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Hascol Petroleum (HASCOL): 2019 diluted LPS at Rs25.9 with 4Q diluted LPS at Rs12.0 (below expectations)

• Hascol Petroleum Limited (HASCOL) reported its 2019 results today, with diluted LPS clocking in at Rs25.9 compared to a diluted LPS of Rs0.2 in 2018 (consolidated). In 4Q2019, the company recorded a diluted LPS of Rs12.0 compared to 3Q2019 diluted LPS of Rs2.7.
• The result is largely affected by a 33% YoY decline in Net Sales, while the cost of sales decreased by 29% YoY resulting in a Gross Loss of Rs1.6bn. This is likely due to inventory losses incurred by the company, falling on the wrong side of international oil price movements in 2019. In 4Q2019 alone, the company recorded a Gross Loss of Rs1.8bn.
• Overall volumes for the company declined by 46% YoY in 2019, where High Speed Diesel (HSD) sales dropped by 47% YoY and Motor Spirit (MS) sales by 31% YoY. The company’s market share consequently also declined to 8% for 2019 from 14% in 2018.
• In 9M2019, the company’s short-term borrowings had reached Rs42.9bn. To recall at the time Policy Rate was 13.25% with Finance Cost coming in at Rs5bn. The 4Q2019 saw a further addition of Rs2.4bn in Finance Cost, bringing total to Rs7.5bn (up 5.6x YoY) in 2019.
• Other operating expenses also grew by 8x YoY to Rs8.8bn, while exchange losses were recorded at Rs2.4bn during the year.

The distribution expenses of the company, in a bid to maintain sales and market share, increased by 14% YoY to end the year at Rs4.4bn.