Shell switched from making profits to a loss in the first quarter of 2012 amid unpaid and swelling government dues and lower profit margins. All the hopes expressed by the CEO in 2011 financial statements falls flat.
The government does not provide adequate returns to fully cover the cost of operations and financing, Shell Pakistan Chairman Sarim Sheikh wrote in a post-result review note sent to the Karachi Stock Exchange on Wednesday. Margins of diesel and petrol are regulated and fixed by the government.
Shell, which is Pakistan’s second largest oil marketing company posted a net loss of Rs 22 Crore in January to March 2012 against net profit of Rs 76 Crore in the same period an year ago.
Government receivables decreased during the quarter but still stood at a massive Rs12.6 billion on account of tax refunds and outstanding fuel subsidies. The company recovered Rs 110 Crore during the period under review.
Sales declined 11% to Rs 5,708 Crore in the three months ended March 31.
The company also cited minimum tax on turnover as another reason for the poor performance. The current rising price environment has led to increased tax liability with no corresponding increase in margin resulting in effective rate of corporate tax of more than 600% and unfairly eroding profit growth, said Sheikh.
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