Administered fuel price cut hurting Lanka IOC 4Q badly

20 May 2015 04:04 am - 0     - {{hitsCtrl.values.hits}}

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Lanka IOC PLC (LIOC), the only private oil company in the country that sells petroleum products through retail outlets, recorded a net loss of Rs.1.06 billion for the March quarter (4Q15) due to the state-directed reduction of fuel prices by the new government.
This was against a net profit of Rs.723 million in the corresponding quarter of the previous year. The profits were also affected by the recent steady rice in international oil prices. 
International oil prices were seen falling sharply since July 2014 by over 50 percent compared to the previous year. 
The prices have started to pick up in the second quarter of 2015 and analysts forecast higher cost of sales for LIOC in the next quarter unless the government jacks up fuel prices or introduces a price formula. 
The revenue for the period affected by the fuel price cut fell to Rs.15.8 billion while cost of sales stood at Rs.16.1 billion, generating a gross loss of Rs.365.3 million. 
With higher administrative and distribution costs, the company reported an operating loss of Rs.1.1 billion against an operating profit of Rs.816.3 million. 
The loss per share for the quarter under review stood at Rs.2 against earnings per share of Rs.1.36.  
The state-run Ceylon Petroleum Corporation, the only other company besides LIOC in diesel and petroleum retailing, said it incurred a loss of Rs.4 billion for the March quarter. 
The government has ruled out a possible hike in fuel prices and Finance Minister Ravi Karunanayke a couple of weeks back said they were looking to reduce prices further.
Petroleum Minister Patali Champika Ranawaka has said a formula to determine retail fuel prices would be introduced soon to reflect international price fluctuations. 
The fuel price cut carried out in the final quarter badly affected the full year performance of LIOC too, with the company reporting a net profit of Rs.1.88 billion for FY15 down from 4.8 billion in FY14.
The revenue fell to Rs.79.9 billion from Rs.81.7 billion while the operating profits fell to Rs.2.09 billion from Rs.5.7 billion.
The earnings per share deteriorated to Rs.3.54 from RS.9.04.
The total assets of the company as at March 31, 2015 stood at Rs.23.5 billion, down from Rs.26.9 billion a year ago.
The company’s retained earnings however increased to Rs.10.5 billion from Rs.9.4 billion. 
Indian Oil Corporation holds 75.12 percent equity of the company, and as the second single largest shareholder, Bank of Ceylon holds 2.02 percent.
Several foreign funds including Wasatch, Acadian Frontier, GF Capital, and Tundra Frontier also feature among the top 20 shareholders of the company. 
 

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