The liquidity crunch at Pakistan State Oil (KSE: PSO) - having an approximately 65 percent of market share in petroleum products supply in the country - created an oil supply halt in the country earlier this year. The signs of this liquidity crisis at PSO can be seen in the firm's first half FY15 financial statement announcement.
Two prime factors pulled down the oil marketing company's bottom line in 2QFY15 and the overall HFY15. First, a drop in volumetric sales of around 17-20 percent year-on-year in 2QFY15 alone squeezed the firms top line.
The drop in furnace oil volumes has been the greatest as receivables surged during the second quarter, curbing furnace oil supplies. PSOs revenues for 1HFY15 can be seen to have dropped by 17 percent year-on-year, whereas the decline is even more pronounced in 2QFY15 (29 percent YoY).
Alongside that, falling crude oil prices resulted in a decline in furnace oil margins However, part of this decline was also balanced by an increase in petrol (motor gasoline) margins and HSD margins. Secondly, what pulled down the firms earnings further were the inventory losses during the period due to falling oil prices in the international market.
PSOs gross margin took a huge hit in 1HFY15, and so did the net margins. The firm saw a significant drop in other income and a modest rise in finance cost, which further heaved the bottom line the OMCs earnings for 1HFY15 slipped by over 70 percent, year-on-year, while they turned crimson in 2QFY15.
And though the situation at the petroleum product supply has been taken care of with the Ministry of Finance releasing funds to the company, the impact of the liquidity crunch will be seen in the coming quarters of FY15 as well.
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Pakistan State Oil (PSO)
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1HFY15 1HFY14 YoY ] 2QFY15 2QFY14 YoY
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Net sales 508,287 611,912 -17% 217,853 305,226 -29%
Gross profit 12,508 23,052 -46% 894 11,190 -92%
Other income 6,722 14,667 -54% 3,349 4,527 -26%
Operating exp 7,783 9,025 -14% 3,412 1,776 92%
Operating profits 11,446 28,694 -60% 830 13,941 -94%
Finance cost 5,941 5,273 13% 3,267 2,123 54%
Profit after tax 4,283 15,799 -73% (960) 8,002
EPS (Rs/share) 15.76 58.15 -73% (3.54) 29.45
Gross margin 2.46% 3.77% 2.46% 3.77%
Operating margin 2.25% 4.69% 2.25% 4.69%
Net margin 0.84% 2.58% 0.84% 2.58%
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Source: KSE Announcement
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