Shell Pakistan : Transmission of Quarterly Report for the Period Ended September, 2023

Driven to

Deliver

Shell Pakistan Limited

Quarterly Report

September 2023

This page is blank intentially

Company

Information

Board of Directors

Chief Executive

Audit Committee

Human Resource and Remuneration Committee

Company Secretary

Registered Office

Auditors

Legal Advisors

Registrar & Share

Registration Office

Zain K. Hak (Chairperson) Waqar I. Siddiqui

Rafi H. Basheer

Parvez Ghias

Imran R. Ibrahim

Madiha Khalid

Zaffar A. Khan

John King Chong Lo

Zarrar Mahmud

Amir R. Paracha

Badaruddin F. Vellani

Waqar I. Siddiqui

Imran R. Ibrahim (Chairperson)

Rafi H. Basheer

Badaruddin F. Vellani

Zaffar A. Khan (Chairperson)

Parvez Ghias

Waqar I. Siddiqui

Zain K. Hak

Lalarukh Hussain - Shaikh

Shell House

6, Ch. Khaliquzzaman Road

Karachi-75530

Pakistan

EY Ford Rhodes

Vellani & Vellani

Advocates & Solicitors

FAMCO Associates (Pvt) Ltd.

8-F, next to Hotel Faran, Nursery Block-6, P.E.C.H.S. Shahra-e-FaisalKarachi-75400

02 SHELL PAKISTAN LIMITED

Director's Review Report

For the the nine months ended September 30, 2023

Dear Shareholders,

The Directors of the Company are pleased to present the unaudited condensed interim financial statements for the third quarter and nine months ended September 30, 2023.

Since last year, the Company has been facing significant disruptions from external factors, such as unprecedented Rupee devaluation, rising inflation, and ongoing macroeconomic instability. These economic challenges resulted in a slow-down in economic activity, significant reduction in industry fuel demand and heightened risks to supply security. Demand was suppressed primarily due to elevated prices, coupled with political and economic unrest and the widespread availability of smuggled products.

Despite the ongoing macroeconomic challenges in the country, the Company successfully delivered a profit after tax of PKR 6,450 million for the nine months ended September 30, 2023. The Company continued its focus on business performance, safety of people and protection of the environment and remained committed towards operational excellence, while keeping costs at a manageable level. The financial result also reflects the impact of one-off technical service fee relief received from Shell International Petroleum Company.

The profit for the nine months ended September 30, 2023, after providing for administrative, marketing and distribution expenses, financial and other charges amount to:

	Rupees in Million
Profit before taxation	11,587
Taxation	(5,137)
Net profit for the period ended September 30, 2023	6,450
	Rupees
Earnings per share - basic and diluted	30.14

Appropriations and movement in reserves have been disclosed in the condensed interim Statement of Changes in Equity on page 08 of the condensed interim financial statements.

As per the announcement made by the Company to the Pakistan Stock Exchange on June 14, 2023, Shell Petroleum Company Limited, United Kingdom (the Immediate Parent of the Company) which is a subsidiary of Shell Plc, informed the Board of Directors of its intent to sell its shareholding of 77.42% in the Company. SPL has been informed that SPCo is carrying out a targeted sales process which will require further due diligence and discussions with potential buyers, and at this stage is seeing strong interest from both international and domestic parties. Any sale by SPCo of its shares in SPL remains subject to the execution of binding documentation and the subsequent receipt of regulatory approvals.

The Company continues to be at the forefront of the industry in Pakistan in ensuring safe operations across the business and playing an industry leading role in terms of safety advocacy.

Macro-economic challenges

The Company's financial results continue to be adversely impacted by the ongoing economic challenges, coupled with long overdue Government receivables of PKR 5,331 million. During the nine months period, PKR has devalued by ~27% against USD resulting in significant exchange loss for the Company.

Despite these challenges, the Company acknowledges and welcomes the Government's recent decision to increase industry margins and take robust measures to combat black market activities, which are aimed at stabilizing the currency. The Company looks forward to further proactive steps from the Government to support the recovery of the industry and contribute to the overall stabilization of the economy.

Lubricants

Shell Lubricants continues to perform well in a highly challenging environment, as is evident via consistent market shares in a declining industry. Focusing on building business in consumer, mechanic and trade - segments, Lubricants launched multifold brand campaigns - including a partnership with KFC on Helix, the celebration of mechanics around the World Mechanics Day, Advance workshops for motorcycle mechanics and Rimula's campaign at trucking hubs across the country. In the B2B ambit, the Company recorded milestones in sectors like fleet, construction, sugar and tapped into new sectors such as cosmetics; with a keen look at opportunities which can further boost the pipeline.

