Shell Pakistan Limited

Shell Pakistan Limited (by Nouman Sabir)

University of Sargodha

Department of Commerce

A Final Project of Financial Management by:

Muhammad Nouman Sabir

(Roll No: 28 – R / 08)

Submitted to:

Prof. Zahid Ali Akbar

Topic:

SHELL PAKISTAN LIMITED

B.Com (HONS)

Vth Semester / Regular


Page - 1

Shell Limited Pakistan

Shell Pakistan Limited (Shell Pakistan) is engaged in marketing of compressed natural gas

and petroleum. The company provides different types of lubricating oil and caters to

businesses and motorists. The company for businesses provides Shell cards, aviation

customer service, exploration and production, transport, liquefied petroleum gas and

industrial operations for power, automotive and sugar. Shell Pakistan for motorists

provides customer service, car care tips, shell Helix motor oil and Shell advance

motorcycle oil. The company also participates in motor sports like formula one and Moto

GP by tying up with Audi, Ferrari and Ducati. Shell Pakistan is headquartered in Karachi,

Pakistan.

Shell @ Glance

The second largest oil company in the country, Shell Pakistan has successfully positioned

itself as the preferred oil and Gas Company in Pakistan, leading the field in its

commitment to customer service, quality of products, safety and environmental

protection. Shell is a global group of energy and petrochemical companies. Our aim is to

meet the energy needs of society, in ways that are economically, socially and

environmentally viable, now and in the future.

Corporate History

Marcus Samuel, founder of the Shell Transport and Trading

Company. Almost 200 years ago, a London antique dealer

began importing sea shells from the Far East to supply a fashion

for exotic décor.

Marcus Samuel’s enterprise laid the foundations for a thriving

import-export business later run by his sons, Marcus Junior and

Sam. At this time oil was largely used in lighting and lubricants

and the industry was based in Baku, Russia, with its large reserves of high quality oil and

strategic natural harbor.


Page - 2

Revolutionizing Oil Transport

The arrival of the internal combustion engine in 1886 led to a surge in demand for

transport fuel. Building on their shipping expertise, the Samuel brothers commissioned a

fleet of steamers to carry oil in bulk. They revolutionized oil transport with the maiden

voyage of their first tanker, Murex. In 1892, Murex was the first ever tanker to transit the

Suez Canal. The brothers’ company was named the Shell Transport and Trading Company

in 1897. It used a mussel shell as its logo.

Becoming Royal Dutch Shell

Shell Transport’s activities in the East, combined with a search for new sources of oil to

reduce dependence on Russia, brought it into contact with Royal Dutch Petroleum. The

two companies joined forces in 1903 to protect themselves against the dominance of

Standard Oil. They fully merged into the Royal Dutch Shell Group in 1907.

Shell changed its logo to the scallop shell, or pecten, which is used today. By the end of

the 1920s Shell was the world’s leading oil company, producing 11% of the world’s crude

and owning 10% of its tanker tonnage. The 1930s were difficult: the group’s assets in

Mexico were seized and it was forced to concede generous terms to the Venezuelan

government when it nationalized its oil fields.

Post – War Expansion

After the Second World War, as peace brought a boom in car use, Shell expanded into

Africa and South America. Shipping became larger and better powered. In 1947 Shell

drilled the first commercially viable offshore oil well in the Gulf of Mexico. By 1955 Shell

had 300 wells. In 1958 Shell began production in Nigeria.

The Oil Crisis

In 1969, Ghaddafi took power in Libya, cutting oil production and raising prices. Other

producers threatened to do the same and the Yom Kippur war of 1973 brought the crisis

to a head. Within weeks OPEC countries quadrupled the oil price and imposed a boycott

for two months. The effect on the West was economically catastrophic.


Page - 3

Tapping New Resources

The 1970s were notable for Shell’s development of the oil fields in the North Sea and

South America - difficult and expensive to do, but crucial given the reduced supplies from

the Middle East. In 1978 Shell completed the Cognac drilling and production platform in

the Gulf of Mexico, the world’s tallest platform at 1,100 feet.

Worldwide Expansion

From the mid-1990s public scrutiny of the oil industry intensified as environmental issues

gained prominence. Shell was criticized over plans to dispose

of the Brent Spar platform and also ran into difficulties in

Nigeria. As the new millennium got under way, Shell

expanded in China and Russia. In 2005 Shell dissolved its old

corporate structure to create a single new company. Shell

remains one of the world’s major oil and gas companies. We

have interests in liquefied natural gas and gas to liquids

products; we help develop sustainable biofuels; and we are involved in wind projects.

