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Karachi, April 11, 2014 (PPI-OT): Marred by sluggish economic performances (5 yr average GDP growth at 2.9% and engulfed by the menace by the menace of circular debt ,Pakistan ‘s oil sales during the past 5 yrs (FY09-13)failed to live up to the precedent set inFY05-08.Such was the magnitude of negativity brought by circular debt that 5Yr volume CAGR (FY08-13) was recorded at just 1% and if it was not for robust MS (motor spirit ) sales during the aforementioned period (5yr CAGR at 17 % ) this growth could well have been in the red zone.
Conversely ,at the time when the industry was shielded from circular debt ,its 3yr CAGR (FY05-08)growth clocked in at an impressive 8% with FO (furnace oil ) leading the way (3yr CAGR at 19% ) .Fast forward to 9MFY14, industry sales growth due to partial resolution of circular debt (leading to higher FO demanded from IPPs) and on –going crisis (making consumers shift towards MS from CNG) has reached 11 % YOY.At that run rate, Pakistan oil sales may reach 21.5mn tons by the end of current fiscal year , at all –time high.
9MFY14 oil sales better off by 11 % YoY : in 9MFY14 we have seen industry selling 13.7 mn tons as opposed to 12.3 mn tons sold during the same period last year .11% YOY growth witnessed during 9MFY14 was primarily due to 16%YOY increase in FO sales to 6.9mn tons while MS sales grew by 22% YoY to 2.8mn tons. Therefore, of 1.3mn tons incremental sales during the aforementioned period ,66% or 0.9 mn tons contribution came from FO. In contrast to this, HSD(high speed diesel ) sales remained unimpressive and virtually stagnant at previous year’s level of 4.8 mn tons.
PSO fails to replicate industry growth: At the time when industry sales growth has clocked in at 11% PSO remained laggard with sales growth of mere 4% YoY . This resulted in the company losing its market share, which from 66% in 9MFY13 fell to 62% in 9MFY14 .This decline is mainly due to dull HSD sales: during the year company faced distribution woes which led to HSD sales declining to 2.6mn tons as opposed to 2.8mn tons , down 7%YoY.
However .7%YoY higher FO sales to 5.1mn tons more than made for the gloom brought in by HSD sales, with summer season all but started, .we believe higher demanded from IPPs will enable PSO to regain some of its lost market share.
PSO 9MFYI4 SaIes
(000′tons) Mar14 MOM 9MFY14 YoY
FO 516 14% 5.072 7%
HSD 221 -4% 2.564 -7%
MS 149 3% 1,371 15%
Others 51 8% 402 -4%
Total 938 12% 8.472 4%
Source: OCAC and AKD Research
Outlook Pakistan’s oil sales to reach 21.5mn tons: As mentioned above , commencement of summer season will improve FO sale of not just PSO but of the whole industry as power (electricity) demand start s to rise. Furthermore, with imminent economic recovery, demand starts to rise. Furthermore, with imminent economic recovery ,we believe demanded for HSD is also likely to pick pace. A for MS ,we believe the demanded will continue to grow as more and more consumers shift from CNGs to MS .This impetus shall allow FY14 OMCs sales to clock in at all time high to 21.5 mn tons.