Corporate results: PSO profits take a spill

Company postpones dividend on swelling receivables of Rs189 billion.


Our Correspondent February 10, 2012

KARACHI: Pakistan State Oil (PSO) posted a massive drop in half-yearly profits and failed to declare a dividend, catching the market by surprise as the announcement is much lower than market expectation.

The country’s largest oil market company’s net profit dropped 36% to Rs4.58 billion due to higher operating expense and tax adjustments in the first half of 2012. The net profit was 18% lower than market expectation as analysts expected it to stand, on average, around Rs5.42 billion.

Meanwhile, the company’s board of directors in the meeting held on Thursday did not announce any cash dividend along with its half-yearly result although a payout of Rs5 per share was anticipated by analysts. The board cited adverse liquidity position caused by the prevailing circular debt situation as the reason to defer dividends. PSO’s payout ratio has dropped in recent years from 77% in FY07 to 12% in fiscal 2011, which has weighed quite heavily on the stock price, said IGI Securities analyst Sana Abdullah.

Other expenses depicted a hefty increase of 79% to Rs8.3 billion during the period under review on the back of higher exchange losses.

However, net sales continued to show impressive growth of 37% to Rs492 billion on account of higher fuel prices while growth in volumetric sales remained subdued around 2%. However, this failed to provide similar impetus to company’s recurring income, further said Abdullah.

PSO’s market share improved to 66% of overall petroleum product sales in the country during October to December 2011 from 65% during the same period a year ago.

The board members showed concern over the ever-rising balance of receivables which stood at Rs189 billion as of December 31, 2011. The management continues to pursue independent power producers as well as the government for recovery of its outstanding receivables.

The government is in process of issuing another Term Finance Certificates of Rs135 billion to 138 billion, which will clear outstanding debt of the power companies and cut down PSO receivables from Hub Power Company and Kot Addu Power Company along with reducing payables to refineries, said Abdullah.

Longer term respite of the situation is unlikely unless the root cause of the circular debt is eliminated, said Abdullah adding that this calls for reduction in the power cost-tariff gap and reduction in line losses.

Published in The Express Tribune, February 10th, 2012.

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