History of Shell in Sub – Continent

The Shell brand name enjoys a 100-year history in this part of the world, dating back to

1899 when Asiatic Petroleum, the far eastern marketing arm of two companies: Shell

Transport Company and Royal Dutch Petroleum Company, began importing kerosene oil

from Azerbaijan into the subcontinent. Even today, the legacy of the past is visible in a

storage tank carrying the date - 1898.

The documented history of Royal Dutch Shell plc in Indo_Pakistan subcontinent dates

back to 1903 when partnership was struck between The Shell Transport & Trading

Company and the Royal Dutch Petroleum Company to supply petroleum to Asia.

In 1928, to enhance their distribution capabilities, the marketing interest of Royal Dutch

Shell plc and the Burmah Oil Company Limited in India were merged and Burmah Shell Oil

Storage & Distribution company of India was born. After the independence of Pakistan in

1947, the name was changed to the Burmah Shell Oil Distribution Company of Pakistan. In

1970, when 51% of the shareholding was transferred to Pakistani investors, the name of

changed to Pakistan Burmah Shell (PBS) Limited.


Page - 4

The Shell and the Burmah Groups, retained the remaining 49% in equal proportions. In

February of 1993, as economic liberalisation began to take root and the Burmah divested

from PBS, Shell Petroleum stepped into raise its stake to 51%. The years 2001 -2 have seen

the Shell Petroleum Company successively increasing its share, with the Group now

having a 76% stake in Shell Pakistan Ltd (SPL)- an expression of confidence.

History of Shell Logo – Patent

For more than 100 years the word “Shell”, our Pecten emblem, and the distinctive red

and yellow colours have identified the Shell brand and promoted our corporate

reputation. These symbols have stood for the quality of our products and services, and

represented our professionalism and values around the world.

The word “Shell” first appeared in 1891 as the trademark for the kerosene that Marcus

Samuel and Company shipped to the Far East. The small London business dealt originally

in antiques and oriental seashells.

In 1897 Samuel formed The Shell Transport and Trading Company. The first logo in 1901

was a mussel shell. In 1904 a scallop shell, or Pecten, gave a visual element to the

corporate and brand name.


Page - 5

Why the Pecten?

The company name was “Shell” and each of Samuel’s tankers carrying kerosene to the

Far East was named after a different seashell.

The Pecten may have been taken from the family coat of arms of a business associate, Mr

Graham, who imported Samuel’s kerosene into India and became a director of The Shell

Transport and Trading Company. Following a pilgrimage to Santiago de Compostela in

Spain the Graham family had adopted the St James’s Shell.

Over the years the form of the Shell emblem has changed gradually in line with trends in

graphic design. Designer Raymond Loewy created and introduced the current emblem in

1971.

Why Red and Yellow?

In 1915 the Shell Company of California first built service stations and had to make these

stand out from the competition. They used bright colours that would not offend the

Californians: because of the state’s strong Spanish connections they chose red and

yellow.

The actual colours have developed over the years, most notably in 1995 when a bright,

consumer-friendly Shell Red and Shell Yellow were introduced to launch our new retail

visual identity. The Pecten remains one of the greatest brand symbols in the 21st century.

Our Values & Customs

Our eight Business Principles are based on our core values and promote trust, openness,

teamwork, professionalism, and pride in what we do. We were one of the first global

companies to state and share our beliefs when we published our General Business

Principles in 1976.


Page - 6

The Shell Code of Conduct

How should I react if a business partner offers me a gift? What is “insider information”

and how must I deal with it? Our Code of Conduct provides practical advice to our staff on

how to comply with laws and regulations, how to work with others and how to resolve

questions on business conduct.

Shell’s Slogan / Mission

“You can be sure of Shell”

Shell’s Objectivity for Customers

Shell is focusing on retailing, providing better facilities to customers, clean petrol pumps

constructing international standard petrol filling stations, good advertising campaigns

and mini markets.

Shell’s Vision

To Be the Top Performer of First Choice

Shell’s Aim

Creating a secure business environment, minimizing economic losses, and business

disruptions safeguarding the group’s integrity and reputations


Page - 7

Shell’s Goal

The goal of the company is to position itself as the preferred oil company in Pakistan,

leading the field in its commitment to safety, customer service, quality and environmental

protection.

Shell’s Strategy

A strategy of corporation forms a comprehensive master plan stating how the

corporation will achieve its mission and objectives. It maximizes competitive advantage

and minimizes competitive disadvantage. The strategy of Shell is to grow internally by

expanding its operations through acquisition and strategic alliances.

