Dangerously caught in the circular debt mesh, the payables and receivables of the largest state-owned OMC continue to present a dreary picture of its cash position. However, the results of the company published on KSE before Eid show a rebound in profitability for the Company compared to FY12.
PSO was able to bag sales worth Rs325 billion for 1QFY13; a healthy growth of 17 percent YoY mainly on account of higher volumetric growth. However, the net earnings of the OMC during the first quarter of FY13 leapt by a huge 68 percent YoY; not only on account of improved sales growth, but also a vivid expansion in the gross profits.
Unlike the hefty inventory and exchange losses that the company faced in the fourth quarter of FY12, Inventory gains due to higher utilisation and relatively stable currency did the trick this time.
Experts have rendered higher margins on petroleum products like MS, HSD and furnace oil and inventory gains as reasons for a whopping 48 percent YoY rise in gross profits and a 90 basis point jump in the gross margins during 1QFY13 vis-à-vis 1QFY12.
Similarly, 12 percent YoY decline in the operating expenses due to relatively stable exchange rate provided some relief to the cash-strapped oil marketing company.
Nonetheless, rising payables continued to blow air in the financial charges which propelled by 53 percent YoY during the quarter ended September 30, 2012. And this was probably the main reason why the company did not announce any interim cash dividend even amid stupendous profitability.
As for the future, the recent softening of oil prices does have chances for possible losses ahead. A decline in the benchmark crude oil prices and depreciation of the currency versus dollar will definitely shake the bottom like it did during the last quarter of FY12.
Lastly, the circular debt continues to be a nightmare for PSO. Payables and receivables of the company at current levels stand at around Rs113 billion and Rs158 billion respectively. With no signs of retreating, financial charges will definitely burgeon in the times to come.
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Pakistan State Oil
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mn Rs 1QFY13 1QFY12 YoY%
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Net sales 276,084 238,736 16%
Gross profit 11,354 7,678 48%
Operating expenses 2,890 3,289 -12%
Operating profits 9,158 5,546 65%
Finance cost 2,871 1,873 53%
Profit after tax 4,190 2,537 65%
EPS 20.35 12.08 68%
Gross margin 4.1% 3.2%
Operating margin 3.3% 2.3%
Net margin 1.5% 1.1%
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Source: KSE Notice