Pakistan State Oil (PSX: PSO) announced its financial performance for the first half of FY17 yesterday, and where the firms earnings took a leap forward, no dividend announcement left a shareholder unhappy as the stock price nosedived. In short PSOs earnings were up, and dividends were down in 1HFY17.
The OMCs topline was up by 16.2 percent in 1HFY17 due to improved volumes overall (i.e. both white oil and black oil segments). In FY16, PSOs topline was down due to lower volumetric growth and lower margins of furnace oil. However, FY17 has brought improvement to the oil marketing giants market share. In 1QFY17, the firm was able to post a 4.4 percent year-on-year increase in net sales, and over 29 percent year-on-year improvement in 2QFY17; and where retail fuel volumes remained suppressed in 1QFY17, the beginning of second quarter onwards has seen improvement in retail volumes for the firm.
Increased gross margins was accompanied by 20 percent rise in other income, which came from income on markup. At the same time, lower finance cost by 21 percent year-on-year aided the bottomline that jumped up by almost 50 percent in 1HFY17, and 62 percent in 2QFY17 alone. Overall, margins improved in 1HFY17 highlighting the impact of demand growth.
However, where the firms profitability is climbing up, the no-dividend-announcement points towards some inherent risks on the horizon; unbridled circular debt is rising once again, which is detrimental to dividend payout.
On a positive note, the OMC is investing in the retail segment; after introducing LNG in 2015 and RON 92/95 petrol in November 2016, PSO has received the countrys first 55,000 tonnes low sulphur diesel from Kuwait, which is Euro II complaint diesel.
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