Financial Performance for the first half of 2019 has been released by Shell Pakistan Limited and according to reports it has incurred a loss of Rs. 1.44 billion. Although, Rs 1.60 billion profit was realized last year.
During the 2nd quarter, the company posted a loss of Rs. 1.70 billion as compared with a profit of Rs. 247 million in the same quarter last year.
However, the net sales of the company grew by 12.50% to Rs. 101.14 billion as compared with Rs. 89.90 billion in the corresponding period. The cost of sales was Rs. 92.72 billion, up by 13.61%, which took the gross profit to Rs. 8.41 billion.
Even though Shell Pakistan was able to maintain and grow its market share in a declining industry, its overall financial results were impacted by some of the macro-economic challenges being faced by the country, primarily due to the devaluation of the rupee and volatility in international oil prices.
In this industry, a large percentage of costs and payables are denominated in foreign currency, thus rupee devaluation had an impact on the cost base and, in turn, on financial performance.
Currency depreciation wreaked havoc on the company’s earnings which were dragged down by a major increase in exchange losses (part of the other expenses)
The company’s other expenses increased by 71%, to Rs. 3.2 billion from Rs. 1.8 billion due to the exchange losses and admin expenses were increased by 17.30% which resulted in an operating loss of Rs. 259.1 million. The rise in finance cost and increase in non-core expenses made a huge dent in the earnings of the company.
