SNGPL’s profits rise 69% in first quarter of FY21

KARACHI: The Sui Northern Gas Pipelines Limited (SNGPL’s) posted a net profit of Rs3.18 billion for the quarter ended September 30, 2020, up 69.14 per cent, compared with the profit of Rs1.88 million during the same period of the last year, a bourse filing said on Monday.

The gas utility announced financial results for FY20 ended June 30, 2020 and the first quarter of FY21 ended September 30, 2020, and said the earnings per share (EPS) for the quarter under review clocked in at Rs5.1 as against Rs2.96 last year. The company did not announce any payout along with the financial results.

Sale revenues during the quarter clocked in at Rs141.96 billion, down 33.7 per cent from Rs214.44 billion recorded in the same quarter of the last year, it said.

An analyst at the Arif Habib Limited said: “[The] sales witnessed a massive decline led by a 3 per cent decrease in RLNG [re-gasified liquefied natural gas] off-take coupled with a massive 30 per cent dip in [the] international Brent oil price to $43/bbl versus $62/bbl in 1QFY19 [first quarter of FY19] in lieu of a drastic erosion in [the] aggregate demand post-outbreak of the Covid-19.”

However, for the year ended June 30, 2020, the Sui Northern Gas Pipelines Limited declared a final cash dividend of Rs4/share, although the company’s net profit declined 15.2 per cent to Rs5.99 billion, compared with the net profit of Rs7.07 billion in FY19.

The gas utility recorded sales revenues of Rs618.52 billion for FY20, down 9.6 per cent from Rs684.625 billion in the previous year.

The analyst at Arif Habib Limited said: “[The] gas sales of the company went down in FY20 given 8 per cent volumetric decline in RLNG imports, as well as the impact of depleting gas reserves (lower domestic gas off-take) and lower international Brent oil price (average of $52/bbl vis-à-vis $69/bbl in FY19).”

The finance costs of the company escalated to Rs49 billion in FY20, up 90 per cent led by a rise in the differential margin (receivable from the government under the provisions of licence for transmission and distribution of natural gas granted to SNGPL by Ogra) to Rs126 billion. As a result, SNGPL relied on increased borrowing to meet the working capital requirements.

Moreover, the growing quantum of late payment surcharges also augmented financial charges. In the first quarter of FY21, the finance costs have depicted a cut of 19 per cent to Rs8.9 billion, primarily owed to a sharp 625 basis points cut in the benchmark policy rate at the beginning of the year by the State Bank of Pakistan (SBP) to support businesses post-initial outbreak of the coronavirus.

The auditors note the settlement of the circular debt, including tariff adjustment, relies on the resolution of outstanding balances owed by the government of Pakistan, and an increase in gas prices and subsidy by the government to the company.
The auditors also drew attention to an ongoing investigation pertaining to some transactions carried out by a director, impact of which will be accounted for once the investigation is completed.

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