LAUGFS Gas bottomline hit by rising LPG prices, steel prices
View(s):Post-tax profit (PAT) at LAUGFS Gas PLC fell sharply by 85 per cent in the first half of 2017/18 in comparison to the corresponding period of the previous year, even though revenue showed healthy growth of 49 per cent.
The group’s operating profits were down by 14 per cent, it said in a media release. According to the published accounts from the stock market website, it was revealed that revenue had risen to Rs. 11.5 billion for the six months ending September 2017 from Rs. 8.2 billion earlier while post-tax results ended with a loss of Rs. 414 million compared to a profit of Rs. 306 million.
The drop, according to a media release from the company, was mainly attributed to a combination of market factors, mainly the rapid increase in global LPG prices, and upward trajectory of world steel prices. Further, the depreciation of the value of rupee against the US dollar as well as the rising interest rates have also impacted the profitability quite significantly.
While international LPG prices have been rising sharply since October 2016, domestic gas prices, which are regulated in the country, have not been adjusted accordingly in the absence of a pricing formula. This has significantly eroded the short term profitability and shareholder value of the group and the company has already made representations to the relevant authorities to rectify the situation with a long term sustainable solution, the group said.
“In spite of the modest results of this quarter, we remain positive about our future outlook. We are focusing on aggressive yet strategically well placed investments for LAUGFS Gas PLC which will enable us to strengthen our regional presence further in the power and energy sector,” commented LAUGFS Gas PLC Chairman W. K. H. Wegapitiya. “While we remain focused on the long term growth strategy backed by strong investments, we expect the support of the relevant authorities to implement a fair and transparent pricing mechanism for LPG that will safeguard local enterprises so that we could continue to contribute to the economic growth of the country,” he stressed.
With the anticipated growth potential for LPG in South Asia, LAUGFS proactively took steps to invest in a LPG import and export terminal at the Hambantota Port. Apart from being the first and the largest investment in the Hambantota port, this terminal will be one of the largest LPG import and export terminals in its class in South Asia in terms of storage capacity. Value generation from this terminal is expected from the second half of 2018.