PSO incurs Rs8.750bln Q1 loss on sales slump

KARACHI: Pakistan State Oil Company Limited (PSO) on Wednesday said it took a hit of Rs8.750 billion during the quarter ended March 31, 2020, a loss per share (LPS) of Rs13.55, mainly owing to a massive slump in sales.

The state-run oil marketing company had posted a profit of Rs1.677 billion with earning per share (EPS) of Rs3.57 in the same period last year.

However, for nine months period ended March 31, 2020 (9MFY20), PSO posted a profit after tax amounting Rs3 billion, compared to Rs5.9 billion in same period last fiscal year

The company in a statement attributed this poor performance to a significant drop in international oil prices in March 2020 (Brent from $52/bbl to $18/bbl from March 2 to March 31, 2020) and its related impact on net realisable value of inventory in hand by PSO.

In addition, reduced consumption of petroleum products due to the country-wide lock down, increase in finance cost due to higher receivables, owing to defaults in payments by SNGPL (Sui Northern Gas Pipelines) and higher interest rates and continued economic slowdown impacted the company’s profitability.

Analysts at brokerage Arif Habib Limited said the company’s topline settled at Rs245 billion for 3QFY20, down 1 percent YoY and 22 percent QoQ due to a decline in overall sales volume by 26 percent YoY and 33 percent QoQ. During 3QFY20, volumes of MoGas (motor gasoline), HSD (highspeed diesel, and FO (fuel oil) decreased 7 percent, 23 percent, and 69 percent YoY, respectively, the brokerage said in its research note.

The company posted a gross profit of Rs2.5 billion with gross margins set at 1.01 percent in 3QFY20 compared to 3.20 percent in the prior year. We view noteworthy changes in ex-refinery prices that resulted in inventory loss of Rs4.7 billion in 3QFY20 compared to meager inventory gain in same period last year.

Other operating income increased 38 percent YoY to Rs1,303 million. “We reckon that increase in other income was due to a markup recorded by the company on delayed payments in the period under review,” Arif Habib Limited said in its report.

The company said despite serious challenges faced by the economic and business world amid COVID-19 outbreak, PSO’s bottom line remained positive.

“The profitable performance [during 9MFY20] was achieved by the company through re-gaining its market share over same period last year and by maintaining growth over and above the industry,” it added.

PSO’s market share increased 2.4 percent in MOGAS (motor gasoline) and 5.8 percent in HSD (highspeed diesel).

The overall market share of white oil increased 3.8 percent during 9MFY20 as compared to the same period last year.

PSO with a purpose to manage the sensitive supply chain of country procured around 40 percent of local refinery production while 49 percent of industry imports were also managed by the company.

“Liquidity remained a key concern for the company and will pose formidable challenge in the future as well, especially in wake of COVID-19 and related economic challenges impeding growth,” the company said.