https://arab.news/bcknn
- Shell Pakistan suffered losses in 2022 due to exchange rates, devaluation of rupee, overdue receivables
- Shell Pakistan says announcement would have no impact on current business operations, which would continue
KARACHI: Shell Pakistan Limited (SPL) said on Wednesday its parent Shell Petroleum Company would be exiting Pakistan with the sale of its 77% shareholding in the local business.
The move came after Shell Pakistan (SPL) suffered losses in 2022 due to exchange rates, the devaluation of the Pakistani rupee, and overdue receivables, and as the country faces a daunting financial crisis and economic slowdown.
"The Board of Directors of Shell Pakistan Limited (SPL), in a meeting of its Board held on June 14, 2023, have been notified by The Shell Petroleum Company Limited (SPCo) of its intent to sell its shareholding in SPL,” the local company said in a stock filing of Wednesday.
“Any sale will be subject to a targeted sales process, the execution of binding documentation and the receipt of applicable regulatory approvals.”
The company said the announcement would have no impact on its current business operations, which would continue.
In a separate statement, Shell Pakistan said the development was a reflection of “simplifying Shell’s portfolio.”
“Shell Pakistan has been in the country for 75 years and has a substantial retail footprint and a strong lubricants business,” a spokesperson for Shell Pakistan said.
“Any sale will be subject to a targeted sales process, the execution of binding documentation and the receipt of applicable regulatory approvals. Shell is seeing strong interest from international buyers.”
Financial experts said global consolidation and the current economic situation in Pakistan were key reasons for the exit.
“They are consolidating their financial position and they have also curtailed retail business in some other countries,” Farhan Mahmood, Head of Research at Sherman Securities, told Arab News.
“Apart from this it could be due to the specific conditions of Pakistan arising out of the exchange rate fluctuations.”
In its recent financial report, Shell Pakistan said finances and profitability of the company continued to be impacted by the current economic challenges affecting the country.
“The Company continues to bear the burden of overdue legacy receivables of PKR 5,331 million from the Government of Pakistan,” the company said in its financial statements for the quarter ended March 31, 2023, posted at the stock exchange.
“The period saw an unprecedented 26% depreciation of the Rupee against the US dollar resulting in significant exchange losses for the Company. The Company’s management continues to proactively engage with the Government authorities to minimize its exposure further from the foreign exchange losses incurred and recovery of the legacy receivables.”