QUARTERLY REPORT SEPTEMBER 2023 03

Mobility (formerly Retail)

The Mobility business continues to lead in providing best-in-class customer value proposition for more customers across the country by introducing 19 new sites and modernizing its existing network, while promoting safe refueling, easy payment solutions and introducing customer-centric programs.

Shell became the first in the industry to introduce Voice of Customer program in Pakistan which enables customers to provide real time feedback through QR codes placed on the sites. So far more than 30,000+ responses have been received that gives Shell valuable insights to continuously keep improving customer service.

Mobility Visual Identify (MVI) is the visual experience for our customers that is being introduced globally and our teams are proud to introduce the latest brand identity in Pakistan. MVI is developed to reflect the evolution of the Shell brand through innovation & improved services, it modernizes the sites and conveys a more welcoming guest-centric mindset while also emphasizing our industry leading Non-Fuel Retailing offers.

Shell's safety initiative "Ehtiyaat Bunay Hifazat" received nearly 82 million views on television, along with 230 million+ views on social media in what was an industry-leading campaign on safety. OGRA recognized the industry efforts in promoting refuelling safety among two and three wheelers, trailblazed by Shell's initiative.

The campaign, "Keep Driving, Keep Winning" was launched for Shell V-Power and Shell Helix customers across the top 97 retail stations in Pakistan, rewarding our customers for choosing Shell.

Shell Pakistan joined hands with Jazz Cash & Easypaisa to enable quick and easy payments to accelerate digital payments.

Mobility also demonstrated remarkable growth in its Convenience Retail (CR) business in Pakistan. This success is attributed to our strategic endeavors and commitment to excellence. The Company expanded its network with 14 new Shell Select stores, while further developing its On-Demand Delivery to deliver two times growth versus last year, showcasing relevance and scalability of the CR business in the quick-commerce space. The CR business's focus remains towards developing new value streams for the business and delivering worldclass customer journeys.

Environmental, Social and Governance

Shell Pakistan initiated two eco-friendly and sustainable solutions on plastic reusability. By recycling discarded Shell lubricant bottles, Shell Pakistan constructed a plastic infused road, 730 feet long and 60 feet wide on which Shell House is located in Karachi. This is a purpose-built solution which benefits neighboring residents, schools, church community and Shell. The initiative was covered by local and international media. The other initiative is a collaboration with a Shell Tameer alumni, Concept Loop, a tech-basedstart-up converting plastic waste into building materials, who deployed pavers at a Shell retail site in Karachi. This successful initiative can be replicated at other retail sites planned for renovation and construction.

Crop stubble burning is one of the biggest contributor of smog in South Asia. UN reported agricultural waste burning contributes to 20% of air pollution emissions (2018). Our economy too, is heavily dependent on traditional agricultural technology. Shell Pakistan worked with local farmers in collaboration with National Rural Support Programme (NRSP), to transform agricultural waste into valuable biochar - a product that can potentially improve soil health. Biochar is produced through the process of pyrolysis - thermal decomposition of biomass in an oxygen-controlled environment. This process releases little to no contaminating fumes and is a sustainable way to get rid of agricultural waste. The results of the pilot project are optimistic. The soil characteristic such as PH levels, organic matter, potassium and phosphorus improved substantially, which led to an increase in land yield by a significant 50%. Through this project, biochar technology presents an opportunity to significantly reduce emissions associated with agricultural waste burning, as well as benefit soil health.

Shell Tameer continues to play a keen role in upskilling and recognizing young entrepreneurs. Tameer completed 22 sessions across Pakistan engaging universities and incubation centers, training over 700 individuals which included 560 startups. Students were trained on the basics of entrepreneurship and were invited to participate in the 10th Tameer Award 2023. This year, the awards expanded reach and tapped Gilgit Baltistan, welcoming bright talent into the pool of entrepreneurs, and to compete with students of metro cities.

Shell Pakistan engaged with fence line community schools of Kemari and Chaklala to share concepts of road safety. Students were engaged in a series of fun activities - story telling, art contest, quiz competition, distribution of 'Once upon a Road,' a book for young readers published by Shell Pakistan, to raise awareness on road safety. The school management found the engagements highly valuable to raise basic civic sense among young minds.

04 SHELL PAKISTAN LIMITED

Going forward

The macroeconomic environment remains challenging for the industry in near term, owing to currency fluctuation, oil price volatility and the general uncertain economic outlook of the Country.

Despite these challenges, the management and the Board of Directors remain committed in ensuring that the Company's financial position is further strengthened, a Goal-Zero approach in safety performance is maintained and that the company continues to play a responsible role in society.

