Laugfs Gas to expand LPG bulk sales in other markets to mitigate domestic biz losses

• Move comes with the aim of greater capacity utilisation of its maritime assets and storage facility in H’tota

Laugfs Gas PLC, which is repeatedly and harshly battered by soaring global prices amid price controls in its key Sri Lankan market, has begun to expand its bulk sales segment of liquefied petroleum gas (LPG) in a bid to change its financial fortunes weighed down by massive losses in the Sri Lankan unit.   

The pivot to bulk sales also comes with the aim of greater capacity utilization of its maritime assets and the storage terminal in Hambantota.  

Laugfs Gas has downstream LPG operations in both Sri Lanka and Bangladesh contributing 39 percent and 24 percent to the group’s revenue respectively. But the Sri Lankan operations remain the only loss-making segment, weighing on the entire group’s bottom line caused by price controls. 

Meanwhile, despite holding the sixth spot in the market with 27 players, 

the operations in Bangladesh is also coming under intense competition with the flood of new entrants after the Bangladeshi authorities granting at least 50 new licenses to LPG operators. In the first fiscal quarter ended in June 30, 2021, the group reported a net loss of Rs.903.7 million, and saw its equity turning to a negative Rs.226.7 million as accumulated losses mounted to Rs.4.1 billion. 

As a result, Laugfs Gas, which has a strong presence in the whole of LPG supply chain with its assets in maritime and terminal operations is now strengthening its midstream operations via its LPG trading arm and its fully owned subsidiary, SLOGAL Energy DMCC.  “As downstream operations continue to be constrained by regulated retail prices in Sri Lanka, there is a clear need to strengthen midstream operations to harness synergies with downstream operations,” said Piyadasa Kudabalage, Laugfs Group Chief Executive Officer.  As an initial step, the group had already transferred the bulk sales business in Bangladesh under SLOGAL Energy with a view to further expanding its geographical outreach. 

The increased volumes in Bangladesh had also required the group to charter an additional gas carrier as SLOGAL Energy drives the capacity utilisation in the group’s other two key business segments –its maritime operations, with own fleet of tankers for transportation, and its storage terminals in Hambantota. Meanwhile, SLOGAL Energy has also expanded its procurement operations to the Gulf in response to the increase in purchasing volumes, which resulted in better pricing and frequency of shipping, while the company is also making inroads into the Maldivian market among other markets around the world.  

“The story is about productivity, efficiency and pricing advantages as SLOGAL became the highest contributor to the group’s bottom line, minimising losses from Sri Lanka operations”, Kudabalage added. 

Laugfs Gas was incurring a loss of around Rs.793 for every 12.5 kilogram cylinder it sold by March 31, 2021 and the company decided to stop the importation of LPG into Sri Lanka in July as their repeated requests for a price increase of Rs.475 went unanswered.  However, on August 12 the company was granted a price increases of Rs.363 for a 12.5 kg cylinder and Rs.145 for a 5 kg cylinder, which brought the new selling price of each cylinder of household gas to Rs.1, 856 and Rs.743.00 respectively.