Sitara Petroleum profit jumps 69% on margin gains

September 22, 2026 (MLN): Sitara Petroleum Service Limited reported a 68.6% jump in net profit for the year ended June 30, 2026, driven primarily by wider margins and a lower tax burden rather than sales growth, according to financial statements filed with the Pakistan Stock Exchange on Tuesday.

The company posted after-tax profit of Rs4.98bn for FY26, up from Rs2.95bn a year earlier, even as revenue rose a comparatively modest 9.25% to Rs133.23bn.

The divergence between sales and profit growth marks the sharpest disconnect in the company's two most recent reporting periods and points to operating leverage, debt reduction and a falling effective tax rate as the principal forces behind the earnings surge.

The Board of Directors, at a meeting held Tuesday in Lahore, recommended a final cash dividend of Rs1 per share, amounting to 100% of paid-up capital.

Shareholders on the register as of October 19 will be eligible for the payout, with the company's share transfer books closing from October 20 to October 27. The annual general meeting has been scheduled for October 27 in Lahore.

Margins widen sharply

The results show cost of sales grew 7.51% year-on-year, trailing the 9.25% rise in revenue and allowing gross profit to expand 45.9% to Rs8.05bn.

Gross margin climbed to 6.04% from 4.52% a year earlier, a gain of 152 basis points that the filing's financial statements attribute to no single disclosed factor, as the notes detailing cost composition were not part of the released statements.

That margin expansion set off a cascade through the income statement. Profit before levy and taxation rose 54.3% to Rs6.12bn, aided by other income more than tripling to Rs185.6m and a 12.5% decline in finance cost to Rs1.01bn.

The finance cost reduction followed a marked pullback in borrowing during the year: short-term bank borrowing fell 81.5% to Rs341m from Rs1.85bn, while the company repaid Rs1.21bn of long-term loans without taking on fresh long-term debt, in contrast to FY25, when it obtained Rs5.32bn in new long-term financing.

Those gains were partially offset by a sharp rise in administrative and general expenses, which climbed 218.9% to Rs545.8m, and other expenses, up 69.3% to Rs457.7m.

The company also recorded a Rs98.4m share-of-loss from an associate company, its first such entry, following a Rs395m investment made during the year. The underlying notes explaining these increases were not included in the filing extract reviewed.

Tax rate nearly halves

Profit before taxation rose 61.8% to Rs5.21bn after accounting for a petroleum levy of Rs910.7m, which itself grew more slowly, at 21.9%, than pre-levy profit.

The final leg of the earnings jump came from taxation: the effective tax rate fell to 4.44% from 8.27% a year earlier, trimming the tax charge to Rs231m despite a substantially larger pre-tax profit base.

Had the prior year's effective rate applied, the tax charge would have been roughly Rs200m higher, suggesting the lower rate alone accounted for close to a tenth of the year's total profit increase.

Earnings per share rose to Rs3.46 from Rs2.11, a 64% increase that trails the growth in net profit, consistent with a higher weighted-average share count following a mid-year share issuance.

The FY26 results are the company's first full-year disclosure following an initial public offering completed during the year.

The statement of changes in equity shows 279.9m new shares issued, raising paid-up capital to Rs1.68bn from Rs1.40bn, alongside a share premium of Rs4.39bn that did not exist on the balance sheet a year earlier.

The cash flow statement records gross proceeds of Rs4.67bn from the share issue, against transaction costs of Rs171.9m.

Total equity more than doubled, rising 115.2% to Rs18.0bn, while cash and bank balances climbed to Rs1.62bn from Rs633.2m.

The IPO proceeds appear to have funded much of the year's debt reduction, with the company also spending Rs1.09bn on additions to property, plant and equipment and a further Rs2.44bn on capital work in progress, pointing to an active expansion project whose scope is not detailed in the disclosed statements.

One balance sheet shift worth noting: while total long-term borrowings fell 66.8% to Rs1.49bn, the current portion of long-term borrowings the portion due within a year rose 166.1% to Rs2.85bn. The company's near-term repayment obligations have therefore risen even as its overall debt load has shrunk.

Working capital under some strain

Trade debts rose 14.9% to Rs7.25bn, outpacing revenue growth and consuming Rs940.8m of operating cash during the year, according to the cash flow statement.

Combined with a Rs401.6m increase in stock-in-trade, working capital changes drove a net operating cash outflow of Rs952.9m before tax and levy payments, which themselves totalled Rs1.69bn for the year.

The company nonetheless generated Rs5.03bn in cash from operating activities, more than ten times the prior year's Rs426.3m, aided by a smaller drag from working capital relative to the scale of cash flow before working capital changes.

Taken together, the filing describes a company where profit growth in FY26 outpaced sales growth by a factor of more than seven, a gap explained chiefly by a wider gross margin, lower finance costs following the IPO-funded deleveraging, and a substantially reduced effective tax rate.

Whether the margin improvement reflects pricing power, a more favorable product mix, lower input costs, or scale efficiencies cannot be determined from the statements as filed, since the notes elaborating cost of sales and expense composition were not included in the release.

Similarly, the drivers behind the more than threefold rise in administrative expenses and the nature of the new associate investment remain undisclosed in the extract available.

The FY25 comparative figures are labelled as restated throughout the statements, though the basis for the restatement is not explained in the portion of the filing reviewed.

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