PSO Records a 50% Decline in Profits in H1 FY2018-19

Pakistan State Oil Company Limited, the country’s largest oil marketing company, has announced its financial results for the Half year that ended in December 2018.

The company reported a 50% decline in profits to Rs 4.24 billion, from Rs 8.52 billion in the same period last year.

The challenging economic trend in the country fueled by rupee’s devaluation and adverse balance of payment position resulted in a decline of 27% in the cumulative liquid fuel market with a negative contribution of white oil and black oil of 12% and 60% respectively. Black oil volumes have been impacted significantly due to power production shift towards RLNG in the country.

Despite the challenging economic scenario, PSO led the liquid fuel market in 1HFY19 with an overall market share of 40.9% (an increase of 0.7% market share vs. Sept 18 quarter). Despite soaring outstanding receivables (inclusive of LPS) from the Power Sector, PIA and SNGPL – as of December 31, 2018 which stood at Rs. 325 billion (September 30, 2018: Rs. 310 billion) – PSO maintained the sensitive supply chain by importing 48% of total industry imports and uplifting 36% of total refinery production in the country.

Earnings per share during the half decreased to Rs 10.86 from Rs 21.78 in the period under view. The company did not announce any interim dividend along with the result.

Similarly, during the 2nd quarter, PSO reported a disappointing result as the profits went down to just Rs 68 million, from Rs 3.49 billion, a sharp decline of 98%.

According to Topline securities, the company reported a decrease in profitability due to the exchange losses which amounted to Rs 1.5 billion and higher inventory loss of Rs 3 billion. Other than this, the company witnessed a decline of 47% YoY in its volumetric sales, which were mainly dragged by Furnace Oil, coupled with Hi Speed Diesel and Motor Gasoline by 35% and 17% year on year.

Earnings per share during the quarter decreased to just Rs 0.17 from Rs 8.93 in the period under view.

During the quarter, PSO reported net sales of Rs 291 billion, showing a 9.58% increase in nets sales with the cost of goods sold increasing by 10.47% to Rs 286 billion taking the gross profit down to just Rs 5.09 billion from Rs 9.52 billion, down by 46.53%.

The other income of the company increased by 121% to Rs 1.67 billion from Rs 756 million. The finance costs during the quarter doubled to nearly Rs 2.02 billion, due to a rise in interest rates and higher bank borrowings.

PSO’s associated company also reported a loss of Rs 185 million from a profit of Rs 52.59 million in the same quarter last year.

PSO’s script at the bourse closed at Rs 225.84, up by Rs 3.34 or +1.50%, with a turnover of 1.06 million shares on Monday.

Despite stiff competition in the industry especially due to an increase in the number of OMC’s and shrinking market size, PSO is making an all-out effort to maintain its market share and leadership position with sustained profitability.

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