Pakistan State Oil (PSX: PSO) announced its financial result for 1HFY19 yesterday, depicting a slide of around 50 percent year-on-year in its earnings. Deteriorating volumetric outlook for petroleum products and expected inventory losses and exchange losses were expected to stain the performance of the oil marketing segment in 1HFY19. PSO’s profitability shows the same.
PSO’s revenues were moderately up by 10 percent, year-on-year, which was due to declining furnace oil sales volumes by 75 percent year-on-year in 1HFY19. This was accompanied by slow petrol and diesel sales and inventory losses due to declining oil prices. The industry sources highlight that the growth in PSO’s top line was largely because of increasing lubricant and LPG sales.
The sector has been experiencing other headwinds like the increasing circular debt, and shifting fuel mix, which has affected the market shares of the players in the sector. PSO that had an overall market share of 54 percent in the liquid fuel segment in 7MFY18 saw its share recede to 40 percent in 7MFY19. This was not only led by declining furnace oil market share from 73 percent to 45 percent, but also a decline in motor gasoline and diesel market shares; PSO’s market share of MS came down from 41 percent to 36 percent, while HSD saw a decline from 46 percent to 38 percent in 7MFY19.
The firm’s net profit came down by over 50 percent, year-on-year in1HFY19, and besides weak volumes and inventory losses, PSO’s decline in other income (penal income) and staggeringly high finance cost in the period were the key factors behind the dismal performance.
PSO has been focusing on the retail side and its RLNG business. But the company’s financial crunch due to the circular debt continues to overshadow all efforts to gain and retain market share. The company would really take a breather if the Rs200 billion circular debt clearance attempt by the government comes through soon.
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