PAKISTAN STATE OIL

S.KAMAL HAYDER KAZMI,
(feedback@pgeconomist.com)
Research Analyst
, PAGE
Dec 12 - 18, 2011

Pakistan State Oil (PSO) is the market leader in Pakistan's energy sector. The company has the largest network of retail outlets to serve the automotive sector and the major fuel supplier to aviation, railways, power projects, armed forces and agriculture sector.

The company is currently engaged in storage, distribution and marketing of various petroleum products.

The company's current market share of 82.3 per cent in the black oil market and 59.4 per cent share in the white oil market, speak volumes about its success. PSO also provides jet fuel to refueling facilities at nine airports in Pakistan and ship fuel at three ports.

The oil giant supplies fuel to industrial units like textile, cement, agriculture, transport etc.

Furthermore, it also supplies fuel to ships at Karachi Port, Korangi Fish Harbour and Port Qasim.

Fuel retailing is one of the core business segments of PSO having finest quality brands such as Premier XL, Green XL and E-10. The retail team at PSO works relentlessly to fulfill the needs of the automotive sector. With more than 3,500 retail outlets nationwide, PSO serves approximately 2.8 million retail customers daily.

PSO retail department is spread across the nation with 14 division offices. All divisional offices and retail outlets across the country are linked to the head office through state-of-the-art enterprise resource planning software SAP.

PSO's journey in chemical's industry of Pakistan is more than three decades old; the company mainly deals in trading of various types of imported and local petrochemicals.

The fuel supplier is fueling the industries of nation by dealing in diverse range of chemical products having vast customer base such a pharmaceuticals, paint industry, pesticides, food industry, detergents, textile, adhesive, packaging/printing, and so forth.

The company is the pioneer in introducing a novel concept to reward customers for their loyalty and patronage through the 'PSO Loyalty Card'.

After the successful launch of PSO Loyalty Cards, PSO launched two kinds of fuel-based cards for the business entities - PSO Fleet and Corporate Cards. These are fuel based cards specifically designed for organizations/individuals who want to manage their fuel expenses systematically. This unique proposition was introduced in February 2003 in the fuel market for the first time by PSO. Both fleet and corporate cards have pre-approved credit limit provided by company/fleet owners or individuals. These cards are well-established and have received an overwhelming response from the corporate world.

FINANCIAL PERFORMANCE (UN-AUDITED) (RS '000)

INDICATORS SEPTEMBER 30, 2011 SEPTEMBER 30, 2010
Net Sales 278,509,325 201,962,864
Gross Profit 7,678,242 6,712,906
Profit from Operations 4,599,623 4,939,502
Profit After Tax 2,487,309 809,864
Earnings Per Share (Rs) 14.50 4.72
Non-Current Assets 9,418,686 9,858,501
Current Assets 277,879,952 252,814,896
Non Current Liabilities 2,899,223 3,257,248
Current liabilities 240,427,172 217,513,173

PSO industrial consumer dominance in the government sector can be judged by the fact that all the major government entities like OGDC, Pakistan army, Pakistan railways, Navy, NLC, PAF Wah and HIT have entrusted PSO to meet their POL needs.

Having 80 per cent share in furnace oil market, PSO is the sole furnace oil supplier to all independent power projects (IPPs) besides supplying oil to KESC, Wapda, etc.

Moreover, PSO is also playing its due role in meeting the growing energy demand of the country.

As per the table, the company's sales revenues touched Rs279 billion, representing a growth of 38 per cent. The company also posted earnings after tax of Rs2.5 billion in first quarter of 2011-12. The increase in earnings was mainly due to reduction in finance cost and improvement in margins as compared to last year.

PSO white oil sales grew to 1.3 million mts in the first quarter of FY12 in comparison to 1.2 million mts. This was due primarily to the increase in motor gasoline demand caused by an increase in motor vehicles sales, CNG shutdowns, increased usage of generators due to frequent power outages and a significant prices gap between motor gasoline and HSD.

On the other hand, black oil sales remained steady at 1.8 million mts. Overall the company's market share in the black oil and white oil segments stood at 77.1 per cent and 52.5 per cent, respectively, thereby contributing to an overall market share of 64.4 per cent.

BALANCE SHEET

With receivables standing at Rs153.5 billion as of 30th September, 2011, circular debt continues to hamper the company's liquidity position. Keeping in view the growing usage of generators in the domestic market, the company has also successfully launched the first ever generator oil in Pakistani market in first quarter.

The company is also currently engaged in enhancing its storage and infrastructure capacity through the construction of a new storage depot of 26,000 KL near Faisalabad on an area of approx 13 acres.

FUTURE OUTLOOK

PSO's management is making all possible efforts to reduce the impact of the financial burdens. The company takes pride in continuing the tradition of excellence and is fully committed to meet the energy needs of today and rising challenges of tomorrow. No doubt, the company is truly a driver of the economy.