PSO registers profit after tax of Rs 0.81 billion in Q1

The Board of Management of Pakistan State Oil (PSO) convened on Thursday at the PSO House to review the company’s performance over the three-month period from July 2010 to September 2010. The leading energy provider announced profit after tax of Rs 0.81 billion vs 1.9 billion during the corresponding period last year.

During the period under review, PSO’s sales revenue touched over Rs. 202 billion as compared to Rs. 201 billion during the corresponding period last year. Earnings after tax for the first quarter were reported as Rs. 810 million versus Rs 1.9 billion during the corresponding period last year. The decrease in the earnings is a direct result of increased turnover tax and high financial charges that PSO has to bear due to non-payment by the power sector.

The first quarter of FY11 was marked by downward trend in the country’s fuel consumption. The overall black and white oil consumption was down by 6.9%. In White Oil the industry was down by 5.8%, while Black Oil consumption was down by 7.9% in the period under review. The downward trend of fuel consumption was primarily due to the devastation of communication infrastructure and closure of some power entities caused by the recent floods. Despite these trends in the period under review, Company’s market share in the Black Oil and White Oil segments stood at 82.2% and 54.7%, respectively thereby contributing to an overall market share of 68.4%.

However, during the second quarter of the financial year with the onset of rehabilitation and construction activities in flood affected areas, involving increased transportation, HSD consumption in the country is likely to improve. Furthermore, with winter approaching fuel oil and Mogas consumption is expected to witness a surge due to shortfall of gas which will have a positive impact on PSO’s market share.

The Board of Management lauded company’s efforts to ensure uninterrupted fuel supplies throughout the country during floods while other companies had shut shop in the affected areas. The Company sold  275,850 Tons of gasoline in Q1 which is the highest ever quarterly sales in its history.

The Board was concerned with the turnover tax issue which has increased the Company’s tax rate to 72% in this quarter thereby adversely affecting profitability and hoped that the Ministry of Finance would help the Company by reducing the tax rate.

The Board also noted the circular debt crisis, which is still a looming concern. As on September 30, 2010, PSO’s receivables stood at an alarming Rs. 140 billion. PSO is working closely with the Government of Pakistan and IPPs for recovery of its receivables and drawing a long-term resolution plan for the rising circular debt.