Pakistan State Oil Company Limited (PSX: PSO) reported a quarterly profit after tax of Rs. 21.89 billion, up by a staggering 1,727 percent.
During a meeting held on October 20, 2023, the company’s Board of Management (BoM) reviewed the group’s performance for the first quarter ended September 30, 2023. The group also posted its highest-ever Q1 net profit after tax of Rs. 23.99 billion translating in earnings per share of Rs. 51.10.
The company didn’t announce any dividend payouts to its shareholders for the period in review.
PSO posted unconsolidated net sales of Rs. 976 billion compared to Rs. 929 billion recorded in SPLY. The growth in sales comes on the back of a higher retail price of petroleum products, and a jump in Motor Spirit and Hi-Speed Diesel volumes by 7 to 8 percent due to a low base impact from last year. Meanwhile, furnace oil volumes were decreased by 87 percent, according to Arif Habib Ltd.
Against the backdrop of galloping inflation, regressed growth, geopolitical tensions, and a global increase in oil prices, the petroleum industry experienced a decline in product consumption. However, PSO navigated these challenges seamlessly, while upholding its commitment to nationwide fuel supply.
The cost of goods sold went up to Rs. 861 billion from Rs. 855 billion during the period. Sales jumped on the back of a higher average retail price of petroleum products, and a jump in MS and HSD volumes by 7 percent and 8 percent YoY due to low base impact from last year, according to Arif Habib Limited.
The company further consolidated its dominance in the white oil segment by increasing its market share by 4.3 percent, closing the quarter with a commendable 53.1 percent market share. Notably, PSO’s market share in diesel and gasoline increased by 4.5 percent and 4.2 percent respectively, reaching 55.0 percent and 47.9 percent.
The black oil segment faced a challenging quarter with a 63 percent decline in sales due to low furnace oil-based power generation, however, PSO maintained its leadership in the black oil segment with a market share of 29.6 percent at the end of the quarter.
The company posted a gross profit of Rs. 58 billion with gross margins set at 6 percent in 1QFY24 compared to a gross profit of Rs. 6.7 billion (0.7 percent gross margin) in SPLY. The improvement in gross margins is attributable to massive inventory gains of -Rs. 36 billion during the period in review.
In an effort to further strengthen the company’s robust supply chain and infrastructure, PSO rehabilitated 24,000 tons of existing storage at Sihala and Zulfiqarabad during the period. Additionally, the construction of 91,000 tons of new storage is currently underway at Faqirabad, Faisalabad and Mehmoodkot. Embracing a forward-looking approach, PSO utilized its digital capabilities to propel growth and enhance operational efficiency by successfully automating an additional 2 terminals at Mehmoodkot and Shikarpur, taking the total to 5.
Meanwhile, the other income was reduced to Rs. 3.3 billion in 1QFY24 owed to lower interest received on delayed payments. Finance costs escalated by ~2x (114 percent) YoY to Rs. 11 billion given higher short-term borrowings.
Earnings per share of the company (consolidated) clocked in at Rs. 51.1 from Rs. 3.72 during the period. PSO paid Rs. 20.9 billion in taxes (unconsolidated) during 1QFY24 compared to Rs. 2.8 billion in 1QFY23.
Acknowledging the challenges posed by mounting trade receivables, high borrowing costs, and escalating finance costs, the Board is actively engaged in settlement discussions with the pertinent authorities to address these concerns.