PSO profit drops 17% to Rs3.5b

Decline comes on back of surge in finance cost

KARACHI: Pakistan State Oil announced a 17% decrease in its after-tax profit to Rs3.5 billion for the quarter ended September 30, 2019 following a massive surge in finance cost.

The company had announced a profit of Rs4.2 billion in the same quarter of previous year, according to a notice sent to the Pakistan Stock Exchange on Wednesday.

Earnings per share stood at Rs8.94 in the period under review compared to Rs10.69 in the previous year. PSO witnessed a 21.3% increase in sales to Rs340.6 billion in the Jul-Sept 2019 quarter due to a surge in prices of petroleum products.

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Additionally, rise in sales volumes by 11% year-on-year to 2.1 million tons (furnace oil, motor spirit and high-speed diesel volumes increased by 27%, 10% and 4% respectively) also contributed to the increase, according to an AHL Research report.

Other income increased nearly 74% to Rs1.7 billion in the period under review from Rs970.5 million. The jump was due to higher mark-up on delayed payments, the report added. Meanwhile, finance cost increased 69.4% to Rs3.1 billion owing to higher reliance on short-term borrowings.

“Major changes were seen in other income, most likely due to inventory gains, and finance cost, which increased given the hike in interest rates,” said Topline Securities’ analyst Syed Fawad Basir in post-result comments.

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“Other operating expenses did not hinder the bottom-line by remaining unchanged on a year-on-year basis, possibly due to strict cost control,” he added.

The analyst highlighted volatility in oil prices, inventory losses, rupee depreciation and a sharp pile-up of circular debt as key risks for the company. PSO’s share price surged Rs6.98 or 5% to Rs146.69 with a turnover of 2.86 million shares. 

Published in The Express Tribune, October 31^st, 2019.

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