Dip in deposit interest, falling sales hit state oil companies

The three state-owned oil companies Padma, Meghna, and Jamuna are in trouble as their earnings have been declining due to the lowered interest rate on deposits and falling sales.

These companies make 80-90 percent of their net profits through interest from fixed deposits in different banks. But, most banks lowered the deposit interest rate in the first half of the current fiscal year, negatively impacting the income of the three oil companies. 

The government last year directed banks to cut their interest rate on deposits to a maximum 6 percent, in a bid to bring down the lending rate to 9 percent. Following the directive, the banks began lowering their deposit interest rates.

Speaking to The Business Standard, officials from the Meghna Petroleum, Jamuna Oil and Padma Oil said the three companies have around Tk10,000 crore in fixed deposits in different banks. 

Until the previous fiscal year, the companies were getting 8-9 percent interest on their deposits. However, the interest on fixed deposits have dipped to 4-5 percent in the first half of the current year, and the trend is likely to continue in the future.

The Jamuna Oil has Tk3,146 crore in fixed deposits. In the first half of the current fiscal year, the company's income from fixed deposit interests dropped by 20 percent to Tk136.26 crore. The company earned Tk171.33 crore from interests for the same period a year ago.

The Padma Oil has Tk3,326 crore in fixed deposits. The company's income from interests dropped by 4 percent to Tk147 crore in the first half of the current fiscal year. The company earned Tk152.50 crore from interests on Tk3,133 crore in fixed deposits for the same period in the previous year.

Meanwhile, the Meghna Petroleum has Tk3,600 crore in fixed deposits, and its earnings from interest dropped by 15 percent to Tk156 crore in the first half of this fiscal year, down from Tk184 crore for the same period last year. 

Meghna Petroleum Managing Director Mir Saifullah al Khaled said the oil companies are losing profits due to the lowered interest rate on deposits.

Oil demand declines

The oil sales of the three state-owned companies dropped in the first half of the current fiscal year.

Compared to that of the previous year, the Padma's oil sales dropped by 6 percent to Tk126.39 crore and profits from oil sales went down by 54 percent to 3.84 crore in the current year.

The Jamuna's oil sales dropped by 18 percent to Tk60.66 crore and profits from sales went down by 77 percent to 6.06 crore, compared to that of the last fiscal year.

Meanwhile, the Meghna's oil sales dipped by 4 percent to Tk106 crore in the current year. Profits from sales have gone down by 4 percent to Tk40.26 crore.

Commenting on the drop on oil sales, Mir Saifullah al Khaled said, "Most of the power companies are using LNG (liquefied natural gas) instead of oil. The business of motor vehicles is also sluggish.

"These factors have contributed to the decline in oil sales."

The three companies also witnessed a drop in net profits due to the sluggish oil sales in the first of half the current fiscal year. 

The Jamuna Oil's net profits went down by 28 percent to Tk103.25 crore, Meghna Petroleum's dropped by 12 percent to 148.79 crore and Padma Oil's dipped by 7 percent to 131.10 crore. 

Share performance

Among all the companies owned by the government, these three oil companies are giving the shareholders the highest amount of dividends. However, the companies' shares have been affected by the downward trend in the Dhaka Stock Exchange in the past six months.

The share price of Padma has dropped by 24 percent, Meghna by 20 percent and Jamuna by 18 percent in the current fiscal year. 

On Thursday, the closing price of Jamuna Oil's shares was Tk139, Meghna's Tk157 and Padma's Tk176.60.