PSO Outperforms Market Through Robust Volume Growth

Date: August 12, 2008
PSO Outperforms Market Through Robust Volume Growth

Karachi, August 12, 2008 : The Board of Management of Pakistan State Oil Company Limited (PSO) reviewed the performance of the company for the financial year ended June 30, 2008 on Tuesday, August 12, 2008 at the company's head office and approved the audited financial statements for the year.

Sardar Muhammad Yasin Malik, Chairman, BoM, presided over the meeting.

The board observed that during financial year 2008 the company achieved impressive performance with a turnover touching Rs 583 billion (US$ 8.5 billion) compared with Rs 411 billion a year ago, an increase of 42%. Profit before tax recorded at Rs 21.4 billion versus Rs 7.1 billion last year and profit after tax at Rs 14.1 billion against Rs 4.7 billion registered in previous financial year. The earning per share was Rs 81.94 versus Rs 27.34 last year.

Based on these results, the board announced a dividend of Rs 12.5 per share. Combined with the earlier interim dividends aggregating Rs 11 per share, the total dividend for the year stood at Rs 23.5 per share translating into a total payout of Rs 4 billion to the shareholders.

PSO made record earnings during 2008 mainly due to one time inventory gain. Last year the company had an inventory loss. Subsequent to the year end 2008, the international oil prices have shown a downward trend which, if it maintains a similar trend may cause corresponding inventory loss for the period.

Excluding the one time large inventory gain, the 2008 operating profit increased by about 40% in line with the massive growth in both regulated and non-regulated business delivered by the company during the year.

Company's income tax payments during 2008 at Rs.7.3 billion Vs Rs.2.4 billion last year showed an increase of 200% mainly due to 35% tax on inventory gain recorded in 2008 accounts.

During FY08 PSO sales volume recorded healthy growth of 11% vs. overall industry growth of 8%. The company outperformed its competitors by recording 18% increase in White Oil sales volume against industry growth of 13%, whereas Black Oil sales increased by 4% versus industry growth of 1%. In Furnace Oil, the company maintained its leadership with 83% market share and registered impressive growth of 4% against industry growth of 2%.

PSO Diesel sales during FY08 were 19.6% higher than last year and substantially higher than the industry growth of 13.2%. During FY 08, PSO achieved sales volume of 5.3 million MTs for Diesel and 0.72 million MTs for Mogas against previous year's figures of 4.4 million MTs and 0.54 million MTs respectively. These figures depict company's impressive growth of approximately 20% in diesel and 33% in mogas sales during FY 08.

During the twelve months ending June 2008, the Diesel sales in Pakistan showed an overall volume growth of 0.97 million MTs out of which 0.87 million MTs (89% of the total industry growth) was contributed by PSO. It is worth mentioning here that during the crunch month of June 08 when some market players restricted their supplies of Diesel due to heavy buildup of subsidy, PSO supplied 30,000 MTs additional Diesel to meet the market demand.

During FY 08, PSO continued to play a vital role in importing deficit products in the country and fulfilled 80% of country's total import requirements. Besides 3.4 million tons of Diesel, 3.5 million tons of Furnace Oil and 0.44 million tons of LSFO was also imported to ensure uninterrupted supply to the power generation sector.

PSO continued its leadership in providing CNG fuel facilities and added 30 more stations to its network, bringing the total to 240 which is more than any other OMC in the country. In this fuel category the company registered an impressive growth of 30% vs. industry growth of 24%. PSO's CNG earnings during FY08 showed a corresponding increase.

FY2008 witnessed an unprecedented rise in oil prices. US brent crude oil price hit USD143 a barrel on 30 June 2008. A major reason underlying soaring oil prices has been weakening of USD due to which, it is believed that certain investors may have used oil as a hedge against USD devaluation due to rising international prices. Throughout the review period the GOP continued to provide huge subsidy on diesel, which touched highest ever level at Rs 37.07 per litre in June 2008.

Throughout FY08 the company continued to face liquidity problems due to ever-increasing receivables from the government on account of Price Differential Claim (PDC) resulting in galloping financial cost.

The Board of Directors of the company were highly concerned that PEPCO, HUBCO and PIA substantially delayed payments to PSO specially in the second half of the year thereby seriously aggravating company's liquidity position. As of June 30, 2008 receivables from these entities stood at Rs. 27 billion adding to company's cash flow problems.

Being fully aware of the global trend in development of alternative and renewable energy resources, the company is in an advance stage of research and development work on bio-diesel and tests are being carried out to blend it with conventional diesel.