive decline in oil prices coupled with inventory loss over same period last year.
Net exchange loss surged to Rs1.24bn
During 1Q09, company has registered exchange loss of Rs1.24bn owing to foreign currency transaction, which represent differential of prices calculated at initial exchange rate at the date of the transaction i.e. the rate when refineries enter into a future oil contract with third parity and actual payment made on the date of exchange rate. Company has booked exchange loss till 30 September, 2008 closing exchange rate.
However, as company revenues are realised on Import parity basis which accounts for exchange rate changes, net impact from exchange rate changes should be nil apart from the tax benefit that is realized due to categorisation of this cost under financial charges.
Other income increase by 173 percent
Other operating income of the company increased to Rs301mn from Rs110 in corresponding period last year, which was mainly backed by substantial increase in interest rate during the year due to income on bank deposit increased.
Dividend income would by realised in 2nd
quarter
During the quarter company had not realised dividend income of Rs505mn which was announced by NRL and APL in their end june-08 results, due to the reason ex-date of both companies arrives in the second quarter. It would be realised in second quarter FY09.
Outlook
Going forward, we expect refinery sector earnings would remain under pressure from the profitability front due to substantial expected inventory loss during the second quarter of current financial year owing to massive decline of 49.8 percent in international oil prices quarter to date has been registered. We maintain our cautious stance on overall refinery sector.