The profit of the Pakistan State Oil (PSO) in the first six months of the current fiscal year is likely to show a growth of 11.8 percent because of higher furnace oil consumption. The net earnings of the PSO in the first quarter ended September 30 amounted to Rs 1.21 billion (EPS: Rs 7.06). "We are forecasting an addition of Rs 1.15 billion (EPS: Rs 6.73) in the profit in the second quarter of 2005 thus forecasting a FY'05 profit of Rs 2.37 billion (EPS: Rs 13.80) as compared to Rs 2.12 billion (EPS: Rs12.37) in the corresponding period last year", said Mohammad Owais, research analyst at First National Equities.
The brokerage house is expecting that PSO would announce an interim dividend of Rs 7.50 in first half against Rs 7 per share in HY'04. The company would report the increase in its profit due to higher petroleum consumption.
Furnace oil (FO) consumption is expected to be low in December due to winter rains because it tends to reduce the demand for furnace oil for at least two months due to greater hydropower generation. Petroleum statistics of November (0.29 million tons) already showed a decline in the furnace oil consumption over October (0.52 million tons).
Sarwat Fatima, head of research at Alfalah Securities, expects that PSO would witness a 15 percent increase in its earnings during 200-04 due to (i) a 15.8 percent jump in average domestic oil prices on Y-o-Y basis and (ii) a 35 percent increase in furnace oil consumption.
"We expect that PSO would book a profit after-tax (PAT) of Rs 4,849 million (EPS: Rs 28.3) in FY05 as compared to a PAT of Rs 4,211 million (EPS: Rs 24.56) earned last year.
"We expect domestic POL consumption will increase by 13 percent on average, where furnace oil consumption is likely to increase by 35 percent in FY05. The increase in furnace oil consumption is likely to be triggered by (i) lower water availability to power plants as compared to last year, which enhances dependence on thermal power generation and (ii) a growth of more than 5 percent in power sector.
Sarwat Fatima said: "According to our calculation, an increase of 13 percent in demand for POL is likely to bring an impact of Rs 205.8 million (EPS: Rs 1.2) on PSO's earnings in FY05, while keeping other variables constant."
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