PSO switches from loss to profit, earns Rs4.14 billion

Recommends interim cash dividend of Rs10 per share

KARACHI: Pakistan State Oil (PSO) returned to profit with earnings of Rs4.14 billion in the quarter ended March 31, 2017 on the back of robust sales and reduced cost of sales, according to a bourse filing on Monday.

The oil marketing company with over 55% market share had posted a net loss of Rs2.13 billion in the same quarter of previous year.

Earnings per share (EPS) came in at Rs15.24 in the Jan-Mar quarter compared to loss per share of Rs7.85 in the corresponding quarter of previous year.

The board of directors recommended an interim cash dividend of Rs10 per share.

PSO’s stock price stood at Rs457, up Rs14.42 or 3.25% with a volume of 1.42 million shares at the Pakistan Stock Exchange (PSX).

The company recorded net sales of Rs218.16 billion in the quarter under review, which was 84% higher than Rs134.61 billion in the same quarter of previous year.



Cost of sales dropped to 95.76% (or Rs208.92 billion) of net sales valuing Rs218.16 billion from 100.45% (or Rs153.22 billion) of net sales of Rs134.61 billion in the previous year. This drop in the cost mainly helped the company to turn around from loss to profit.

Topline Securities’ analyst Umair Naseer said in post-result comments that the increased sales were “driven by higher [international] oil prices”.

“International oil prices surged 77% in the period under review, which was partially reflected in local ex-refinery prices,” he said.

As a result of higher oil prices, the gross profit advanced to Rs9.2 billion versus loss of Rs610 million in Jan-Mar last year. The higher gross profit could be attributed to higher margins on furnace oil (margins linked with prices) and absence of any inventory losses.

Growth in white oil (petrol and diesel) demand also contributed to higher sales and gross profits for the company. “White oil sales were up 5% year-on-year to 1.4 million tons in the third quarter (Jan-Mar) of FY17,” he added.

The company also cut down its operating cost by 5% to Rs2.9 billion, contributing to the net profit. Similarly, other income went up 6% to Rs1.7 billion “likely due to higher penal income (late payment surcharge) from the power sector,” said Naseer.

Finance cost rose to Rs1.48 billion from Rs1.41 billion.

“Key risks to the PSO stock include volatility in oil prices and inventory losses, rupee depreciation, exchange losses and sharp pile-up of circular debt,” the analyst added.

In the nine-month period, PSO’s profit soared three times to Rs14.15 billion (EPS Rs52.10) from Rs4.59 billion (EPS Rs16.91) in the corresponding period of FY16.

Published in The Express Tribune, April 25^th, 2017.

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