|Date: February 17, 2009|
|PSO declares Rs.5 interim 1st Half 09 Dividend|
Consolidates Market Share Despite Economic Slowdown
Karachi February 17, 2009: The Board of Management (BoM), Pakistan State Oil (PSO), on Tuesday, February 17, 2009 declared a cash dividend of Rs. 5 per share to its shareholders for the 1st half FY09 ended December 31, 2008. The announcement came following the Board of Management review of the first half FY09 performance of the country’s largest oil marketing entity. Sardar Yasin Malik, BoM Chairman, presided over the meeting.
During the first half of FY09, the OPEC basket price of crude oil experienced a very sharp decline and touched lowest level of US$ 33 per barrel in December 2008 against the highest level of US$ 141 per barrel in July 2008. This significant decline in crude oil prices was one of the uncontrollable external factors which heavily affected the bottom line of the company.
Due to the decline in prices as mentioned above the GOP was able to roll back the subsidies on fuel prices thus reducing the pressure on the national exchequer.
During the review period, the industry sales were lower by 4% mainly due to higher retail price and a general slowdown of the economy. Despite this decline, the company improved its market share by 1.3% to 71.2% and sold 6.03 million tons of product in the review period. This translated into a turnover of Rs. 392 billion versus Rs 248 billion in the corresponding period last year, an increase of 58%.
Notwithstanding the top line growth, inventory loss to the tune of Rs 20 billion impacted the profitability of the company, resulting in a loss after tax of Rs. 10 billion versus profit after tax of Rs.5.5 billion during first half of FY 08. The loss after tax in Q2 FY09 was Rs.1.6 billion versus Rs. 8.4 billion in Q1 FY09. In Q1 FY09 the company had taken an NRV (net realizable value) adjustment for anticipated reduction in inventory value. In addition, the 1st quarter of FY09 also witnessed a Rs. 3.26 billion exchange loss.
The Board of Management announced a first interim cash dividend of Rs. 5 per share translating into a cash payout of Rs. 858 million to its shareholders as the Board observed that the company is on its way to recovery.
Effective February 09 the margins for OMCs were revised from 3.5% to 4% with lower and upper limit of $45 - $80per barrel average price of Arabian Light Crude oil on Gasoline, Kerosene, and Light Diesel Oil. For Diesel the margin is currently fixed at Rs. 1.35/ litre.
The circular debt remained a serious problem owing to receivables from the power sector (HUBCO, KAPCO, and PEPCO) and PIA which continuously defaulted on payments during the review period. As on December 31, 2008 receivables from these entities stood at Rs. 70 billion. PSO is making all out efforts with the help of GOP for recoveries from these entities to ensure availability of products in the country and to reduce the impact of financial cost on the company.
Despite stiff challenges posed by external factors the company kept focus on customer oriented products and services. One such initiative was the launch of Vehicle Identification System (VIS) - the state of the art system which provides full automation, reliability and control to the corporate customers with vehicle fleets, thus eliminating the risk of misuse and pilferage. Alliances were also established with United Bank for Auto Credit Cards, Cupola for establishing KFC outlets and Arif Habib Bank for ATMs at selected PSO stations.
PSO has been declared as the winner of “Brands of the Year Award” in the category of fuel. In addition to this, the company received “Large Tax Payer Award” by Large Taxpayers Unit Karachi to acknowledge PSO’s contributions to the national exchequer.
In the period under review, PSO has been awarded the ISO/IEC 27001: 2005 Information Security Management System (ISMS) certification in recognition of its secure multi-site provision of IT Services to offices and departments. PSO is the first company in the Oil & Gas Industry in Pakistan to achieve this milestone in information security.
On the CSR front, PSO together with Heritage Foundation established 2 schools in the districts of Mansehra in the period under review.
The Board expressed its confidence that, given its inherent strengths the company will continue to overcome all the challenges imposed by global and local market contingencies and with prudent initiatives it will continue to maintain its leadership in the oil marketing sector.