PSO records surprising gains

The marketing and sales of imported liquefied natural gas (LNG) in Pakistan have become a profitable business after the government passed on rising international gas prices to local consumers. This move has helped state-owned energy firms avoid further accumulation of circular debt, reduce their reliance on bank borrowing, and improve their working capital.

Amid this favourable environment, Pakistan State Oil (PSO) surprised the market with strong quarterly earnings, booking Rs10.2 billion in other income in the fourth quarter ended June 30, 2024. According to Zayan Babar Khan, an analyst at Optimus Capital Management, this income is likely due to the recognition of a late payment surcharge on LNG receivables.

PSO reported a net profit of Rs15.86 billion for the full year ended June 30, 2024, a remarkable 180% increase compared to Rs5.66 billion in FY23. This translated into earnings per share of Rs33.79, up from Rs12.06 the previous year. In the fourth quarter alone, the company posted a profit of Rs2.46 billion, compared to a loss of Rs5.69 billion in the same quarter last year.

Khan noted that the government's decision to increase gas prices twice, in November 2023 and February 2024, turned LNG into a profitable venture for PSO. By the third quarter of FY24, PSO's financial position had already improved. "Looking ahead, we anticipate no further accumulation of circular debt, which should allow PSO's loss-making RLNG business to support its cash-rich petroleum operations," Khan said.

PSO's cumulative finance costs also declined to Rs423 billion in the first three quarters of FY24, down from Rs467 billion in the first two quarters, reflecting improved liquidity and reduced borrowing. In the fourth quarter of FY24, PSO incurred a finance cost of Rs11.9 billion, a 21% decrease from the previous quarter and the same period last year.

In a statement, PSO highlighted its financial performance and strategic resilience in a challenging market. At a meeting in Islamabad on August 27, 2024, the Board of Management reviewed the group's financial results for FY24. The Board also announced a dividend of Rs10 per share for FY24.

PSO's subsidiary, Pakistan Refinery Limited (PRL), also performed well, recording a profit after tax of Rs4.1 billion on gross revenue of Rs403.6 billion. On a consolidated basis, the group reported a profit after tax of Rs18.3 billion, with an EPS of Rs39.

In the competitive white oil market, PSO increased its market share to 51.6%, strengthening its leadership position.