The countrys largest oil marketing and distribution firm - Pakistan State Oil - surprised the market yet again with its half yearly financial result announcement on Wednesday. Unlike the previous quarter however, it was a positive surprise this time round as the earnings of Rs26.9/share were far above the consensus estimates.
The reasons for a positive result in comparison to the awful one in the same period last year are many but well known and largely built in the expectations. What seems to have caused the major deviation is a mammoth surge in the other income which stood at Rs2.2 billion for the second quarter.
At this point of time, in the absence of detailed accounts, it would be anybodys guess as to what caused such a stupendous rise in the other income. Looking at the basic numbers nothing suggests a definite cause for this increase, apart from the Rs490 million reduction in the plant and property, which could have resulted from sale of some valuable land. But as suggested earlier, it is mere speculation and deserves a patient wait to exactly gauge the matter in case.
Besides the one-off event, the company seems to have put commendable efforts in reducing the operating expenditures to combat negative pressures of uncontrollable factors, such as the menace of circular debt. Whether it is a case of reduction in employees size, cut in marketing and advertising spending or just efficient resource management, is yet to be seen - but it just might be the plan B, which the firms chairman referred to at the beginning of the period.
The power crisis maybe a headache for the masses and the government, but certainly the PSO doesn mind it one bit. Acute gas shortage during the period coupled with the introduction of new IPPs and RPPs, has brought glory to the firms topline as the demand for furnace oil a.k.a. Black Oil beefed up by 28 percent.
The company seems all set to reap the fruits of whatever number of RPPs commence operations during the latter half of FY10. Depleting gas reserves and a lot more thermal power plants in the offing together cook a perfect recipe for the firm to bolster its top line in the times to come.
All what the company would not want to happen, however, is a repeat of prior years oil price downhill rally that destroyed the firms performance back then. The oil price movement during the fiscal year so far has shown promising signs - i.e. remaining range bound without much volatility - and PSO would take it gleefully given the strong future of the Black Oil.
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PSO P&L
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Rs(mn) 1HFY10 1HFY09 % chg 2QFY10 2QFY09 % chg
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Sales 350,211 334,663 5% 180,943 145,682 24%
Cost of sales 336,692 342,387 -2% 173,817 146,003 19%
Gross profit 13,519 (7,724) NA 7,126 (321) NA
Gross margins 4% -2% NA 4% 0% NA
Other income 2,290 496 362% 2,221 240 824%
Finance cost 3,877 2,926 33% 2,304 1,853 24%
Operating expenses 4,472 6,803 -34% 1,985 2,022 -2%
PAT 5,084 (10,049) NA 3,712 (1,666) NA
EPS (Rs) 30 (59) NA 19 (10) NA
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Source: KSE notice
Consistent ADR and cost control reap fruits for ABL
Unlike its peers, Allied Bank managed to keep the pace of deposits growth of 10.5 percent with gross advances growth of 11.7 percent in 2009. The line mangers commendable performance is evident from the fact that the bank maintained its advance-to-deposits ratio at 75-76 percent during 2009, in a time when the industry witnessed a decline of 590 bps during 9MCY09.
The substantial rise of 41 percent in the companys net mark-up income reflects the results of an improved deposits mix in its favour as it managed to increase the demand liabilities by 340 bps to 41 percent.
But this had a downside too, as coupled with the higher shift in non-performing loans to loss category, the provisioning increased by Rs1.16 billion during the last quarter. However, owing to exuberant last quarter growth of 12 percent in advances, the gross infection ratio declined by 57 bps to 6.52 percent. With the infection ratio virtually stagnant at last years level, net mark-up income post-provision swelled by 40 percent.
The non-core business provided valuable support to the bottom line as a decent gain on sales of securities in stock market and improved investment banking business facilitated the other income to increase by 22 percent.
The banks efforts to keep in check the expenses, evident by a 740 bps decline in cost to revenue ratio - helped it achieve the staggering 71 percent growth in the bottom line.
Had the bank booked the benefit of forced sales value, the bottom line would have looked greener. However, considering non distributable gains on P&L from FSV additional benefit, the management decided against the idea.
ABL is comfortably over a billion rupees ahead of minimum capital requirement of Rs6 billion. And the issue of 10 percent bonus shares shows its prudence for the coming year. The banks prudence is more visible from 257 bps increase in the capital adequacy to 13.47 percent.
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Allied Bank Limited
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Rs (mn) CY09 CY08 % chg
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Mark-up earned 41,122 30,571 35%
Mark-up expensed (22,422) (17,273) 30%
Net mark-up Income 18,700 13,298 41%
Provisioning (4,498) (3,156) 43%
Net mark-up income after provisions 14,202 10,142 40%
Non-markup income 5,958 4,897 22%
Operating revenues 24,658 18,195 36%
Non-markup expenses (9,624) (8,918) 8%
Profit before taxation 10,536 6,121 72%
Profit after taxation 7,122 4,157 71%
EPS (Rs) 10.02 5.85 71%
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Source: KSE notice