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PSO full-year net profit falls 15pc to Rs15.46 billion

By Our Correspondent
August 14, 2018

KARACHI: Pakistan State Oil, the country's largest oil marketing company by revenue and market share, on Monday reported a 15 percent decline in its full-year net profit due to higher operating cost and fall in declined in other income.

PSO's net profit for the year to June 30 fell to Rs15.461 billion from Rs 18.225 billion a year earlier, the company said in a statement to the Pakistan Stock Exchange. The company also announced a final cash dividend of Rs 5/share or 50 percent for the period ended June 2018.

This is in addition to interim dividend paid Rs10/share or 100 percent already paid. The company along with cash dividend also announced 20 percent bonus, i.e. for every five shares, one share will be given free share.

The earnings per share remained at Rs 47.42 as compared with Rs 55.90 in the same period last year. The net sales of the company recorded an increase of 20 percent to Rs1.056 trillion compared with Rs878 billion of the preceding year.

Analyst Umair Naseer at Topline Securities said the company’s sales registered growth on back of higher oil prices and inventory gains. Average International Oil prices have increased by 31 percent during the year.

“In volumetric terms, oil sales of PSO were down 20 percent to 12 million tons in FY18, primarily due to lower furnace oil sales which was down 35 percent on yearly basis amid lower demand from power sector,” Naseer said. “Oil sales excluding furnace oil was up 3 percent in FY18.”

He said the key risks to the company’s bottom-line in the near term are volatility in oil prices and inventory losses, rupee depreciation and exchange losses and pile up in circular debt. Analyst Sharoon Ahmed at Elixir Securities said company’s earnings fell by 15 percent though seven percent growth in gross profit led by 20 percent growth in sales.

Analysts said the company’s other income declined 30 percent, while operating expenses surged 15 percent during the period. A higher effective tax rate of 43 percent versus 38 percent in FY17 also eroded profits.

Operating costs during the period under review amounted to Rs15.263 billion as compared with Rs13.616 billion while other income falls to Rs7.497 billion as against Rs11.142 billion of same period preceding year, the company statement said.

Financing costs showed a small fall to settle at Rs5.123 billion as compared with Rs5.923 billion. Analysts expect PSO's earnings to recover in the current fiscal year, on the back of higher volumes and stable oil prices. The company has over 65 percent share of Pakistan's oil marketing business, ahead of major multinational players like Shell Pakistan and Total Parco.