Inventory gains and improved volumes boost PSO’s profits to Rs 5.27 billion

October 27, 2020 (MLN): After unveiling consecutive losses in the two preceding quarters, Pakistan State Oil (PSO) has earned net profits of Rs 5.27 billion in 1QFY21, which was 50.4% YoY higher than the profits of Rs 3.47 billion reported in the same quarter of last year.

This translated into earnings per share which clocked in at Rs 11.07, marking a jump of 48.6% YoY.

The company earned profits largely due to expected inventory gains on the back of recovery in oil prices. To highlight, in the last quarter of FY20, the company recorded a loss of Rs 9.5 billion as sharp reduction in international oil prices resulted in significant inventory losses of Rs 27 billion including Rs 5 billion related to Pakistan refinery.

On the revenue front, despite increase in overall sales volumes by 9% YoY to 2.26 million tons (FO, HSD and MS volumes increased by 27%,14% and 10% YoY) during 1QFY21, PSO’s topline plunged by 16% YoY to Rs 285 billion from Rs 340.6 billion mainly owing to fall in retail fuel prices. However, average rupee devaluation of 6% YoY helped limited the downside.

The company recorded a gross profit of Rs12 billion against Rs11.47 billion profit in 1QFY20 due to improved OMC margins of white oil by Rs0.16/ltr, higher volumes and expected inventory gains during the quarter under review.

As per the report by Foundation Securities, lower LNG price is expected to restrict the upside in gross profit. Thus, the company recorded gross margins of 4.1% against 3% in 1QFY20.

Also, the Other income of PSO depicted a decline of 28.4 YoY to Rs 1.22 billion during 1QFY21 likely owing to lower penal interest income booked during the quarter.

On the expense side, the company observed 18% YoY surge in operating cost mainly due to Rs 478 million worth of provision of impairment on financial assets.

Furthermore, due to lower short-term borrowing and cut in policy rate, the financial charges of the company plummeted significantly by 62.5% YoY to Rs 1.1 billion, compared to Rs 3 billion in the corresponding quarter last year.

Lastly, the company booked an effective tax rate at 34% during the quarter under review compared to 45% reported in 1QFY20.

Consolidated Statement of Profit or Loss for the Quarter ended September 30, 2020 ('000 Rupees)

 

Sep-20

Sep-19

% Change

Net Sales

                  285,109,660

                  340,642,349

-16.30%

Cost of products sold

                (272,941,147)

                (329,227,949)

-17.10%

Gross Profit

                     12,168,513

                     11,414,400

6.61%

Other income

                       1,220,929

                       1,705,301

-28.40%

Operating cost

 

 

 

Distribution & marketing expenses

                     (2,597,396)

                     (2,662,437)

-2.44%

Administrative cost

                        (880,176)

                        (828,995)

6.17%

Reversal/(provision) for impairment on financial assets-net

                        (478,067)

                           218,113

Other expenses

                        (550,180)

                        (542,274)

1.46%

 

                     (4,505,819)

                     (3,815,593)

18.09%

Profit from operations

                       8,883,623

                       9,304,108

-4.52%

Finance costs

                     (1,168,641)

                     (3,112,293)

-62.45%

Share of profit of associates – net of tax

                           151,555

                           144,583

4.82%

(Loss)/Profit before taxation

                       7,866,537

                       6,336,398

24.15%

Taxation

                     (2,639,478)

                     (2,862,447)

-7.79%

(Loss)/Profit for the year

                       5,227,059

                       3,473,951

50.46%

(Loss)/Earnings per share – basic and diluted (Rupees)

                               11.07

                                  7.45

48.59%

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Posted on: 2020-10-27T12:42:00+05:00

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