Lanka IOC PLC (LIOC) reported higher revenues but profits tumbled in the quarter ended in September 2024 reflecting growing demand for fuel in a recovering economy, but the margins narrowed, taking a toll on the bottom-line.

LIOC, Sri Lanka’s only listed fuel distributor reported revenue of Rs.73.52 billion in the July – September quarter in 2024, up 19.2 percent from the same period last year. This is despite at least a couple of new players entering the market after the downstream operations were liberalised in 2022, following the fuel shortage.

But cost of sales was up at a faster 27.3 percent to Rs.68.61 billion.

This puts a dent on the gross margin which fell by a half to 6.7 percent from 12.6 percent in the year earlier period.

The government cut the price of the fuel at the pump several times during the quarter in line with the decline in global oil prices as fuel prices are now determined by a cost-reflective pricing formula since the middle of 2022.

Despite the conflict in the Middle East, global oil prices haven’t climbed and instead have broadly stayed muted in the low US$ 70 a barrel due to the lower demand coming from China, the world’s largest oil consumer.

Further, the rising generation of alternative energy such as those generated from non-conventional renewable energy and the growing use of electric battery powered mobility by way of adoption of electric vehicles have somewhat put a downward pressure on the demand for oil.

The company reported earnings of Rs.4.74 a share or Rs.2.53 billion for the quarter compared to Rs.9.50 a share or Rs.5.06 billion in the year earlier period, logging a 50.1 percent slump in profits.

The company’s share ended Rs.1.75 a share or 1.55 percent higher on Friday at Rs.115.00.

The company increased what it has invested in short term investments from Rs.38.93 billion to Rs.47.32 billion in the last six months. As a result, the finance income rose to Rs.1.45 billion from Rs.1.27 billion a year ago.

The India parent, Indian Oil Corporation Limited has 75.12 percent in LIOC while the government and its proxies hold a small stake in the company, inclusive of the Employees Provident Fund.