Shell focuses to differentiate its products from competitors in the area of quality and

services.

Shell’s Policy

A policy is a broad guideline for decision-making that links the formulation of strategy

with its implementation. The policy of Shell is to make sure that the employees

throughout the firm make decisions and take actions that support the corporation’s

mission, objectives, and strategies.

People Diversity in Shell Organization

We employ around 101,000 people in more than 90 countries and territories. Our people

are central to the delivery of our strategy and we involve them in the planning and

direction of their own work. We create a work environment that values differences and

provides channels to report concerns.

We value communication and consultation with our employees, directly or via staff

councils or recognised trade unions. We encourage our staff to report their views about

our processes and practices safely and confidentially to managers or Human Resources

staff. Our global telephone helpline and website enable employees to report breaches of

our Code of Conduct and the Shell General Business Principles, confidentially and

anonymously.


Page - 8

A diverse workforce and an inclusive work environment are vital to our

success and are aligned with our core values of honesty, integrity and respect for people.

The varied skills and experience of people from different cultures, gender and ages

benefits our business, helping us to better understand our customers across the world

and to build stronger relationships at a local level. Our focus on diversity and inclusion

also means customers, employees and partners choose us more often.

New Energy Future – by Shell

Everyone has a part to play in securing a new low-carbon energy future. At Shell we are

working to deliver cleaner energy and helping our customers to use less energy.

The world is shifting towards a new low-carbon energy future. It will be powered by a

range of sources, from cleaner fossil fuels to renewables. But to reach it, governments,

industry and customers must work together. Shell is already taking the first steps with

partners to tackle the challenges that lie ahead.

The energy transition will take time and fossil fuels will continue to provide the bulk of

energy for many years to come. We use advanced technology to open up new sources of

oil and natural gas and to squeeze more from existing resources.

Managing CO2 – We use a range of approaches to tap into the energy of natural gas,

the cleanest-burning fossil fuel. It emits 50-70% less carbon dioxide (CO2) than coal when

burnt to generate electricity.

We liquefy natural gas for shipping to markets from remote fields, and we turn natural

gas into cleaner-burning liquid transport fuels and other products. From 2012, we will

produce more natural gas than oil.

Low-carbon biofuels offer the most commercially realistic way to reduce CO2 emissions

from transport in the coming years. We are working to increase the sustainability of

today’s biofuels, and investing in the development of advanced biofuels.

Smarter Mobility – In a new, low-carbon energy future cars will be powered by a wide

range of fuels and energy sources, from advanced petrol and diesel to biofuels,

electricity, and even hydrogen.


Page - 9

We are helping our customers use less energy. We are developing more

advanced fuels and lubricants to help drivers go further on less fuel, and we offer driving

tips to further improve economy. We also help build roads using less energy and with

fewer CO2 emissions because our technology allows asphalt to be mixed at lower

temperatures. With our customers and partners, Shell is helping to secure the new

energy future.

Shell Pakistan – General Business Principles

Shell Pakistan Limited General Business Principles govern how Shell Pakistan Ltd.

conducts its affairs. The objectives of Shell Pakistan Ltd. are to engage efficiently,

responsibly and profitably in oil, gas, chemicals and other selected businesses and to

participate in the search for and development of other sources of energy to meet

evolving customer needs and the world’s growing demand for energy.

We believe that oil and gas will be integral to the global energy needs for economic

development for many decades to come. Our role is to ensure that we extract and

deliver them profitably and in environmentally and socially responsible ways. We seek a

high standard of performance, maintaining a strong long-term and growing position in

the competitive environments in which we choose to operate.

We aim to work closely with our customers, partners and policy-makers to advance more

efficient and sustainable use of energy and natural resources.

Shell Worldwide Managerial Strategies

Shell is a global group of energy and petrochemical companies. Our headquarters are in

The Hague, the Netherlands, and our Chief Executive Officer is Peter Voser. The parent

company of the Shell group is Royal Dutch Shell plc, which is incorporated in England and

Wales.

Our strategy seeks to reinforce our position as a leader in the oil and gas industry in order

to provide a competitive shareholder return while helping to meet global energy demand

in a responsible way. In Upstream we focus on exploring for new oil and gas reserves

and developing major projects where our technology and know-how adds value to the

resource holders.


Page - 10

In Downstream our emphasis remains on sustained cash generation from our

existing assets and selective investments in growth markets. Our core values of honesty,

integrity and respect for people form the basis of the Shell General Business Principles.