Composition of the Board

Total Number of Directors	Male: 10 Female: 01
Independent Directors	04
Non-Executive Directors	04
Executive Directors	03

We would like to take the opportunity to thank shareholders, customers, employees and all other stakeholders for their dedication, sustained support, and trust in the Company.

On behalf of the Board of Directors

Zain K. Hak	Waqar I. Siddiqui
Chairperson	Chief Executive
Karachi: October 18, 2023

QUARTERLY REPORT SEPTEMBER 2023 05

Condensed Interim Statement of Financial Position

As at September 30, 2023

ASSETS	Note
Non-Current Assets

Unaudited		Audited
September 30,	December 31,
2023----------- (Rupees '000)	-----------2022

Property, plant and equipment	5
Right-of-use assets
Intangible assets
Long-term investments	6
Long-term loans
Long-term deposits and prepayments
Deferred taxation
Current Assets
Stock-in-trade	7
Trade debts
18.4
Loans and advances
Short-term deposits and prepayments
Other receivables	8
Bank balances
9
TOTAL ASSETS
EQUITY AND LIABILITIES
Equity
Share capital	10
Share premium
General reserves
Unappropriated profit
Remeasurement of post-employment benefits - actuarial loss
Unrealized loss on remeasurement of equity investment classified as
fair value through other comprehensive income
Total equity
Liabilities
Non-Current Liabilities
Asset retirement obligation
Long-term provisions
Long-term lease liabilities
Provision for post-retirement medical benefits
Current Liabilities	11
Trade and other payables
Advances received from customers (contract liabilities)
Unclaimed dividend
Unpaid dividend
Accrued mark-up

Taxation - net

Current portion of long-term provisions

Current portion of long-term lease liabilities

Contingencies and commitments	12
TOTAL EQUITY AND LIABILITIES

The annexed notes 1 to 23 form an integral part of these condensed interim financial statements.

22,228,554

6,429,4275,599,869-

69,135

320,239

843,529

35,490,753

61,208,022

6,430,738

77,155

84,973

6,615,736

15,156,611

89,573,235

125,063,988

2,140,246

11,991,012

207,002

7,259,579

(543,266)

(5,000)

21,049,573

367,087

2,950,169

6,274,463

178,788

9,770,507

85,820,550

2,566,147

250,187

3,826,186454,565-

603,832

722,441

94,243,908

125,063,988

20,579,301

6,453,393

2,101

5,198,192

51,163

220,100

780,010

33,284,260

42,921,597

5,910,061

62,784

535,584

8,216,986

10,801,097

68,448,109

101,732,369

2,140,246

11,991,012

207,002

807,101

(543,266)

(5,000)

14,597,095

321,113

2,923,281

5,945,991

178,788

9,369,173

73,703,492

1,442,366

278,892

508,954

2,848

882,792

236,964

709,793

77,766,101

101,732,369

Zarrar Mahmud	Waqar I. Siddiqui	Imran R. Ibrahim
Chief Financial Officer	Chief Executive	Director

06 SHELL PAKISTAN LIMITED

Condensed Interim Statement of Profit or Loss and other Comprehensive Income (Unaudited)

For the nine months ended September 30, 2023

		Nine months ended				Quarter ended
		September 30,				September 30,					September 30,				September 30,
	Note	---------------------------------------------------------------2023				2022 (Rupees '000) 2023---------------------------------------------------------------	2022
Sales		325,665,500	307,921,601				110,247,969			109,437,385
Other revenue		897,120	535,687				255,983			210,771
		326,562,620				308,457,288							110,503,952						109,648,156
Sales tax		(5,390,835)	(5,248,092)				(1,425,954)			(1,531,921)
Net revenue
	321,171,785	303,209,196				109,077,998			108,116,235
Cost of products sold		(291,563,388)	(270,053,828)				(97,660,827)			(102,892,340)
Gross profit
	29,608,397	33,155,368				11,417,171			5,223,895
Distribution and marketing expenses		(8,798,132)	(10,107,157)				(3,284,990)			(5,810,081)
Administrative expenses		(6,916,045)	(5,664,629)				(1,922,699)			(2,128,285)
Other expenses	13	(13,492,211)	(12,315,539)				(545,526)			(3,473,970)
Other income	14	12,740,424	973,480				521,815			(109,907)
Operating profit / (loss)
	13,142,433	6,041,523				6,185,771			(6,298,348)
Finance costs	15	(1,954,502)	(1,043,801)				(782,068)			(559,055)
		11,187,931		4,997,722					5,403,703				(6,857,403)
Share of profit of associate - net of tax	6	399,570	617,546				146,204			13,524
Profit/ (loss) before taxation		11,587,501		5,615,268					5,549,907				(6,843,879)
Taxation	16	(5,137,131)	(2,751,371)				(2,639,488)			2,199,746
Net profit/ (loss) for the period		6,450,370		2,863,897					2,910,419				(4,644,133)
Other comprehensive income
Items that may be subsequently
reclassified to profit or loss
Share of other comprehensive income / (loss)		2,108	(38,914)				-			-
of associate - net of tax	6
Total comprehensive income / (loss)
for the period		6,452,478		2,824,983					2,910,419				(4,644,133)
		---------------------------------------------------------------				(Rupees '000) ---------------------------------------------------------------
Earnings / (loss) per share - basic and diluted	30.14	13.38				13.60			(21.70)

