Wafi Energy rebounds strongly
Wafi Energy Pakistan Limited (formerly Shell Pakistan) has reported a strong financial turnaround in 1QCY25, posting a net profit of Rs873 million, which is an increase of 178 percent year-on-year. This performance comes amid a transitional period following the acquisition by Wafi Energy Holding and within a broader context of macroeconomic volatility and sector-wide regulatory challenges affecting oil marketing companies in Pakistan.
Although net sales declined by 7 percent year-on-year in 1QCY25 to Rs99 billion due to both pricing and volume pressures, the gross profit remained largely stable. Despite the decline in revenue, the gross margin improved slightly to 6.32 percent from 6.04 percent in the same period last year, indicating effective cost containment. A significant contributor to this performance was the reduction in distribution and marketing expenses by 21 percent and administrative costs by 14 percent, which allowed the company to post a 71 percent increase in operating profit. This improvement was achieved despite other expenses spiking by over 41 times, likely due to non-recurring or transitional costs. Other income increased by 24 percent year-on-year, helping to further strengthen the bottomline. Finance costs rose by 13 percent, but this was well absorbed due to the operating gains. Share of profit from associates increased by 7 percent.
Wafi's lubricants business was a major driver of performance. The consumer segment recorded double-digit volume growth supported by prominent marketing campaigns and partnerships, including Shell Helix's branding during the ICC Champions Trophy 2025, the company reported. The industrial segment maintained its leadership position in the mining sector and benefitted from strong original equipment manufacturer (OEM) partnerships and robust cash collections. The mobility business also showed progress, with the launch of four new Shell-branded retail sites and upgrades to three existing ones. Premium fuel sales through Shell V-Power reached record levels, reflecting changing consumer preferences.
The company is, however, facing increased cost pressures due to recent regulatory changes such as the shift in the sales tax collection framework. These changes have led to higher operating costs and constrained cash flows, which is an industry-wide concern. Wafi Energy is currently working with regulators and industry stakeholders to push for a revision in margins to reflect the new cost realities.
On the liquidity front, the company's cash flow from operations rose significantly to Rs10.7 billion compared to a net outflow in the same quarter last year. This was primarily driven by improved working capital management and timely recovery of receivables.
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