Shell by Numbers

+ 90 countries where we operate

~ 101,000 number of employees

2% amount of world’s oil we produce

3% amount of world’s gas we produce

3.1 million barrels of gas and oil we produce every day

44,000 Shell service stations worldwide

145 billion liters of fuel sold

>35 refineries and chemical plants we run

1 ranking by Fortune 500 in 2009

Our Businesses

Upstream searches for and recovers crude oil and natural gas. Downstream refines,

supplies, trades and ships crude worldwide, manufactures and markets a range of

products, and produces petrochemicals for industrial customers.

Projects & Technology manages delivery of Shell’s major projects and drives the research

and innovation to create technology solutions.

Financial Performance

Revenue $278.2 billion

Income $12.7 billion

Capital Investment $31.7 billion

Investment in R & D $1.2 billion

Fast facts for Sustainable Developments

$2 billion spent on CO2 and renewable energy technologies over the last 5 years.

In 2009 greenhouse gas emissions from facilities where we operate were

approximately 35% below 1990 levels.


Page - 11

$13 billion spent in 2009 with locally owned companies in low and

middle income countries.

$132 million on social investment programmes in 2009.

Shell Pakistan Managerial Strategies

Shell Pakistan is divided into 8 functional areas i .e. Retail, Lubricants, Aviation,

Operations, Finance, Corporate, Human Resource and Commercial Fuels. It has played a

leading role in abridging the growing energy demand gap in Pakistan. We are

represented in all aspects of the upstream and downstream oil business in Pakistan - in

exploration both onshore and offshore, in refining, as well as a 26% share holding in the

white oil pipeline. Currently Shell in Pakistan is headed by Mr. Zaiviji Ismail bin Abdullah,

Chairman and Managing Director of Shell Pakistan Limited (SPL) and Chairman of Shell

Companies in Pakistan.

Shell has over 100 years of experience in developing the technology and services that

make us a leading provider of innovative and new fuels today. We were the first to

introduce retail visual identity on its forecourts. We strive to meet and exceed customer

expectations by delivering the best fuels and service to our customers at every site, every

visit, everyday. With a dynamic portfolio and a fast-growing retail network, the Shell

Brand is the most preferred brand amongst motorists across Pakistan.

Shell has always placed great importance on the health, safety and environment aspect

of the society it does business in. Safety is one of our top priorities, and we base our

policies on the belief that all accidents are preventable.

Market Share

PSO Shell APL Others


Page - 12

Over the last decade, SPL has developed a robust programme of social

investment, which supports organizations and initiatives in the areas of health,

education, welfare, community development, heritage and environment.

In an increasingly competitive business environment, we at Shell Pakistan strive ever

harder to maintain operational excellence. We strengthen standardized and simplified

business processes and systems, and ensure top quality, right quantity and su perior

service to all customers across the country.

Shell’s Task Environment in Pakistan

Ø Customer

Ø Supplier

Ø Labor component

Ø Competitors

Ø Government

CUSTOMER - Our customers are high class, low class and also middle class, because every

class is used petrol for consumption.

SUPPLIER - Our suppliers are Pakistan refinery, National refinery and Attock refinery and

Dhodak refinery.

LABOUR COMPONENT - Labour is frequently available in Pakistan because of high

unemployment rate. So skilled and unskilled persons are available at lower wages rate.

COMPETITORS - Major competitors of Shell are PSO with petrol pumps and Caltex with

petrol pumps. But Shell Pakistan Limited operates in the Petroleum refining sector. Shell

Pakistan Limited also compete with three other petroleum refiners in Asia

Chennai Petroleum Corporation Limited

National Refinery Limited

Mangalore Ref & Petrochemicals Limited


Page - 13

Stock Exchange Corporate Profiles (in Pakistan)

Shell Pakistan Limited (SPL) is a Pakistan-based company engaged in the marketing of

petroleum and compressed natural gas. It also blends and markets various kinds of

lubricating oils. The Company has investments in two non-trading subsidiaries, namely

Shell Pakistan Provident Trust (Private) Limited and Shell Pakistan Pensions Trust

(Private) Limited. The Company introduced Shell Helix Ultra, Shell Helix CNG Super, and

restored its Quick Oil Change service as Shell Helix Oil Change Plus.

Ticker: SHEL Country: PAKISTAN

Exchanges: KAR Major Industry: Oil, Gas, Coal & Related

Services

Sub Industry: Oil Refiners & Distributors

2009 Sales

100,407,007,366

(Year Ending Jan

2010).

