Shell Pakistan : Quarter 1 Report

Driven to

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Shell Pakistan Limited

Quarterly Report

March 2023

02 SHELL PAKISTAN LIMITED

Director's Review Report

For the quarter ended March 31, 2023

Dear Shareholders,

The Directors of the Company present the unaudited condensed interim financial statements for the quarter ended March 31, 2023.

The period witnessed material external shocks such as the unprecedented devaluation of the Rupee, rising inflation and macroeconomic uncertainty. The continued economic challenges over the period resulted in a slow-down in economic activity, low demand and risks to supply security. However, the Company was able to maintain its market share.

The profit/ loss for the period ended March 31, 2023, after providing for administrative, marketing and distribution expenses, financial and other charges amount to:

Appropriations and movement in reserves have been disclosed in the condensed interim Statement of Changes in Equity on page 07 of the condensed interim financial statements.

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 finances and profitability of the Company continue to be impacted by the current economic challenges affecting the country. The Company continues to bear the burden of overdue legacy receivables of PKR 5,331 million from the Government of Pakistan. The period saw an unprecedented 26% depreciation of the Rupee against the US dollar resulting in significant exchange losses for the Company. The Company's management continues to proactively engage with the Government authorities to minimize its exposure further from the foreign exchange losses incurred and recovery of the legacy receivables.

Lubricants

Lubricants business continues to be a key growth lever for the Company's overall business performance. In the face of massive economic headwinds, Lubricants business set its growth trajectory by focusing on the basics: consistent activations, sustained penetration and conscious pricing actions. Growth came predominantly on the back of expansion in the diesel engine oil sector and B2B new wins majorly in construction, fleets, general manufacturing and process oil sectors.

Mobility (formerly Retail)

Our Mobility business held its own under testing circumstances by delivering best in class customer value propositions and maintaining market share in a safe and compliant manner. Proactive coordination with Supply and Distribution ensured fuel availability across our network as supply challenges emerged across the industry. On the advocacy front, increase in OMC margins to Rs 6 per litre was realized through structured efforts. Moreover, 6 new sites were commissioned during the quarter to shore up Fuel and Non- Fuel retail delivery. Our safety campaign, "Ehtiyat Bunay Hifaazat" reached new heights at the industry level as other OMCs followed suit. The brand gained positive mileage via its alliance with the finalist (Multan Sultans) of the Pakistan Super League.

QUARTERLY REPORT MARCH 2023 03

Environmental, Social and Governance

Shell Tameer and SoS Technical Training Institute, Karachi signed an agreement to assist and prepare a student team from the institute to participate in the Shell Eco-marathon Asia, an annual competition hosted by Shell where student teams from all over the world design, build and drive energy efficient vehicles. The opportunity has been extended to a vocational institute where young automobile technicians from the underprivileged communities will receive technical and financial assistance from Shell Pakistan to design a fuel-efficient car for Shell Eco-marathon.

In another collaboration with SoS Technical Training Institute, Shell retail site service champions from Karachi underwent vocational skills development program for 6 months, 5 successfully graduated receiving certification from Sindh Board of Technical Education (SBTE).

Shell Tameer conducted workshops on Entrepreneurship and Business Model Canvas engaging 314 young startups and aspiring entrepreneurs from 7 institutes in Karachi, Lahore and Hyderabad.

Going forward

The Company and the Industry are expected to face severe challenges in the near term. Some of these continue to be macro-economic in nature such as currency, 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.

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

On behalf of the Board of Directors

04 SHELL PAKISTAN LIMITED