Corporate results: Year-long crisis hits PSO’s profits

Company saw earnings drop 68% to Rs6.9b; new CEO takes charge.

KARACHI:

Pakistan State Oil (PSO) was unable to escape the wrath of the fall in price of crude oil as its net profit for fiscal 2014-15 dropped 68% to Rs6.9 billion, down from the previous year’s Rs21.8 billion.

Much of the slide in earnings was due to hefty loss booked earlier this year on inventory of petroleum products, which saw a decline in price in tandem with global trends.

PSO’s net revenue was down 23% to Rs913 billion, reflecting the impact of lower petroleum product prices in the past year.

Profitability was affected by sharp decline of 46% in the OPEC basket price of crude oil, which came down to $59 per barrel in June 2015 from $109 per barrel in July 2014, the company said in a statement.



Its gross margin, the money it keeps after paying for the cost of products, was just 2.6% in 2015, lower than the 3.1% it made in the previous year.

Analysts say it got a respite in the fourth (April-June 2015) quarter after with inventory gain following re-increase in the price at petrol pumps.

Its other income, a major part of which comes from interest it earned on delayed payment from power producers, was down 28% to Rs14 billion.

PSO has been operating without a board of directors since earlier this year and all decisions have being taken by the managing director under the directives of the government.

Refocus of attention

Over the years, the company has lost market share to private firms in the petrol and diesel categories as the government has refocused its attention to import of furnace oil, which is used to run thermal power plants.

In recent months, PSO has also been importing liquefied natural gas (LNG). Information related to that will come out once detailed accounts are made public.

The company says it continues to dominate market with a share in black oil and white oil segments standing at 66.6% and 49.8 %, respectively. Black oil is used to refer to furnace oil while white oil is used for all the other products.

Sales volume for petrol grew by 18.5% in fiscal 2015 over the same period last year due to an upsurge in demand as petrol price decreased and shortage of CNG persisted, the company said in a statement.

The company’s diesel sales were almost stagnant.

PSO still managed to announce a final cash dividend of Rs4 per share, which is in addition to the earlier interim cash dividend of Rs6 per share.

Imranul Haque takes charge

After months of confusion and controversy, Sheikh Imranul Haque finally took charge as CEO of PSO. He then went on to sign annual accounts with a massive decline in profit.

His appointment should come as a relief for PSO employees who had been working under an ad-hoc management, which was taking all orders from the government.

Published in The Express Tribune, September 2^nd,  2015.

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