SSGC posts massive Rs9.3 billion loss in H1 as gas purchase prices, arrears bite

KARACHI: The state-owned gas utility Sui Southern Gas Company (SSGC) reported a massive loss of Rs9.3 billion for the first half of the fiscal year 2022-23, as rising costs and disputes with key customers weighed on its performance.

The company, which supplies natural gas to Sindh and Balochistan, said in a filing to the Pakistan Stock Exchange on Monday that it had incurred a loss after tax of Rs10.58 per share for the six months ended Dec. 31, 2022, compared with a loss of Rs2.13 per share in the same period a year earlier.

SSGC's net sales rose 10.3 percent to Rs208.72 billion, but its gross profit turned into a loss of Rs2.2 billion, as its cost of sales surged 12.1 percent to Rs210.92 billion. Analyst attributed the company loss to higher gas purchase prices, transmission losses, unaccounted for gas, and depreciation and amortization charges.

SSGC also faced a significant increase in its operating expenses, which rose 21.2 percent to Rs10.13 billion , while its other income declined 4.1 percent to Rs7.8 billion. The company's finance cost jumped 35.6 percent to Rs3.01 billion, mainly due to higher interest rates and borrowings. SSGC said it had outstanding receivables of Rs29.97 billion from K-Electric, the main power supplier in Karachi, and Rs25.17 billion from Pakistan Steel Mills, which have been classified as current assets.

However, both customers have disputed the late payment surcharge imposed by SSGC on their overdue balances, and the company has decided to recognise the surcharge on a receipt basis from July 2012.

“Further, KE and PSML have disputed Late Payment Surcharge (LPS) on their respective balances due to which management has decided to recognize LPS on a receipt basis from the aforesaid entities effective from July 01, 2012,” it said.

SSGC said it was unable to determine the recoverability and timing of the payments from K-Electric and Pakistan Steel Mills, due to their adverse operational and financial conditions and large accumulation of arrears.

The company also said it was dependent on the financial support from the government of Pakistan, which has confirmed to extend the necessary assistance to the company for the foreseeable future to maintain its going concern status. “Hence, the sustainability of the future operations of the company is dependent on the said support.”