Shell Pakistan records Rs533m profit on oil gain

Net income rose to Rs532.7 million ($8.8 million), or Rs9.72 a share, in the first-quarter ended Sept. 30, compared with a loss of Rs215.5 million, or Rs3.93, a year ago, the Karachi-based company said in a statement to the stock exchange today. Sales fell to Rs32.7 billion from Rs34.3 billion.

Fuel demand in Pakistan is increasing, spurred by an economy that is forecast to expand 7.2 per cent in the 12 months started July 1, 2007, from 7 per cent last year. Oil prices reached a record $89 a barrel yesterday, bolstering the value of oil inventories held by Shell Pakistan.

“The company’s sales in the engine lubricants and gas area improved,” said Farhan Mehmood, a research analyst at JS Global Capital Ltd., in Karachi. “The gains in inventories also helped Shell return a profit.”

Pakistan asks companies to sell fuels below cost in return for a commitment that the government will compensate them for the losses. The government didn’t make the payments on time last year and also in the first quarter this year, forcing Shell Pakistan to borrow money for its expenses.

Shell Pakistan’s shares, which have risen 12.8 per cent this year, were unchanged at 449 rupees at noon local time break on the Karachi Stock Exchange. Shell has a 76 per cent stake in the company.

Oil stocks gained between Rs60 million and Rs70 million in value because of higher crude prices, according to Mehmood.