October 05, 2021 (MLN): Sui Northern Gas Pipelines Ltd (SNGP), a utility gas company, has shown a 55% surge in profits that clocked in at Rs8.94 billion (EPS: Rs14.09) during 9MFY21 against a net profit of Rs5.78bn (EPS: Rs9.11) reported in the corresponding period last fiscal year.
The increase in profitability was mainly due to a significant reduction in expected credit loss and lower finance costs.
According to the financial results sent to Exchange, the sales revenue experienced a decline of 12% YoY despite a 19% YoY jump in RLNG offtake. As per the report by Arif Habib Ltd (AHL), the augmented RLNG sales were offset by lower natural gas dispatches (depleting reserves) as well as a 27% dip in imported price in lieu of dwindling International Brent Oil price (down by 15% YoY) to USD 49.48/bbl vs. USD 58.40/bbl in SPLY amid drastic erosion in aggregate demand post-outbreak of COVID-19.
Despite substantial reduction in UFG, the operating profit of the company inched lower by 5% YoY to Rs 41.6bn in 9MFY21 as the company saw other allowable expenses last year that determined in the last quarter.
Notably, finance costs have been slashed by 19% YoY in 9MFY21 to Rs28.8bn on an account of a 625bps cut in the policy rate by SBP to support businesses amid pandemic. This provided a cushion to the company’s earnings. The other highlight is the colossal reduction in expected credit loss which showed a decline of 99% YoY to Rs14mn in 9MFY21 against Rs1.80bn recorded in 9MFY20.
While on the tax front, the company booked effective taxation at 30% during 9MFY21.
The Oil and Gas Regulatory Authority (OGRA) recently released a note on its updated stance on RLNG UFG whereby it believes that i) both companies SNGP and SSGC do not have a separate mechanism to measure UFG losses for natural gas and RLNG, ii) gas utilities arbitrarily allocate natural gas and RLNG to their consumers, and iii) both SNGP and SSGC do not maintain any mechanisms to effectively evaluate ringfencing on their respective distribution networks.
Therefore, OGRA has initiated a process through international auditors, to determine actual UFG losses for indigenous gas, as well as imported RLNG. Until proper ringfencing is done, OGRA stated that it will only allow UFG up to the benchmark for natural gas (6.3% for distribution). However, the Lahore High Court has already passed a decision in favor of the domestic gas utilities regarding the same issue (19th Jul’21), allowing complete RLNG costs to be passed on under the ringfencing mechanism. Therefore, this too may be suspended by the Court, said AHL report.
|
Financial Results for the Nine months ended March 31st, 2021 (‘000 Rupees) |
|||
|---|---|---|---|
|
Mar-21 |
Mar-20 |
% Change |
|
| Revenue from contracts with customers-Gas Sales |
445,853,462 |
507,909,842 |
-12.22% |
| Add: Tariff adjustment |
88,692,130 |
60,069,992 |
47.65% |
| Cost of gas sales |
(498,198,504) |
(527,453,081) |
-5.55% |
| Gross profit |
36,347,088 |
40,526,753 |
-10.31% |
| Other operating income |
17,371,690 |
15,776,841 |
10.11% |
| Selling cost |
(4,984,250) |
(4,580,145) |
8.82% |
| Administrative expenses |
(5,963,328) |
(5,349,640) |
11.47% |
| Other operating expenses |
(1,114,607) |
(669,741) |
66.42% |
| Expected Credit Loss |
(14,556) |
(1,798,819) |
-99.19% |
| Operating profit |
41,642,037 |
43,905,249 |
-5.15% |
| Finance cost |
(28,877,714) |
(35,798,153) |
-19.33% |
| Profit before taxation |
12,764,323 |
8,107,096 |
57.45% |
| Taxation |
(3,825,503) |
(2,328,395) |
64.30% |
| Profit for the period |
8,938,820 |
5,778,701 |
54.69% |
| Earnings per share – basic and diluted (in Rs.) |
14.09 |
9.11 |
54.67% |
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