The annexed notes 1 to 23 form an integral part of these condensed interim financial statements.

Zarrar Mahmud	Waqar I. Siddiqui	Imran R. Ibrahim
Chief Financial Officer	Chief Executive	Director

QUARTERLY REPORT SEPTEMBER 2023 07

Condensed Interim Statement of Changes in Equity (Unaudited)

For the nine months ended September 30, 2023

	Capital			Revenue reserve
	reserve
Share	Share		General	Unappropriated	Remeasurement	Unrealised loss	Total
capital	premium		reserves	profit	of	on
					post-employment	remeasurement
					benefits -	of equity
					actuarial loss	investments

Balance as at December 31, 2021 (Audited)	2,140,246
Net profit for the period		-
Other comprehensive income for the period		-
			-
Balance as at September 30, 2022 (Unaudited)
	2,140,246
Balance as at December 31, 2022 (Audited)	2,140,246
Net profit for the period		-
Other comprehensive income for the period		-
			-

11,991,012

-

-

-

11,991,012

11,991,012

-

-

-

(Rupees '000)

207,002		1,587,146	(598,930)
-		2,863,897			-
-		(38,914)			-
-		2,824,983			-
207,002		4,412,129	(598,930)
207,002		807,101	(543,266)
-		6,450,370			-
-		2,108			-
-		6,452,478			-

(5,000) 15,321,476

• 2,863,897
• (38,914)
• 2,824,983

(5,000) 18,146,459

(5,000) 14,597,095

• 6,450,370
• 2,108
• 6,452,478

Balance as at September 30, 2023 (Unaudited)	2,140,246		11,991,012

207,002

7,259,579

(543,266)

(5,000) 21,049,573

The annexed notes 1 to 23 form an integral part of these condensed interim financial statements.

Zarrar Mahmud	Waqar I. Siddiqui	Imran R. Ibrahim
Chief Financial Officer	Chief Executive	Director

08 SHELL PAKISTAN LIMITED

Condensed Interim Statement of Cash Flows (Unaudited)

For the nine months ended September 30, 2023

CASH FLOWS FROM OPERATING ACTIVITIES

Cash generated from / (used in) operations

Finance costs paid

Interest portion of lease liabilities paid

Income tax paid

Long-term loans and advances

Long-term deposits and prepayments

Net cash generated from / (used in) operating activities

CASH FLOWS FROM INVESTING ACTIVITIES

Fixed capital expenditure

Proceeds from disposal of operating fixed assets

Dividend received from associate

Interest received on short-term deposits and saving accounts

Net cash used in investing activities

CASH FLOWS FROM FINANCING ACTIVITIES

Principal portion of lease liabilities paid

Dividends paid

Net cash used in financing activities

Net increase / (decrease) in cash and cash equivalents

Cash and cash equivalents at the beginning of the period

Cash and cash equivalents at the end of the period

Cash and cash equivalents comprise of:

Bank balances

Short term borrowings - secured

		Nine months ended
		September 30,					September 30,
	2023	2022
Note		----------- (Rupees '000) -----------
17	9,343,591	(4,318,498)
	(18,883)	(291,513)
	(583,158)	(162,209)
	(2,257,256)	(2,066,009)
	(17,972)	(13,877)
	(100,139)	24,068
		6,366,183					(6,828,038)
	(3,183,998)					(3,155,821)
	385,151					705,350
	-					23,221
	1,198,278					98,477
	(1,600,569)					(2,328,773)
	(327,006)	(778,728)
	(83,094)					-
	(410,100)					(778,728)
	4,355,514		(9,935,539)
	10,801,097	4,973,417
	15,156,611		(4,962,122)
	15,156,611	737,878
	-	(5,700,000)
		15,156,611			(4,962,122)

The annexed notes 1 to 23 form an integral part of these condensed interim financial statements.

Zarrar Mahmud	Waqar I. Siddiqui	Imran R. Ibrahim
Chief Financial Officer	Chief Executive	Director

QUARTERLY REPORT SEPTEMBER 2023 09