Employees: 534

Currency: Pakistan Rupees Market Cap: 14,215,351,015

Fiscal Yr

Ends: December

Shares

Outstanding: 68,487,912

Share Type: Ordinary Closely Held

Shares: 52,666,047


Page - 14

Board of Directors

Indicators 2009 2008

Profit/ (Loss) before taxation(mn) 3910 (3049) Profit/ (Loss) after taxation(mn) 2563 (1726) New Capital Expenditure(mn) 1325 1024

Shareholder,s Equity(mn) 8271 6256

Earning/ (Loss) per Share 37.42 25.20

No Name of Member

1 Mr. Zaiviji Ismail

2 M/s. Shahnaz Wazir Ali

3 Mr. Rafi H. Basheer

4 Mr. Farrokh K. Captain 5 Mr. Imran R. Ibrahim

6 Mr. Nick Chong

7 Mr. Zaffar A. Khan

8 Mr. Michael

9 Mr. Badruddin F. Vellani 10 Mr. Omar Sheikh

11 Mr. Gary Fisher


Page - 15

Products & Services

Following are the major products of the Shell Pakistan…!

- On the Road Fuel

- Oils & Lubricants

- Shell Motorsports

- Businesses Lubricants

- Commercial Fuels

On the Road Fuel

- Unleaded = Shell Unleaded has been designed to help keep your engine clean and

helps protect against corrosion. Designed

to help keep your engine clean. To

operate at their best, engines require the

precise amount of air and fuel to enter

the engine and be mixed together at the

right time. With some fuels, deposits may

form over time on the back of the inlet valves. This can lead to delays in the

required fuel charge entering the engine and a poor mix of fuel and air, reducing

the engine’s performance. Shell Unleaded has been formulated to help prevent

the build-up of these deposits, and to help maintain your engine’s performance.


Page - 16

- Shell Diesel = New improved Shell

Diesel with fuel economy formula

contains ingredients that are designed

to speed-up ignition; keep the engine

clean; reduce foaming; and protect

against corrosion. It is formulated to

help the fuel ignite earlier, in order to help convert chemical energy more

effectively into energy that drives your wheels. It is developed to help protect

against deposit formation, and so help your engine achieve, and maintain, better

fuel mixing, further contributing to overall combustion efficiency.

Oils & Lubricants

Shell lubricants provide increased protection against engine wear and corrosion in your

car, pickup, or motorbike.

- Shell Advance

- Shell Helix

- Shell Lube – Match

- Shell Rimula

Shell Motorsports

Through technical partnerships with Ferrari, Ducati

and the Shell-Pennzoil team in NASCAR, Shell has the

most extreme test bed to develop the best premium

products for every Shell customer. In this section you

have the chance to get behind the scenes and find out

all you need to know about Shell’s involvement .

Businesses Lubricants

At Shell Lubricants, we use our leading technology to bring you innovative oils and

greases designed to meet your challenges. Our extensive range includes our ultimate -

performance synthetic lubricants, which offer outstanding protection, long lubricant life

and system efficiency.


Page - 17

Our international team of on-the-ground lubricant experts has experience in

your industry. These people can help you to reduce your total cost of equipment

ownership by maximising the value of using Shell lubricants. The benefits are proven in

real-life applications. Ask us how our technology-leading products can enhance your

operations.

Commercial Fuels

Supplying transport, heating and industrial fuels to corporate and distributing companies

in many industries, including road transport, mining, construction, power and agriculture.

Our product portfolio ranges from standard main grades to premium fuels with advanced

Shell formulation. Whatever your needs, you can rely on our fuels to help you get the

most out of your vehicle or machinery.

Environmental & Social Behavior – by Shell

Contributing to sustainable development is integral

to the way we do business. As we work to help meet

the world’s growing energy needs we aim to bring

benefits to local communities and reduce impacts of

our operations, including tackling greenhouse gas

emissions. We look after our people and our core values of honesty, integrity and respect

for people have been laid out in the Shell General Business Principles for over 30 years.

Innovation Concept – by Shell

Innovative technology is helping to shape the energy

future. Shell is opening up new energy resources and

squeezing more from existing resources to help

power the world's economies.


Page - 18

Financial Analysis of Shell Pakistan Limited

The profit before taxation of Shell Pakistan Limited has increased to Rs 1,762.434 million

in the half year period ended June 30, 2010 as compared to Rs 962.213 million earned in

the corresponding period in 2009. However, the company s profit after tax declined to Rs

720.210 million in the period under review against Rs 1,013.962 million in the same period

a year back.

