Pakistan State Oil (PSO), the largest oil marketing company in Pakistan, has reported a significant decline in earnings for its 3QFY23.
According to the company’s financial statements, the profit after tax (PAT) for the quarter stood at PKR 13.6 billion, down by 58% YoY, while the earnings per share (EPS) were PKR 29.07, a decline of 58% compared to the same period last year.
The decline in earnings was primarily due to higher finance costs and lower gross margins, as per the analysis by Insight Securities. However, on a sequential basis, the company witnessed a turnaround in profitability due to inventory gains during the period. The average ex-refinery prices of Motor Spirit (MS) and High Speed Diesel (HSD) increased by 13% and 4% QoQ, respectively in 3QFY23.
PSO’s topline increased by 43% YoY in 3QFY23 due to higher petroleum product prices, whereas volumetric sales fell by 28% due to higher product prices, slowdown in economic activity, and influx of smuggled petroleum products. Gross margins of the company clocked in at 5.7% in 3QFY23, down by 2.0 percentage points YoY due to lower inventory gains recorded in the quarter. As per estimates, inventory gains stood at PKR 28 billion in 3QFY23.
Finance cost recorded an increase of 10.0x/1.7x YoY/QoQ in 3QFY23, possibly due to higher short-term borrowings and late payment surcharge. Other income decreased by 83% YoY to PKR 1.9 billion likely due to a decrease in delayed payment surcharge booked on circular debt-related payments.
The effective tax charge clocked in at 49% in 3QFY23 against 30% in SPLY, which contributed to the decline in earnings.
In conclusion, PSO’s 3QFY23 results reflect the challenges faced by the company due to higher finance costs and lower gross margins. However, the company’s sequential turnaround in profitability and the increase in topline due to higher petroleum product prices provide some positive signs for the future. The company will need to take measures to address the challenges faced to ensure sustainable profitability in the long run.
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