PSO Consolidates Market Share despite Economic Slowdown

Karachi, August 12, 2009: The Board of Management of Pakistan State Oil Company Limited (PSO) reviewed the performance of the company for the financial year ended June 30, 2009 on Wednesday, August 12, 2009 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.

During FY09, the Company’s sales revenue touched Rs. 719 billion compared to Rs. 583 billion in the corresponding period last year mainly due to the reliance of power sector on PSO for supply of Furnace Oil as other suppliers in the market shied away due to circular debt problem.

During FY09, PSO sold 13.2 million tons of POL products as compared to 13 million tons during the preceding year. The Company was able to sustain its sales volumes and market share despite the overall economic slowdown and decline in petroleum products consumption in the white oil segment. 

PSO ended FY09 at an overall market share of 71.3% as compared to 70.5% during FY08.   

Black Oil

In Black Oil, PSO’s sales volume grew by over 10.2% which enabled the Company to enhance its market share appreciably from 82.3 % in FY08 to 85.8% in FY09. This actually demonstrates Company’s ability to meet the rising Furnace Oil demand from the power sector.

White Oil

In White Oil, despite a negative growth of 9.1% in sales volumes, PSO continued its market leadership with 59.4% market share. 
 
The decrease in white oil volumes was mainly due to the overall economic downturn in the country which resulted in a 5.3% decline in industrial volumes as well.

Financial Results FY09
During FY09, the loss after tax came to Rs. 6.7 billion versus profit after tax of Rs. 14 billion during FY 08, mainly due to higher financial servicing cost and the inventory losses which incurred during the first half of FY09.

The 2nd half performance of the company during FY09 shows a positive picture primarily due to stabilized oil prices at the level of $ 60-70 per barrel. As a result of steady oil prices, the company was able to post improved after tax earnings of Rs 781 million during the 3rd quarter and Rs. 2,571 million during the 4th quarter as compared to the losses incurred during the 1st and 2nd quarters of FY09. 

Dividend
The total dividend for the year stood at Rs 5/- per share translating into a total payout of Rs 0.86 billion to the shareholders.

Inventory Losses
The decline in the profitability of the Company is mainly attributed to heavy inventory losses suffered on account of a fall in international oil prices. FY09 witnessed sharp fluctuations in international oil prices which touched the highest level of US$141/bbl in July 2008 against the lowest level of US$33/bbl in December 2008. The Company registered Rs. 18.9 billion on account of net inventory losses during FY09 as compared to inventory gains of Rs. 11 billion during FY 08.

Pak Rupee Devaluation
In addition to inventory losses Pak rupee devaluation of 19% against US$ severely hampered the profitability of the Company, as more than 80% of oil product imports in the country are carried out by PSO.  

Financial Charges
PSO’s financial charges during FY09 increased many folds mainly due to heavy bank borrowing to address liquidity crunch resulting from circular debt. The Company ended up incurring Rs. 6.2 billion as financial charges during FY09.

The above factors also adversely affected other players in the oil industry in Pakistan and globally during the review period.

Circular Debt
The Company faced serious liquidity problems owing to receivables from the IPPs (Hubco, KAPCO, PEPCO) and PIA who defaulted on payments to PSO. As on June 30, 2009 receivables from these entities stood at Rs. 73 billion. At present outstanding dues from HUBCO, KAPCO, PEPCO and PIA stand at Rs.78 billion.

PSO management made all out efforts throughout FY09 for recoveries from these entities to ensure availability of products in the country. As a result, the Company during the financial year 2008-09 received Rs.167 billion from the power sector and Rs. 39 billion PDC from the Government of Pakistan.