KARACHI: Byco Petroleum incurred a loss of Rs692 million in the July-September quarter, slightly more than what the company had to suffer in the same period of last year, it announced on Friday.
It could have been worse if the company had not taken benefit of Rs309 million in deferred tax – the tax liability that is offset against capital expenditure. The loss comes on the back of difficulties refineries and marketing companies face in predicting prices of petroleum products to avoid what is known as inventory losses.
The company’s bottom line did not improve despite a relatively better performance as gross margin at 3.12% was higher than last year’s 2.5%.
But it is still significantly lower than the gross margin of 5.13% – the highest in the industry – that it was able to maintain in the previous year, which ended in June 2015.
It has become apparent that Byco is undertaking cost-cutting measures as all its costs were down compared to last year. Byco Petroleum has 35,000 barrels-per-day refinery and a marketing company with over 260 retail outlets. It also owns a liquid terminal through a wholly owned subsidiary.
After six painful years, it finally turned corner in fiscal year 2014-15 with an operational profit of Rs2.9 billion, which came primarily on the back of better inventory management. Byco took a combination of steps to ensure that the inventory of oil was kept at the minimum to avoid the loss, which occurs when price goes down and inventory is worth less.
Despite paying Rs5 billion of loans in the past year, financial charges continued to eat into its operational income. In the July-September quarter of 2015-16, it recorded Rs545 million in financial charges.
Published in The Express Tribune, October 31st, 2015.
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