Sui Southern Gas Company Limited (SSGC) has reported a challenging first quarter for the fiscal year ending September 30, 2025, with a dramatic 85% decline in net profit compared to the same period last year. This sharp downturn was primarily driven by a significant drop in gas sales revenue and a massive increase in levies, overshadowing a notable rise in other income.
Financial Performance
The company's consolidated net revenue from gas sales for the quarter fell by approximately 20%, from PKR 117.2 billion in Q1 2024 to PKR 93.6 billion in Q1 2025. This substantial revenue contraction directly impacted the gross profit, which plummeted by about 85% from PKR 5.04 billion to a mere PKR 751 million year-on-year. This indicates severe pressure on the core gas distribution business.
Operating expenses also saw an increase, particularly the allowance for expected credit losses, which rose from PKR 1.79 billion to PKR 2.59 billion. Consequently, the operating profit, before considering other income, turned into a loss of PKR 3.85 billion, a stark reversal from a profit of PKR 1.13 billion in the prior year. However, a significant increase in 'Other Income' to PKR 9.15 billion (from PKR 7.60 billion) helped cushion this operational setback, bringing the operating profit after other income to PKR 5.30 billion.
Despite the boost from other income, the bottom line was severely hit by a staggering increase in levies. The minimum tax differential alone surged from PKR 40 million to PKR 1.06 billion. As a result, the profit for the period collapsed to PKR 785 million, down from PKR 5.19 billion, translating into an Earnings Per Share (EPS) of PKR 0.89 compared to PKR 5.90 previously.
On the balance sheet, total assets saw a slight increase quarter-on-quarter, reaching PKR 1.13 trillion. Property, plant, and equipment increased, suggesting continued capital expenditure. However, trade debts rose by approximately PKR 10 billion to PKR 141 billion, indicating ongoing challenges in receivables management. Short-term borrowings also increased significantly by about PKR 7.5 billion to PKR 90.3 billion, while long-term financing decreased. Cash flow from operations remained stable at around PKR 6 billion, but increased outflows for investing and financing activities led to a larger net decrease in cash and cash equivalents.
Key Drivers & Segments
The primary driver of the weak financial results is the substantial decline in revenue from gas sales, pointing to either lower volumes or unfavorable pricing dynamics. The significant increase in the allowance for expected credit losses suggests persistent issues with customer payments or a more conservative accounting approach.
- Reduced Gas Sales: A ~20% drop in net gas sales revenue directly impacted the top line and gross profitability.
- Higher Credit Loss Allowance: A substantial increase in provisions for expected credit losses weighed heavily on operating expenses.
- Soaring Levies: The minimum tax differential saw an exponential rise, significantly eroding the profit before taxation.
Management Actions & Strategic Signals
The increase in property, plant, and equipment suggests that SSGC is continuing its capital expenditure programs, likely related to infrastructure development or maintenance. However, the company's financial results announcement explicitly states 'Nil' for cash dividend, bonus shares, right shares, and any other entitlements, signaling that the current profitability does not support shareholder distributions.
The shift in the debt structure, with a decrease in long-term financing but an increase in short-term borrowings, coupled with higher repayments of local currency loans, indicates active debt management but also potential reliance on short-term funding. The substantial negative cash and bank balances at the period end highlight ongoing liquidity pressures.
Investor Takeaway
For investors, these results paint a challenging picture. The core profitability of SSGC is under severe pressure from declining gas sales revenue and an escalating tax burden. While 'Other Income' provided a crucial buffer, it cannot be relied upon to consistently offset operational weaknesses. The lack of any dividend declaration reinforces the company's current focus on internal financial stability rather than shareholder returns.
Rational investors should closely monitor several key areas: the trend in gas sales volumes and pricing, the company's ability to recover its substantial trade debts, and any changes in government policy regarding levies and tariff adjustments. The company's liquidity position, marked by increasing short-term borrowings and negative cash balances, also warrants careful attention.
Given the significant drop in EPS and no immediate prospects for dividends, SSGC's stock may face continued pressure. A turnaround would likely require a sustained improvement in gas sales, effective management of receivables, and a more favorable regulatory and tax environment.