Lanka IOC revenues and profits soar on higher prices and volumes in 2Q

The revenues and the profits of Lanka IOC PLC (LIOC) soared after authorities implemented a cost-reflective

pricing formula for fuel and restored some normalcy in fuel supplies after a quota system was put in place, ending days long queues seen at fuel stations for months since the country ran out of foreign currency to regularly import fuel since February this year. 

Sri Lanka’s only private sector fuel distributor reported revenues of Rs.87.96 billion in the July - September quarter, the company’s second fiscal quarter compared to Rs.20.61 billion in the year earlier period when the country was under lockdowns for half of that period due to the fourth wave of the virus.

The company said its year-on-year volumes increased by 25 percent from 128,807 metric tonnes to 160,468 metric tonnes between the two periods.  

However the revenue in the quarter was considerably up even from the previous quarter ended in June when the company reported revenues of Rs.49.93 billion, which may have come from both higher volumes and the pump prices as the government had to revise fuel prices several times before introducing a cost-reflective formula. 

The global fuel prices have also fallen by about 35 percent from its June highs of US$ 124 a barrel. The prices at Brent crude futures, the international benchmark for oil, was trading around US$ 92.00 barrel intraday yesterday. 
Despite concerns of another run up in prices after the OPEC + agreed to cut production few weeks ago, the global recession fears have weighed on the prices. 

Besides auto fuel, the company also engages in bunkering, lubricants, bitumen and petrochemicals, but the company said the conditions have been extremely challenging for all business verticals.   

In an earnings release, LIOC cited, “Spiralling inflation, dearth of foreign exchange, high volatility in international oil prices and fears of global recession”, as the challenges facing the company. 
During the months-long shortages of oil at the pump due to the shortage of acute foreign currency which persisted through most of July, the company made enormous attempts to keep their fuel stations supplied from their limited stocks. 

During this period, LIOC was granted the approval to open 50 new fuel stations on top of approval for 46 stations they earlier obtained. The company said they would start opening the stations in the next few months. 

In further reforms to the energy sector, the government fortnight ago passed legislation to further liberalise the sector allowing global suppliers to enter as retail operators while eliminating the State monopoly on jet fuel. 

The company reported earnings of Rs.23.21 a share or Rs. 12.36 billion in the three months to September compared to 53 cents a share or Rs.281.55 million a year ago. 

The company’s share ended 7.82 percent lower yesterday at Rs.176.75.  The company said the higher borrowing costs and the unprecedented LC confirmation costs due to significant country risks perceived by banking institutions caused its finance cost to soar during the quarter. 

Indian Oil Corporation Limited, India has 75.12 percent stake in LIOC.