PSO in FY19

Pakistan State Oil (PSX: PSO) announced its financial performance for FY19 yesterday where the squeeze in earnings narrowed compared to its 9MFY19 and 1HFY19 profits. This was primarily due to better 4QFY19 financial performance.

Overall, the OMC giant posted a year-on-year increase of 9 percent in its net revenues. Despite an overall decline of around 38 percent year-on-year in volumetric sales by the OMC, PSO’s revenues posted modest increase versus a decline by most of the other oil marketing companies. This was due to a rebound in the company’s volumes in the last quarter of FY19, which has continued in July and August 2019 as well.

PSO’s unconsolidated earnings declined by 32 percent in FY19, which came from higher inventory losses as well as lower volumes. Plus lower other income and higher other expenses  and finance cost weighed heavy on its profitability due to exchange losses from around 32 percent currency depreciation during FY19 as well as higher interest expense on borrowings. After the phasing out process of furnace oil, PSO has been focusing on the retail side and its RLNG business. However, the liquidity crunch due to the circular debt continues to overshadow its operations.

While there has been no growth in other income for PSO in FY19 in its unconsolidated financials, its consolidated accounts show that other income grew staggeringly by over two times, which could be due to gains on the acquisition and consolidation of PRL after PSO acquired 52.67 percent stake in the refinery during the year. Though the company announced a cash dividend of Rs5 per share in addition to interim dividend of Rs5 already paid, it also announced a bonus issue of one for every five held or at 20 percent.