PSO in 1HFY25

Pakistan State Oil (PSX: PSO) has demonstrated resilience in its financial performance for the first half of FY25 amid a challenging economic landscape. Despite a decline in net sales due to lower retail prices, the company successfully improved its profitability through strategic cost management, inventory gains, and an emphasis on liquidity optimization.

Pakistan State Oil reported net sales of Rs1.625 billion for 1HFY25, marking an 11 percent year-on-year decline due to lower average retail prices and a 4 percent year-on-year reduction in sales volumes across key petroleum products. Despite lower revenue, the company achieved a 44 percent year-on-year increase in net earnings. For 2QFY25, the company reported a profit versus a loss in 2QFY24.

Gross profit margin improved to 3.12 percent in 1HFY25, compared to 3.02 percent in 1HFY24, mainly due to inventory gains. Finance costs declined by 24 percent year-on-year, supported by a 19 percent reduction in short-term borrowings and easing interest rates.

Total petroleum product sales declined by 4 percent year-on-year in 1HFY25, with Motor Spirit (MS) sales down 5 percent year-on-year, High-Speed Diesel (HSD) sales down 5 percent year-on-year, and Furnace Oil (FO) sales down 29 percent year-on-year. In 2QFY25, however, sales volume saw a recovery with an 8 percent quarter-on-quarter increase in MS and a 62 percent increase in HSD sales, driven by the Rabi sowing season and anti-smuggling measures.

PSO demonstrated a strong recovery in profitability, supported by inventory gains, lower finance costs, and improved sales volumes in the second quarter. Challenges remain due to declining fuel prices and potential fluctuations in sales volumes, but effective cost management and liquidity improvements position the company well for the coming quarters. The absence of a half-yearly dividend was noted, indicating a cautious approach towards cash management. Despite a challenging pricing environment, PSO successfully increased its profitability in 1HFY25 through effective cost control, inventory gains, and improved sales volume trends in 2QFY25. The company’s strong liquidity position and lower finance costs indicate resilience, with potential for further operational improvements in the second half of the fiscal year.