Lanka IOC December profits down on lower revenues, higher costs

Lanka IOC PLC, Sri Lanka’s second largest fuel importer and distributor, reported both lower revenues and profits in the three months through December 2023, as the prices at the pump came off their 2022 highs under the monthly pricing formula, amid the softened global energy prices and relatively strong rupee.
Kicking off the December quarter earnings season this week, Lanka IOC PLC reported revenues of Rs.72.02 billion in the October-December period, down 3.8 percent over the same period in 2022, when the country was coming off its worst currency and energy crisis after months-long shortages.
Since then, the government has further liberalised the energy sector, inviting international players into the local retail operations and as a result, China’s Sinopec commenced importation and distribution of fuel in August last year, as the third operator. 

While Lanka IOC didn’t provide the data related to the volumes of sales during the quarter, users may have pumped much higher volumes of fuel during the foregoing quarter than a year ago, as the government ended the QR code-based fuel rationing system, effective from September last year, while the economy started recovering from the third quarter, which may have gained further steam in the fourth.
It is however uncertain if the country’s fuel consumption has reached its pre-crisis levels, as many people either stopped or significantly cut down on the use of their personal vehicles after the prices more than doubled in 2022. And the rest of the economic activities are also still far 
off from normalising.

The revenue slippage at Lanka IOC could be attributed to the relatively lower prices than a year ago, which got adjusted based on the easing global oil prices and the slight strength of the rupee compared to its over 80 percent decline in value against the dollar in 2022. Meanwhile, the cost of sales rose by 6.6 percent to Rs.67.01 billion in the three months from a year ago, albeit the prices at the Brent exchange, the global benchmark for oil, coming off from their 2022 highs, caused by Russia’s invasion of Ukraine.

As a result, the gross profit fell by 58.3 percent to Rs.5.0 billion.
Meanwhile, the company reported earnings of Rs.5.66 a share or Rs.3.01 billion in the company’s third fiscal quarter, compared to Rs.15.46 a share or Rs.8.23 billion reported in the same period in 2022.
In the nine months to December 2023, the company reported earnings of Rs.19.76 a share or Rs.10.52 billion, compared to Rs.57.31 a share or Rs.30.52 billion in total earnings in the same period in 2022.
The nine months revenues were at Rs.188.47 billion, down 11.4 percent from a year ago.
Indian Oil Corporation Limited, India, has a 75.12 percent stake in the company.