PSO – 1Q profits decline

The oil marketing companies have seen robust sales of petroleum products in most ofFY22. Higher volumes and higher petroleum product prices were the key factors behind the revenue growth of OMCs in FY22. However, FY23 began on a turbulent note and the first quarter of the fiscal year was marred with political turmoil and ongoing uncertainty, a weakening economy, and flash floods across all provinces of the country. This significantly pulled the demand for petroleum products amid rising energy and oil prices. Pakistan State Oil (PSX: PSO) – the largest OMC in the country also saw its volumetric sales during 1QFY23 fall by around 22 percent year-on-year. Product-wise, the decline in volumes for furnace oil, diesel, and petrol stood at 22, 24, and 28 percent year-on-year, respectively for 1QFY23.

Despite the decline in volumes, PSO’s revenue growth in 1QFY22 stood at 88 percent year-on-year due to rising petroleum product prices. The company’s market share increased by 1.3 percent in white oil and 1.6 percent in black oil, reaching 48.8 percent and 65.6 percent, respectively. However, gross profit declined by 70 percent year-on-year, and gross margins also fell significantly, which was due to significant inventory losses incurred during the quarter.

PSO’s operating profits fell by 53 percent year-on-year in 1QFY23 despite the growth in other income that came from higher interest rates. PSO’s bottom line further came under pressure from an eight times increase in finance cost on account of ballooning short-term borrowings. The company’s notice to the shareholders also includes the concern raised by the board over mounting trade receivables, precisely due to the significant increase compared to June 30, 2022. Overall, the company’s profits for 1QFY23 fell by 90 percent year-on-year.