Falling interest income weighs on profits of government-run oil companies
Padma Oil, Meghna Petroleum and Jamuna Oil – state-owned fuel distributors under the Bangladesh Petroleum Corporation (BPC) – recorded lower profits in the July-September quarter due to lower interest income from their term deposits – income from other income segments.
In fiscal year 2020-21, Padma Oil – the country’s largest and oldest company in this sector, and Meghna Petroleum reported 121% and 79% year-over-year decline in profits, respectively.
Only Jamuna Oil – the first national oil company that came into operation during the Pakistani era in 1964, posted a 2.44% increase in profits in fiscal year 21.
Despite rising and falling profits, all three companies declared the same dividend for fiscal 21 as the previous fiscal year.
According to their financial reports, companies – which have around Tk 10,000 crore in term deposits with different banks – derive around 80 to 90% of their total profits from interest income.
In 2020, the government capped the bank deposit rate at 6%, with the aim of reducing the loan rate to 9%.
Following this decision, banks began to lower their interest rates on deposits. As a result, the decline in interest income has had an impact on the profits of oil companies.
Padma Oil profit drops 121%
In fiscal year 2020-21, the profit of Padma Oil Company, which collects, stores and markets fuel, decreased 121% to Tk 228.58 crore from Tk 272.98 crore a year ago.
Despite declining profits, the company, which also produces and markets petroleum products, lubricants and greases, bitumen, liquefied petroleum gas (LPG) and agrochemicals, declared a 125% cash dividend as l ‘Previous exercice.
In the first quarter of fiscal year 2021-2022, its profit fell 4% to Tk 53.69 crore from Tk 60.51 crore in the corresponding period of the previous year.
Meghna Petroleum profit drops 79%
In fiscal year 2020-21, profit at Meghna Petroleum, which markets petroleum products, fell 79% to Tk 282.14 crore from Tk 307.91 crore the previous year.
In the first quarter of this fiscal year, its profit fell to Tk 65.28 crore from Tk 70.78 crore in the same period a year ago.
In the first three months of fiscal 22, net profit decreased by 3.89% Tk to 65.28 Tk crore compared to 70.78 Tk crore in the same period of the previous fiscal year.
Meghna Petroleum Secretary General Reza Md Riazuddin said at the end of the year that profits had declined due to falling interest income for lower interest rates on deposits.
“Fuel handling has not decreased, therefore the revenues of this sector are relatively stable. However, due to the decrease in revenues from the depots, the profit decreased,” he added.
The company declared a dividend of 150% or Tk 15 per share like the previous year, despite a drop in net profit at the end of the year.
Jamuna Oil profit increases 2.44%
Despite the decline in income from term deposits, Jamuna Oil Company’s profit increased 2.44% in fiscal year 2020-21.
However, in the first quarter of the current fiscal year, the company’s profit fell 1.95% to Tk 40.55 crore from Tk 44.90 crore in the corresponding period last year.
It achieved net profit of Tk 201.4 crore in fiscal year 2020-21, which was Tk 200.16 crore a year ago.
The company declared a 120% cash dividend for its shareholders.
MD Masudul Islam, Secretary of Jamuna Oil Company, said: “The main reason for the drop in profits is the drop in interest income. Most of the profits come from term deposits. However, they have declined, affecting the overall profits of the company.