Research Analyst
Oct 1 - 7, 2012

Presently, Pakistan State Oil (PSO) is the nation's largest energy company and is engaged in the marketing and distribution of various POL products including gasoline, high speed diesel, furnace oil, jet fuel (JP-1), kerosene, CNG, LPG, petrochemicals and lubricants.


INDICATOR 2012 2011 2010
Sales revenue 974,917 877,173 1,199,928
Net revenue 1,024,424 820, 530 742,758
Gross profit 34,323 34,280 29,166
Operating profit 17,313 25,217 21,233
Profit before tax 13,674 17,974 17,963
Profit after tax 9,056 14,779 9,050

PSO possesses the largest distribution network in the country comprising of 3,760 outlets out of which 3,527 outlets serve the retail sector and 233 outlets serve the bulk customers. Out of the most of 3,760 outlets: 1720 retail and 184 consumer business outlets have been upgraded with the most up-to- date facilities as per the visualization of the new vision retail programme. The company also operates 29 company owned and company operated sites which serve the retail sector.

Being a focal member of AEDB biodiesel advisory committee which is working on the roadmap of National biodiesel program, PSO believes that biofuels will make a major contribution to road transportation and power generation fuels. This will also lead to reduction in carbon emissions in the coming years.

In chemical industry of Pakistan, PSO's journey is more than three decades old; the company mainly deals in trading of various types of imported & local Petro-chemicals.

PSO has come a long way from being a government department in early 1970s to where it is today as a major corporate heavyweight on Pakistan stock exchanges. It has now made itself synonymous with community contribution.

During financial year 2012, PSO's after tax profitability has declined by 39 per cent as compared to previous year. This decline was mainly due to the fact that company has suffered heavy exchange losses amounting to Rs 8.6 billion versus Rs 0.7 billion last year. Heavy exchange losses were suffered on account of sharp rupee devaluation by 10 per cent approximately. Furthermore, in 2011, there was one time tax reversal of Rs. 2.3 billion on account of reinstatement of turnover tax from 1.00 per cent to 0.5 per cent by tax authorities.

During June 30, 2012, the total assets of the company increased by 32 per cent as compared to last year. This was primarily due to various in trade debts balance on account of ever increasing circular debt related receivables. At the end of June 2012, the profitability ratios have shown a declining trend as compared to financial year 2011. However, during the same period the overall trend of asset utilization ratios have remained flat as compared to last year except for fixed asset turnover ratio which has increased on account of increase in turnover as less capitalization of property plant and equipment as compared to last year.


Since the 2008 financial crisis, global refinery throughput has increased by more than 3.0 mb/d, reflecting the improvement in world oil demand. This recovery in global oil consumption has been mainly due to growth in non-OECD countries, as OECD demand has declined by more than 4 mb/d from the peak seen in 2005.

Non-OECD countries, particularly those in Asia, have expanded their refinery capacity, leading to a change in the regional supply/demand balance and resulting in some Asian countries, such as India, becoming product exporters.

In line with contracting demand, refinery utilization rates in many OECD countries have dropped in recent years, mainly in Europe where refineries have suffered from poor economic performance due to weak margins in the Atlantic Basin.

In 2011, OECD gasoline demand was particularly disappointing, dropping by 3 per cent from the 5-year average to almost 14 mb/d, with US consumption falling to 8.4 mb/d in January, the lowest level in years.

In addition to lower gasoline consumption, the supply side has been subjected to pressure from the substitution of non-refined products, mainly natural gas liquids (NGLs) and biofuels. At the same time, the other component of light distillates, naphtha, has been weak due to low demand in the petrochemical sector across the globe.

Although, US refiners have seen better margins than in Europe, due to less expensive domestic crude and export opportunities to Latin America. This comparative economic advantage has allowed US refineries to hit a record-high utilization of 92 per cent in July 2012, despite weak domestic demand. Furthermore, exports of diesel and gasoil have surged to a high of around 1.0 mb/d in 2Q12, reconfirming the country's newfound status as a net exporter of refined products. Since the start of 2H12, margins have experienced a recovery worldwide on the back of relatively higher product demand, amid shutdowns, outages, and closures of some refineries in the Atlantic basin.

Due to the poor economic performance of the refining industry in recent years, the volume of announced capacity closures has accelerated since the end of last year, amounting to 3 mb/d of capacity by end-2012. European refineries have been mainly affected, as well as some refineries on the US East Coast that have not been able to switch to cheaper crude. Despite the significant volume of closures, these shutdowns are not likely to boost margins, as refining capacity globally is projected to increase by 1.3 mb/d and 1.7 mb/d in 2012 and 2013, respectively. Most of this new capacity will be located in non-OECD countries, particularly Asia and the Middle East. Under-utilized capacity will therefore remain high, estimated at around 3.5 mb/d in 2012 and 4.0 mb/d in 2013, keeping margins under pressure in the coming year.

Moreover, due to the expected slowdown in the world economy, the global demand growth forecast for 2013 remains at around 0.9 mb/d, almost at the same level as in the current year.