I am surprised that the board of management made the announcement but did not give any explanation
DUBAI: The board of management of Pakistan State Oils Limited (PSO) announced on February 6 that the company made a net profit amounting to Rs10 billion for the half-year period ending on December 31 this year but it is shocking that the board further announced that it has decided not to declare any dividend for shareholders for this six-month period ending on December 31. The company made a net profit of Rs6.7 billion for the half year period that ended on December 31, 2016 and declared a 50 per cent dividend. The board of management owes an explanation to the company’s shareholders as to why it has not declared dividends for shareholders despite very handsome profits. Has the net profit of Rs10 billion been invested in some company’s expansion project? Or, has it been used to finance PSO’s ever increasing circular debts?
Throughout the corporate world, companies use profits for the benefit of its shareholders by either distributing it to shareholders as dividend or by investing in the expansion projects of the company. Here, we have a situation that the company’s profit is possibly being used to finance the circular debts. I am not convinced this is in the interest of shareholders who are the real owners of the company. I am surprised that the board of management made the announcement but did not give any explanation as to why there was no dividend despite company’s record profits. This situation defies all general behavioural norms of the management of a big public company.
The time has come in Pakistan that the management of public companies hold press conferences to elaborate on the company’s performance, management and various decisions at least biannually. I would request honourable Prime Minister Nawaz Sharif, Minister of Petroleum and Natural Resources Mr Shahid Khaqan Abbasi, who is also Chairman of PSO’s board of directors and Finance Minister Mr Ishaq Dar take notice of this very strange financial story of Pakistan’s biggest public company, in which the government is the majority shareholder.
Ejaz Ahmad Magoon
Published in The Express Tribune, February 8th, 2017.
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