Byco Petroleum Pakistan Limited

Byco Petroleum Pakistan Limited was formed in January 1995 as a public listed company. It started its first oil refinery with a capacity of 30,000 barrels a day at Hub, Balochistan with commercial production starting from July, 2004. The company manufactured a variety of petroleum products including Liquefied Petroleum Gas, Light Naphtha, Heavy Naphtha, High Octane Blending Component, Motor Gasoline, Kerosene, Jet Fuels, High Speed Diesel and Furnace Oil.

Byco branched out into the petroleum marketing business in 2008 and the segment has grown phenomenally over the past six years. Now the company enjoys presence in both mid-stream and downstream sector of the oil business. In addition, a new company Byco Oil Pakistan Limited was set up in 2008 for setting up 120,000 barrels a day refinery. This new refinery was completed in December 2012 and is the largest refinery in the country.

The private equity group Abraaj Capital has also invested in the company after realising the potential the company offers. In 2012, Byco completed the single point mooring project. This floating port is the first of its kind in the country and has a capacity to handle very large petroleum cargo vessels.

Currently the following companies come under the Byco umbrella: Byco Oil Pakistan Limited (BOPL), Byco Petroleum Pakistan Limited (BPPL) and Byco Terminals Pakistan Limited (BTPL).

Snapshot FY15

The year was extremely challenging for the entire oil sector and especially for the refineries which witnessed a sharp decline in crude and product prices which continued throughout the first half of the year. During the initial six months of year, prices dropped by approximately 55 percent amidst the global supply glut in the oil markets. Despite strong increase in sales volume by 49 percent the company suffered at the expense of low oil prices. The company enhanced its oil marketing business by establishing 11 new retail outlets at strategic locations during the year and now has 261 retail sales outlets in Pakistan. The government also revised margins for Oil Marketing Companies (OMCs) which improved the profitability of this segment of BYCO.

Net sales for the year amounted to Rs94.8 billion, two percent higher from last year despite a 55 percent fall in prices because of the focus on high margin products. Byco earned a gross profit of Rs4.9 billion in FY15 as compared to a gross profit of Rs409 million last year. This substantial increase in gross profit can be attributed to impressive increase in sales volume coupled with increased level of production which resulted in high absorption rate of manufacturing overheads and improved marketing margins.

Moreover, an effective supply chain management policy coupled with a lower inventory holding period allowed the company to curtail its inventory losses. Overall it was a good year given the past lacklustre performance and the company is expected to build upon this year of growth.

Byco also has plans and approved in principle a potential merger of the company and its wholly owned subsidiary, Byco Terminals Pakistan Limited, with and into Byco Oil Pakistan Limited (BOPL) subject to regulatory approval.

3QFY16 and 9MFY16

Byco experienced a robust growth in sales volume during the quarter which translated into strong top-line growth in the third quarter as well as 9MFY16. The EPS improved from previous periods rising to Rs0.45 for the quarter and Rs0.56 for 9MFY16.

The reason behind the impressive profitability margins was the increase in margins between international prices of products and crude oil. There is expected to be further volatility for the foreseeable future given the recent Brexit vote as well as the supply glut situation persisting in international oil markets. However, Byco has hedged its bets through increased focus on distribution and marketing with its sights set on high margin products.

Additionally, the refinery capacity was also rationalised. Finance costs were also managed favourably with payment of loan instalments as well as early LC settlements and the added benefit of decrease in KIBOR rates following a cut by the State Bank of Pakistan in overall interest rates.

Future Outlook

The proposed merger is expected to bring some positive synergies which include a larger asset base, economies of scale and increase in risk absorption capacity. The larger asset bases will allow the company to undertake larger investments and expand growth prospects with a potentially lower cost of fund raising.

The merger will strengthen BOPL’s activities by integrating upstream and midstream segments allowing for expansion after consolidation and improving economics of scale.

The larger size of the merged entity as well as the integration is expected to increase the merged entity’s risk absorption capacity, thereby enhancing the capacity to manage the potential risks arising out of adverse and uncertain operating environments.

The amalgamations will make single corporate and tax reporting possible for the merged entity and avoid duplication of work and higher costs. Last year, in order to improve the capital structure of the company, the company had approved the proposal to sell Isomerisation unit to a wholly owned subsidiary company namely Byco Isomerisation Pakistan (Private) Limited (BIPL).

Now, with the inauguration of Byco Oil Pakistan Limited’s refinery, the company hopes the isomerisation unit will bring substantial increase in margin and saving in transportation and storage cost of naphtha.

Byco has diversified its portfolio from mid-stream to downstream and is on a path to financial recovery. With the imminent merger it is likely profitable times for the company are on the horizon.

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Byco Petroleum Pakistan Limited


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Rs(mn)                              9MFY16      9MFY15         YoY      3QFY16      3QFY15         YoY


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Net Sales                           54,226      64,349        -16%      17,829      19,509         -9%


Cost of Sales                     (50,007)    (61,626)        -19%    (15,945)    (17,355)         -8%


Gross profit                         4,219       2,723         55%       1,884       2,154        -12%


Operating profit                     2,135       1,216         76%         970       1,137        -15%


Profit / (Loss) before taxation        106     (1,135)        109%         287         453        -37%


Profit / (Loss) after taxation         550     (1,248)        144%         440         415          6%


EPS                                      1         (1)           -           0           0           -


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