KARACHI: Low sales and “structural changes” in the energy exploration and production (E&P) industry have caused “serious concerns” about the ability of Ados Pakistan Ltd — a stock exchange–listed entity engaged in the supply of oil and gas field–related equipment — to continue its regular operations.

As a result, the engineering company has decided to delist itself from the Pakistan Stock Exchange (PSX) by buying back its own shares currently held by minority shareholders.

“The Voluntary Delisting Committee of the PSX… has approved the minimum buyback price of Rs29 per share,” the stock exchange said in a regulatory notice on Aug 11. The front-line regulator said the company will “qualify for delisting” only if its minimum quantum of the shareholding purchase is 342,800 shares, which is 25 per cent of 1.37 million shares outstanding with the minority shareholders.

The company’s current stock price is Rs26 apiece.

According to company CEO Zia Akbar Ansari, the sponsors are taking Ados Pakistan Ltd private because they wish to protect the interest of the minority shareholders amid an “extremely uncertain” future.

The oil and gas industry has been in a recession-like situation since 2017-18, he said while complaining about foreign firms dumping their products in the local market. “(The) induction of Chinese suppliers/companies into the business has greatly increased competition, resulting in fewer orders and low profit margins in order to compete in the bidding process by state-owned (E&P) companies,” he said in the latest review report by the company’s directors to shareholders. The company posted a net profit of Rs101.9m in the first three quarters of 2021-22 versus a net loss of Rs26.1m a year ago.

The state-owned E&P companies stopped buying equipment from Ados Pakistan Ltd after declaring it disqualified “on the basis of experience”. Declining sales and long-term net losses left the company unable to service the licensing and certification costs for its manufacturing licence from the American Petroleum Institute — a prerequisite for doing business with state-owned E&P firms.

The management of Ados Pakistan Ltd has vowed to generate sufficient cash flows, meet financial obligations and strive for profitability regardless of external market shocks. In this regard, the management is re-evaluating

the nature of its core business and any “diversification or modification”.

Published in Dawn, August 14th, 2022