KARACHI: The total receivables of Pakistan State Oil (PSO) have reached Rs 810 billion, however the management indicated that due to the significant increase in consumer gas prices, PSO’s liquidity position is anticipated to improve.

The PSO’s receivables from SNGPL were over Rs 500bn, from GENCO Rs 150 billion and from Hubco and PIA were Rs 27 billion. PSO anticipates no further debt accumulation from SNGPL following discussions between two companies in February 2024.

Pakistan State Oil conducted its corporate briefing session where the management discussed financial performance and future outlook of the company.

The management said the liquid oil consumption in Pakistan has dropped from 13,005,000 tons in the first nine months of FY23 to 11,485,000 tons in the same period in FY24, with a decline of 11.7 percent.

HSD volumes saw a decline of 249,000 tons and PMG volumes fell by 302,000 tons, Myesha Sohail at Topline Securities said, adding that HSD demand is being reduced by 3000-4000 tons every day, mainly due to lower demand by industries and smuggling. Furnace Oil (FO) also saw a fall of 982,000 tons as its usage in electricity generation has been reduced significantly.

The PSO management expects a small YoY increase oil consumption in the upcoming year, ie, FY25.

To recall, PSO saw a 6 percent YoY rise in sales to Rs 2.67 trillion and a 30 percent YoY rise in profit to Rs 13.4 billion in the nine months of FY24. In the third quarter of FY24, EPS clocked-in at Rs 12.03/share taking nine months of FY24 EPS at Rs 28.54/share.

Pakistan State Oil is leading the white oil market and witnessed increase of 1.3ppts in its market share (from51.1 percent to 52.4 percent in 9MFY24). Product-wise, market share was 54.5 percent in HSD and 46.2 percent in PMG.

Inventory loss as per the management is a ‘zero sum game’ where stock of minimum 20 days is to be kept and thus leads to inventory gains/losses.

In accordance with the FE-25 borrowing mechanism, the Company borrows dollars from the bank and pays an interest cost. The exchange gain/loss is to be bear by the government of Pakistan, not by the company. Currently, 60 percent of the Company’s total borrowing is of FE-25 borrowing.

The management highlighted that PSO’s liquidity condition is likely to be improved due to timely payment of LNG receivables amidst a sharp increase in consumer gas prices.

Equity swaps was suggested by the PSO management. As per the management, government doesn’t have cash so the only solution to settle a circular debt balance amount is to swap PSOs receivables amount with the GoP assets. The management takes this as the only viable option.

The PSO management is working on various options including, setting-up Electric charging stations, diversifying into fintech, NBFC & renewable energy sectors, Rehabilitation and development of new storages, exploring investment in a white oil pipeline project in northern Pakistan and automation and digitization at locations & retail outlets.

Copyright Business Recorder, 2024

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M. Zahid Iftikhar Jun 25, 2024 10:50am
PSO should be privatized completely & should refuse to extend credit to GOP owned & operated SOEs. Just look at PIA sitting pretty with 27 Billion that it will never pay back. Same for SNGPL & others.
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