Pakistan State Oil Company Limited (PSX: PSO) announced its financial performance for FY23 yesterday with an unconsolidated profit of Rs12 billion versus Rs184 billion in FY22 – declining by 93 percent. For the latest quarter (4QFY23), PSO posted an earnings decline of 122 percent year-on-year.

PSO’s topline growth was visible. In FY23, PSO’s revenues were seen increasing by 38 percent year-on-year, while those in 4QFY23 were down by three percent. This rise in revenues on a year-on-year basis in FY23 however, was solely due to higher selling prices of petroleum products because the volumetric sales of key petroleum products like motor spirit, diesel and furnace oil declined by 17percent, 25 percent, and 64 percent year-on-year, respectively. The fall in overall volumes for PSO in 4QFY23 was around 48 percent year-on-year with motor spirit, diesel and furnace oil sales falling by 22 percent, 39 percent, and 97 percent year-on-year, respectively. While the oil marketing companies had seen robust sales of petroleum products in most of FY22, the petroleum sales have been weakest in the last 5 years in FY23 due to the economic downturn, political turmoil, and flash floods.

PSO’s gross profit also took a hit in FY23 due to inventory losses amid weaker sales. The gross margin for the OMC settled at 2.21 percent in FY23 - down by more than 400 basis points year-on-year. And despite significantly lower reversal of provisions on financial assets and lower other expenses, the company’s operating margins fell due to weaker gross profits.

PSO also witnessed a decline in other income of about 46 percent year-on-year during FY23 given lower interest received on delayed payments. Bulkiness on the OMC’s bottomline was the finance cost that surged by 8 times in FY23 along with share of loss from associates in FY23 versus profit in FY22.