HASCOL Faces Escalating Losses Despite Revenue Surge
In a concerning trend for Hascol Petroleum Limited (PSX: HASCOL), the company, which experienced a partial reduction in losses in 2021, finds itself grappling with mounting losses in the subsequent years. The latest financial reports reveal a staggering 90 percent year-on-year increase in the company's after-tax losses, reaching Rs14 billion in 2022. As of the first nine months of the calendar year 2023 (9MCY23), Hascol's after-tax losses stand at Rs13 billion, indicating a potential continuation of negative earnings into 2023, though possibly lower than the record-high loss in 2020, which amounted to Rs23 billion.
Karobar
The challenges faced by the oil marketing sector are evident in Hascol's financial struggles, exacerbated by a sharp devaluation of the currency, dwindling reserves, import curtailments, and surging inflation. Despite these challenges, Hascol managed an impressive 165 percent year-on-year increase in net sales during 9MCY23, attributed to a rise in both sales volume and sales price. The company achieved significant gross profit growth during this period, even in the face of higher costs of sales.
While Hascol successfully kept operating expenses in check, the positive momentum was dampened by a spike in finance costs and substantial exchange losses. The company incurred exchange losses of Rs6.36 billion, up by 96 percent year-on-year, due to currency devaluation and limited Letter of Credit (LC) lines. Coupled with a 33 percent increase in finance costs amid a higher interest rate environment, Hascol's earnings slipped into negative territory.
According to the company's 1QCY23 director's report, Hascol's corporate revival plan, focusing on the restructuring of its bank debt, is progressing as planned. The initiative aims to attract fresh equity from existing and potential investors. Notably, Taj Gasoline Limited, a private oil marketing company with 61 retail sites in Sindh, expressed interest in acquiring at least 41 percent shareholding of Hascol Petroleum Limited back in June. Hascol has granted approval for the due diligence process.
