Shell Pilipinas Corp. (SPC) reported a P4.33-billion net loss in the second quarter, a sharp reversal from the P221.73-million net profit posted a year earlier, as rapidly rising global product costs squeezed margins.

According to the listed oil company's quarterly report filed with the Securities and Exchange Commission, second-quarter net sales climbed 49% to P83.68 billion from P56.15 billion, while cost of sales surged 63.8% to P83.60 billion from P51.05 billion. Gross profit consequently fell to P89.73 million from P5.11 billion.

For the first half, Shell Pilipinas posted a P2.72-billion net loss, reversing the P965.32-million net profit recorded a year earlier. Core earnings, which exclude inventory holding gains or losses and other one-off items, swung to a P1.89-billion net loss from P1.98 billion in earnings in the same period last year.

"This was mainly driven by the steep decline in fuels marketing margins due to the timing lag between rapidly rising global product costs and local market pricing," the company said.

Shell Pilipinas also booked a P1.38-billion pretax inventory holding loss in the first half due to severe fuel-price fluctuations arising from the Middle East crisis. The loss was partly reduced by the sale of the company's remaining crude inventory in June.

First-half net sales rose 28.8% to P146.97 billion from P114.14 billion, mainly due to higher pump prices driven by the increase in global oil prices amid the Middle East crisis that began in March. Cost of sales increased 36.1% to P140.46 billion from P103.23 billion as global fuel prices rose to about $123 per barrel by the end of June from about $82 per barrel a year earlier.

First-half gross profit fell 40.3% to P6.52 billion from P10.91 billion, while selling, general, and administrative expenses rose 2% to P8.67 billion. The company also recognized P409.4 million in impairment losses related to its supply footprint optimization strategy.

On the volume side, sales slipped 0.9% to 1.94 billion liters from 1.96 billion liters, while marketing volume declined 2% to 1.90 billion liters from 1.94 billion liters. Commercial fuels volume increased 4% on stronger demand from the power sector and the reseller channel, with the segment recording its highest monthly volume in June. Mobility volumes fell 4% as high pump prices weighed on consumer demand, while the lubricants business was supported by continued customer demand and the expansion of the Shell Flagship Workshop network.

"The first half tested the resilience of energy supply chains across the industry. Our priority was clear: keep fuel available, support our customers and trade partners, and help keep the Philippine economy moving," Shell Pilipinas President and Chief Executive Officer Lorelie Quiambao Osial said.

"By leveraging Shell's global Trading & Supply network, local infrastructure, and strong customer relationships, we maintained reliable supply through one of the most volatile market environments in recent years," she added.

Shell Pilipinas said the continuing Middle East conflict had intensified oil-price volatility and posed risks to fuel oil and lubricants supply globally and domestically, adding that the resulting fuel-price swings had substantially affected its financial performance since March.

On Monday, shares in Shell Pilipinas fell P0.16, or 1.9%, to P8.24 apiece. — Sheldeen Joy Talavera