Corporate results: PSO profits surge to Rs12.557 billion
Company makes triumphant return, but investors prefer cash.
A major boost to net profit came from an 18% reduction in operating expense to Rs14.8 billion. PHOTO: FILE
KARACHI:
Investors spurned Pakistan State Oil (PSO) on Thursday despite an increase in profits and a global spur in commodity markets amidst uncertainty over Syria, as the company announced a lower than expected dividend payout.
This was the first result posted by the major Oil Marketing Company (OMC) since the government announced the partial resolution of the circular debt issue, something that had staggered oil and power firms and threatened to destroy the sector.
PSO is the largest OMC in the country, controlling nearly three quarters of the market. As a result, it was also the worst affected by circular debt, forcing the company to borrow heavily to finance operations, resulting in large finance costs.
PSO on Thursday reported a 38.64% rise in profit to Rs12.557 billion in fiscal 2012-13, compared with Rs9.056 billion in the previous year, on the back of a one-off decline in operating expense and finance cost.
A major boost to net profit came from an 18% reduction in operating expense to Rs14.8 billion.
“This improvement started in the third quarter. We will have a better idea about the reasons behind the low operating expense when analysts are briefed by company officials,” said Head of research at Summit Capital, Shahid Ali.
PSO’s finance cost saw a slide of Rs4 billion to Rs7.59 billion, as trouble associated with inter-corporate circular debt eased on the company.
A relative plateuing of the rupee’s exchange rate also resulted in a lower than expected exchange loss – the extra cost paid for imported fuel due to fluctuations in the exchange rate, analysts said.
Revenues increased by 7% to Rs1.294 trillion from Rs1.199 trillion in the previous year as PSO continued to hold a major chunk of market share in sale of petroleum products, including diesel and furnace oil which saw significant increases in off-takes.
PSO’s gross profit rose by 6% to Rs36.5 billion. Other income came down by 38.6% to Rs5.9 billion mainly due to decline in interest earnings as a result of a government effort to clear circular debt, analysts said.
Earnings per share (EPS) for PSO jumped to Rs50.84 from Rs36.67 in the previous year, a 39% increase. For comparison, EPS for 4Q2013 was Rs13.1 per share, compared to Rs0.8 per share in 4Q2012.
Investors however weren’t as forgiving. PSO announced a final cash dividend of Rs2.5 per share, taking the figure for the whole year to Rs4.58 per share, and a 25% bonus share.
The payout of the company was below analyst expectations as the market wanted the company to be generous after partial resolution of circular debt. As a result, PSO saw a 3.48% drop in share price.
The improved performance was in line with market expectations, as the result of a first step by the government to resolve the country’s energy crisis. However, investors worry that circular debt might rise again, and rapidly, as the government has not completely resolved the issue and there is an absence of any visible long term measures against the problem.
Published in The Express Tribune, August 30th, 2013.
Investors spurned Pakistan State Oil (PSO) on Thursday despite an increase in profits and a global spur in commodity markets amidst uncertainty over Syria, as the company announced a lower than expected dividend payout.
This was the first result posted by the major Oil Marketing Company (OMC) since the government announced the partial resolution of the circular debt issue, something that had staggered oil and power firms and threatened to destroy the sector.
PSO is the largest OMC in the country, controlling nearly three quarters of the market. As a result, it was also the worst affected by circular debt, forcing the company to borrow heavily to finance operations, resulting in large finance costs.
PSO on Thursday reported a 38.64% rise in profit to Rs12.557 billion in fiscal 2012-13, compared with Rs9.056 billion in the previous year, on the back of a one-off decline in operating expense and finance cost.
A major boost to net profit came from an 18% reduction in operating expense to Rs14.8 billion.
“This improvement started in the third quarter. We will have a better idea about the reasons behind the low operating expense when analysts are briefed by company officials,” said Head of research at Summit Capital, Shahid Ali.
PSO’s finance cost saw a slide of Rs4 billion to Rs7.59 billion, as trouble associated with inter-corporate circular debt eased on the company.
A relative plateuing of the rupee’s exchange rate also resulted in a lower than expected exchange loss – the extra cost paid for imported fuel due to fluctuations in the exchange rate, analysts said.
Revenues increased by 7% to Rs1.294 trillion from Rs1.199 trillion in the previous year as PSO continued to hold a major chunk of market share in sale of petroleum products, including diesel and furnace oil which saw significant increases in off-takes.
PSO’s gross profit rose by 6% to Rs36.5 billion. Other income came down by 38.6% to Rs5.9 billion mainly due to decline in interest earnings as a result of a government effort to clear circular debt, analysts said.
Earnings per share (EPS) for PSO jumped to Rs50.84 from Rs36.67 in the previous year, a 39% increase. For comparison, EPS for 4Q2013 was Rs13.1 per share, compared to Rs0.8 per share in 4Q2012.
Investors however weren’t as forgiving. PSO announced a final cash dividend of Rs2.5 per share, taking the figure for the whole year to Rs4.58 per share, and a 25% bonus share.
The payout of the company was below analyst expectations as the market wanted the company to be generous after partial resolution of circular debt. As a result, PSO saw a 3.48% drop in share price.
The improved performance was in line with market expectations, as the result of a first step by the government to resolve the country’s energy crisis. However, investors worry that circular debt might rise again, and rapidly, as the government has not completely resolved the issue and there is an absence of any visible long term measures against the problem.
Published in The Express Tribune, August 30th, 2013.