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February 19, 2019

PSO’s half-year profit drops 50pc on economic slowdown


February 19, 2019

KARACHI: Pakistan State Oil (PSO) recorded a 50 percent year-on-year decline in profit to Rs4.2 billion for the first half of the current fiscal year of 2018/19, translating into earnings per share (EPS) of Rs10.9.

The company on Monday said the economic downtrend and reduction in overall market size has impacted the company’s profitability.

“Major reasons for reduction in PAT (profit after tax) as compared to the same period last year are lower gross profit mainly due to dip in sales volume of black and white oil, higher inventory loss due to reduction in international oil prices, increase in finance cost due to sharp hike in discount rate by SBP (State Bank of Pakistan) and higher average borrowing levels versus the same period last year, lower interest income from power sector and foreign exchange loss on account of rupee devaluation,” it said in a statement.

PSO’s profit amounted to Rs8.5 billion with EPS of Rs21.8 in the corresponding period a year earlier.

Analyst Shankar Talreja at Topline Securities said key risks to the company include volatility in oil prices and inventory losses, rupee depreciation and growing circular debt.

The company said it maintained the sensitive supply chain by importing 48 percent of total industry imports and uplifting 36 percent of total refinery production in the country in spite of soaring outstanding receivables from power sector, Pakistan International Airlines and Sui Northern Gas Pipelines Limited, "which stood at Rs325 billion as of December 31, 2018 compared with Rs310 billion on September 30, 2018". “Despite the challenging economic scenario, PSO led the liquid fuel market in 1HFY19 with an overall market share of 40.9 percent,” it added.

The company said the challenging economic trend in the country fueled by rupee devaluation and adverse balance of payment position resulted in negative growth of 27 percent in the cumulative liquid fuel market with negative contribution of white oil and black oil of 12 and 60 percent, respectively. Black oil volumes have significantly been impacted due to power production shift towards re-gasified liquefied natural gas.

“Despite stiff competition in the industry especially due to an increase in the number of OMC’s (oil marketing companies) and a shrinking market size, PSO is making an all-out effort to maintain its market share and leadership position with sustained profitability,” it added.

“The management expressed sincere gratitude to all stakeholders, including government of Pakistan, especially petroleum division of ministry of energy and shareholders of the company for their continued support and guidance.”

Fauji Cement’s quarterly profit increases 24pc

Fauji Cement Company Limited’s profit increased 24 percent year-on-year to Rs1.022 billion for the three-month ended December 31, 2018, translating into EPS of Re0.74, a bourse filing said.

Fauji Cement earned Rs823 million with EPS of Re0.60 in the corresponding period a year earlier.

The company announced cash dividend of Re0.75/share for the quarter. Analyst Tahir Abbas from Arif Habib Limited said the company booked effective taxation of 29 percent during the period under review versus 28 percent a year earlier. The company’s finance cost decreased 56 percent to Rs23 million during the three-month period.

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