Things are not going well when PSO starts asking for the release of funds. With more than 60 percent of the market share, Pakistan State Oil Limited was the key beneficiary of the circular debt resolution. But with spectre of load shedding gaining momentum amid rising temperatures, the firms name has started popping up in media, pleading the government to release funds for the cash strapped entity.
Though the piling of receivables has begun for the firm, PSOs nine-month financial performance gives out a healthy picture. For 9M FY14, the leading oil marketing companys earnings doubled compared to 9M FY13. The key figures show that majority of the growth came from PSOs other income, as its sales volumes of major petroleum products did not witness any significant growth during 9M FY14 vis-à-vis 9M FY13.
The growth in other income stems from not only the interest income the firms books on PIBs issued to resolve the circular debt, but also the late payment mark-up received during the period. Had it not been for such a magnanimous increase in other income, PSOs profits would have plummeted in 9M FY14. The significance of other income is even more pronounced during 3Q FY14 when the firm registered a significant fall in gross margins. Recall that one good omen for PSO, and the OMC sector in general, was the forecast of recent rupee appreciation resulting in high exchange gains. Operating expenses, which include exchange gains and losses, rose by only eight percent year on year during 9M FY14, and plunged by 44 percent year on year during 3Q FY14 showing the support provided by the rupee appreciation to the bottom line.
While PSO has faced a restricted growth in volumes--around four to five percent year on year--hopes about rising furnace oil and high speed diesel along with consistent motor gasoline demand are running high. Yes, the threat of rising receivables also looms. But, as far as FY14 earnings are concerned, PSO is all set to shine as already 9M FY14 earnings have surpassed the entire earnings of FY13.
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Pakistan State Oil
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Rs(mn) 9MFY14 9MFY13 YoY 3QFY14 3QFY13 YoY
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Gross sales 1,023,266 930,406 10% 296,306 300,873 -2%
Gross profit 29,543 25,674 15% 6,491 8,762 -26%
Gross margin 3.43% 3.25% 2.60% 3.42%
Other income 17,565 3,976 342% 2,898 642 352%
Operating profits 36,232 19,567 85% 7,538 6,085 24%
Operating margin 4.21% 2.47% 3.02% 2.38%
Finance cost 7,413 6,039 23% 2,141 1,559 37%
Profit after tax 19,400 9,377 107% 3,600 3,063 18%
EPS 71.41 34.51 107% 13.25 11.27 18%
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Net margin 2.25% 1.19% 1.44% 1.20%
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Source: KSE Announcement