The company s earning per share stood at

Rs 10.52 in the half-year period this year

against Rs 14.80 in the same period last

year. The board of directors of the

company in its meeting held on Tuesday

approved the payment of an interim

dividend for the year ending December 31,

2010 at the rate of Rs 4.00 per ordinary

share of Rs 10 each i.e. 40%.

Zaiviji Ismail bin Abdullah, the Chairman

and Chief Executive of Shell Pakistan paid

that during the first half of the current

year the company has achieved significant

growth in its pre-tax earning, achieving Rs

1.762 billion in comparison to Rs 962

million earned in the same period last

year. He said this improvement in

profitability is mainly on the back of

continued volume growth in key business segment, better product mix towards higher

margin products and favourable movements in the international price of oil during the

period.


Page - 19

However, he said, the after tax earnings declined to Rs 720 million as against Rs 1.014

billion in the same period last year due to an exceptional increase in Income Tax following

the re-introduction of turnover tax in the previous year s budget and the subsequent

increase in the rate of tax from 0.5 percent to 1.0 percent in this year s budget.

It is pertinent to note that the company is now being taxed at an extraordinary high

effective tax rate of 70 percent due to the recent increase in turnover tax rates. This has

significantly increased the cost of doing business for the company and added further

pressure on its bottom line The

management of the company is

pursuing this matter with relevant

fiscal authorities with a view to

rationalise the applicable income tax

rates.

He said that the 50 percent reduction

in shareholder returns is primarily due

to the imposition of the increase in

turnover tax and the long

outstanding government receivables,

a situation that is causing serious

0

20000000

40000000

60000000

80000000

100000000

120000000

140000000

160000000

180000000

200000000

June'03 June'04 June'05 June'06 June'07 June'08 Dec'08 Dec'09

Gross Sales

Gross Sales


Page - 20

concerns amongst shareholders. We still have approximately Rs 5 billion

outstanding government receivables, comprising of price differential claims and sales

tax/petroleum development levy (PDL) refunds , he said and added the sooner these

outstandings are settled, the better it would be for all key stakeholders. The

management team is vigorously following up the matter with the concerned government

authorities.

Looking forward to the rest of the year, we see some new challenges on the business

front in the aftermath of the crises from the flood damages faced the most parts of the

country , he said adding Nonetheless, we are confident that the company will overcome

these challenges and create a more friendly environment for businesses to prosper and in

this spirit, we continue to look beyond 2010 positively.

He said the country is currently going through a very challenging period and our thoughts

are with people who have impacted from the ongoing flood crises. More than 200 sites of

the company have also been effected. We are doing our utmost to ensure continued and

adequate supply of all products across the country. In addition, a number of our staff are

already involved in supporting relief efforts on a voluntary basis in various parts of the

country.

He said that the events of the last few weeks are indeed very unfortunate. To he lp with

the relief and rehabilitation efforts, the company and its employees are jointly making a

total contribution of Rs 5 million. In addition to this, the parent company, Royal Dutch

Shell, has also committed a further Rs 10 million bringing total initial contribution of Rs 15

million. We are confident that the country will get through this difficult situation very

soon , he added.


Page - 21

According to the financial results sent to Karachi Stock Exchange (KSE), the

company s sales increased to Rs 102.015 billion in the half year period this year against Rs

82.002 billion in the same period last year. The cost of product sold increased to Rs

84.422 billion against Rs 66.750 billion.

Financial Highlights


Page - 22

Profitability Analysis

-100.00

-80.00

-60.00

-40.00

-20.00

0.00

20.00

40.00

60.00

June'03 June'04 June'05 June'06 June'07 June'08 Dec'08 Dec'09Net Profit Margin on Sales

Gross Profit Margin

Return on Assets

Retutn onEquity

Comparison of key Figures with the Industry

Shell PSO APL

Increase in Sales (%) 84.28 23.33 12.86

Increase in Gross

Profit (%) 5.38 -89.97 -3.52

Increase in Profit

before tax (%) 134.56 -153.13 -2.87

Increase in Profit after

tax (%) 149.63 -147.67 1.43

Increase in EPS (%) 149.62 -147.66 1.80


Page - 23

Liquidity Analysis

Previous Years Analysis Approaches

In recent years, this stock has performed terribly. In fiscal year 2000, the stock traded as

high as 367.50 Pakistan Rupees, versus 165.15 Pakistan Rupees on 1/18/02. For the 52

weeks ending 1/18/02, the stock of this company was down 42.5% to 165.15 Pakistan

Rupees. During the past 13 weeks, the stock has fallen 8.3%.

