Industry

PSO earnings decline 64 percent

Karachi, April 22, 2019: Pakistan State Oil (PSO) posted 64 percent YoY decline in its third quarter of this fiscal year (3QFY19) earnings, below our expectations due to inventory loss of around Rs200 million during the outgoing quarter (vs. inventory gain of R1.7bn in 3QFY18) and lower penal income.

The company recorded loss of around Rs2.3bn on petrol, while, gain of around Rs2bn and Rs95mn on FO and HSD respectively.

Further, volumetric decline of 6% YoY in HSD/Petrol and 31 percent YoY decline FO sales also weighed on overall gross profits of the company.

According to Topline, Pakistan State Oil (PSO) recorded growth in sales by 9 percent YoY despite volumetric decline as HSD/Petrol prices were up 14 percent and 8 percent YoY respectively. Further, due to rupee devaluation revenues from RLNG sales also improved.

Finance cost of the company increased by 53 percent YoY due to higher debt borrowings and higher interest rates (+475bps since Jan 2018). Other income was down 55 percent YoY due to lower penal income. The company declared a cash dividend of Rs5 per share.

Key risks to the stock include:

1: volatility in oil prices and inventory losses.

2: rupee depreciation.

3: sharp pile up in circular debt.

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