Precariously entangled in the circular debt mesh, the largest state owned oil marketing companys (OMC) payables and receivables might be portraying a weedy cash position, but its performance over six months is laudable amid such shaky times. The Company announced its 1HFY13 result yesterday, which shows a substantial improvement in its profitability over comparable period.
The overall industry volumes have been relatively lackluster during the first half of FY13 rebounding in December 2012 on account of stronger demand for motor gasoline and high speed diesel. The market for furnace oil has remained considerably depressed due to shortage of gas to the power plants.
With such strong volumetric headwind, sales volumes of the national giant also took a hit of around three percent YoY. But with higher realised prices especially of MS and HSG, the Company was able to bag sales worth a little over half a billion rupees. Hence the top line grew by nine percent YoY during 1HFY13.
Where increase in POL prices of around 30 percent and better margins on high speed diesel and motor gasoline pushed up gross profit of Pakistan State Oil, the impact of flattish furnace oil sales and margins on the gross profit kept the growth in gross profits restricted.
The bottom line of PSO was the real charmer. A whopping 37 percent year-on-year increase in the net profits of the OMC delighted shareholders. Where the expectations about higher finance cost subduing the earnings of the company were rampant, high earnings for the Company came riding surprisingly on higher other income and a relatively less-than-robust increase in the financial charges.
What delighted the shareholders further was the announcement of interim cash dividend of Rs2.5 per share along with a bonus issue of 20 percent, despite battling stringent cash flows.
The second quarter of FY13 was relatively flat, predominantly due to subdued sales, whereas on a sequential basis, the performance is not very attractive particularly due to decline in sales of furnace oil sales. On average, furnace oil contributes 50 percent of the total off take of the Company.
Where the circular debt continues to hold the Companys fate, the profitability of PSO will further get a boost if the margins on HSD and MS are revised. Subject to ECCs approval, the Ministry of Petroleum has suggested an increase in margins on MS and HSD by Rs0.25 per litre and Rs0.10 per litre, respectively.
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Pakistan State Oil
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mn Rs 1HFY13 1HFY12 YoY 2QFY13 2QFY12 YoY
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Net sales 534,838 492,876 9% 258,754 254,140 2%
Gross profit 18,101 16,417 10% 6,747 8,739 -23%
Other income 2,139 1,261 70% 1,527 365 319%
Finance cost 4,479 4,000 12% 1,608 2,128 -24%
Profit after tax 6,274 4,583 37% 2,084 2,096 -1%
EPS 30.48 22.27 37% 10.13 10.18 0%
Gross margin 3.4% 3.3% 2.6% 3.4%
Net margin 1.2% 0.9% 0.8% 0.8%
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Source: KSE Notice
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