During the 12 months ending 6/30/01, earnings per share totaled 30.12 Pakistan Rupees

per share. Thus, the Price / Earnings ratio is 5.48. Earnings per share fell 18.7% in 2001 from

2000. This company is currently trading at 0.09 time’s sales. Shell Pakistan Limited is

trading at 1.07 times book value. The company's price to book ratio is higher than that of

all three comparable companies, which are trading between 0.25 and 0.97 times book

value.

0.00

0.20

0.40

0.60

0.80

1.00

1.20

1.40

1.60

June'03 June'04 June'05 June'06 June'07 June'08 Dec'08 Dec'09

Current Ratio

Current Ratio


Page - 24

The market capitalization of this company is 5.79 billion Pakistan Rupees (US$96.42

million). Closely held shares (i.e., those held by officers, directors, pension and benefit

plans and those shareholders who own more than 5% of the stock) amount to over 50% of

the total shares outstanding: thus, it is impossible for an outsider to acquire a majority of

the shares without the consent of management and other insiders. The capitalization of

the floating stock (i.e., that which is not closely held) is 2.33 billion Pakistan Rupees

(US$38.83 million).

During the 12 months ending 6/30/01, Shell Pakistan Limited paid dividends totaling 12.50

Pakistan Rupees per share. Since the stock is currently trading at 165.15 Pakistan Rupees,

this implies a dividend yield of 7.6%. The company has paid a dividend for 4 straight years.

During the same 12 month period ended 6/30/01, the Company reported earnings of 30.12

Pakistan Rupees per share. Thus, the company paid 41.5% of its profits as dividends.

On the 63.63 billion Pakistan Rupees in sales reported by the company in 2001, the cost of

goods sold totaled 44.75 billion Pakistan Rupees, or 70.3% of sales (i.e., the gross profit

was 29.7% of sales). This gross profit margin is significantly better than the company

achieved in 2000, when cost of goods sold totaled 91.1% of sales.

Shell Pakistan Limited's 2001 gross profit margin of 29.7% was better than all three

comparable companies (which had gross profits in 2001 between 3.9% and 5.1% of sales).

The company's earnings before interest, taxes, depreciation and amorization (EBITDA)

were 1.96 billion Pakistan Rupees, or 3.1% of sales. This EBITDA margin is worse than the

company achieved in 2000, when the EBITDA margin was equal to 5.6% of sales. The three

comparable companies had EBITDA margins that were all higher (between 3.2% and 4.8%)

than that achieved by Shell Pakistan Limited.

In 2001, earnings before extraordinary items at Shell Pakistan Limited were 1.06 billion

Pakistan Rupees, or 1.7% of sales. This profit margin is lower than the level the company

achieved in 2000, when the profit margin was 3.6% of sales.

The company's return on equity in 2001 was 22.1%. This was significantly worse than the

already high 32.0% return the company achieved in 2000. (Extraordinary items have been

excluded).


Page - 25

Current Analysis Approach

The current quarter saw some

stabilisation in oil prices to around

$55 a barrel. However, the company

continued to make inventory losses

on account of unfavourable

movements in the international

prices of oil in the previous quarters.

The company's performance in the

quarter remained very similar to the

industry with a 3.6% decline in the

company's sales in the quarter

ending March 2009 as compared to

the same period last year (SPLY).

Attock Petroleum, which is the third largest company in the OMC sector after PSO and

Shell, also had a decline in its sales by 8% in 3Q09 as compared to 3Q08. Only PSO which is

the market leader in the oil marketing sector with a 72% market share managed a minor

1.8% growth in its sales in 3Q09 as compared to 3Q08.

The company's decline in its fuel sales combined with a 79% decline in its non-fuel retail

sales resulted in a 25.6% decline in the company's gross profit. However, the company's

decline in the gross profits was lower than its competitors PSO who had a 37.5% decline in

their gross profits.

The company also had a 101% increase

in its administrative and marketing

expense which contributed to a 65%

decline in its operating profits as

compared to the SPLY. The energy

sector also faces the problem of

circular debt which is estimated to be

around Rs 200 billion in the energy

sector.


Page - 26

Shell still continues to finance sizeable receivables of over 5 billion rupees from

government and other public sector entities which has resulted in a financing cost of

around 185 million rupees and has resulted in an increase in the company's financing cost

by 131.8% in 3Q09 as compared to 3Q08. The circular debt position is even worse in the

other two major oil marketing companies with PSO having dues of over Rs 50 billion and

Attock Petroleum having dues of Rs 6 billion that have not been cleared yet by the

government.

Top Company Award 2009

Shell Pakistan Limited, a company of the Royal Dutch Shell plc group, was recently

awarded the prestigious Top Companies Award for 2009 by the Karachi Stock Exchange.

The awards were conferred after a lapse of 2 years and are KSE's means of recognising

the excellent performance of the top 25 companies on the basis of comprehensive

criteria.


Page - 27

SWOT Analysis Shell has the quality control and quantity control team visit and inspect the quality and

quantity of motor gasoline of their petrol pump regularly.

STRENGTHS

Shell confirms its position as a leader in the gas and power business with a deal to

design the world's first large scale Gas to Liquids plant

Shell is using effective means for the promotion of its products. It is heavily

emphasizing on advertisement and other promotional tactics

Shell provides in time deliver to their petrol pumps

The HRM policies of Shell are its strengths; its incentive based policies are

motivating for employees

The shell gives the proper attention to their customers

Shell has international standard petrol pump

Mobile training units’ side keeping staff up to date on a whole range of topic

including most important issues of health safety and environment

Shell has the heavy budget for the promotion activities

All tanker is fitted with special tamper-profit seals to ensure that only the highest

quality fuel is delivered to all company operation sites

WEAKNESS

They have no proper shades and sitting arrangements at the filling stations

because people who came for oil changing and car washing face difficulties in this

regard

There is no proper drainage system at filling station

There is very little empowerment of employees

Shell has eight regional retail managers who are watching the activities of petrol

pumps in all over the Pakistan that is insufficient to handle the problems


Page - 28

OPPORTUNITIES

Shell has maintained a tradition of introducing new innovation as compare to its

competitors. The example being the mobile, training unit, quality and quantity unit,

Mini-market (select, Jet was (Rianbow), oil change. Lubricants (Rumila C.D.X,)

Helix that is opportunity for Shell to maintain these facilities

People perceptions are changing and they prefer digital pumps. So they should

renovate their petrol pumps. Shell also has an opportunity to enter in the nice

market

Shell has strong financial position so it has opportunity to avail a new market share

in CNG business

Shell is the market leader due to innovation so it can easily win the customer

confidence

THREATS

The smuggling of petrol in Baluchistan form Iran is one of the greats threats to the

company

The fake oil makes up a large share in the market, if such practices are not

prohibited it will create a disastrous effects on sale

PSO is also servicing in profitable areas

Shell is charging few paisas more than their competitor. Shell is facing very stiff

competition to PSO and Caltex

Entrant of new companies in the refinery sector


Page - 29

CURRENT MARKETING STRATEGY OF

SHELL PAKISTAN LTD The current strategy of shell is concentrate on its business and selected market areas. By

using this strategy company expands its business by upgrading petrol pumps in the

country.

Especially they are concentrating in the following three areas:

Customer service

Brand image

Quality & Quantity

Customer Services - Shell Pakistan ltd. is working for customer satisfaction because

customers play a very vital role in the prosperity ort failure of a particular company. That

is the reason that shell is operating with the basic aim to satisfy its customers and provide

better and better service to its customers. In brief it can be said that shell gives a strong

emphasis on customer services.

Brand Image - The second strategy of Shell is creating a strong Brand Image of the

company in the customers mind. In visual terms, the installation of Shell’s Retail Visual

Identity (RVI) makes a striking and immediate difference between shell’s gasoline

stations and those of its competitors, Pakistan State Oil (PSO) and Caltex. The RVI

programme is massive, for the 1200 or so sites which shell inherited through the take

over, around two thirds are scheduled to be developed as RVI sites, many of them being

completely redesigned from the underground storage tanks up. In addition, new sites are

being acquired in strategic locations.

The new sites are being designed according to the international standards keeping in

view the cleanliness in all respects and an Excellent/Terrific out look. The purpose of this

is to attract the customer and develop a strong brand image in his mind.


Page - 30

Quality & Quantity - The third strategy of the company is to set standards for reliability

and honest dealing because it is fundamental to the company’s reputation. For the

improvement of quality and quantity following points are important:

Mobile Training Units

Quality & Quantity Control System

References:

- www.shell.com

- www.shell.com.pk

- Business Recorder

- www.invest.com.pk

- Google

- Wikipedia

- KSE Index Analysis WEB

THE END

http://www.shell.com/

http://www.shell.com.pk/

http://www.invest.com.pk/

Date post:	05-Apr-2015
Category:	Documents
Upload:	ali-raza-sahni
View:	2,367 times
Download:	7 times

Shell Pakistan Limited

Documents