analysis of financial stetement pso

8/3/2019 Analysis of Financial Stetement PSO

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PAKISTAN STATE OIL LIMITED

ANALYSIS OF FINANCIAL STATEMENTS

INTRODUCTION

Pakistan State OIL (PSO) came into being in the mid-1970s when the Government of

Pakistan amalgamated three Oil Marketing Companies: Esso Eastern, Pakistan

National Oil (PNO) and Dawood Petroleum as part of its Nationalization Plan.

From 1999 to 2004, PSO had undergone radical changes, both internal and external

and has emerged with a new look and as a market leader with a long term vision. The

company is the only public sector entity in Pakistan that has been competing effectively

with three foreign multinationals, Shell, Caltex and Total.

PSO is currently enjoying over 73% share of Black Oil market and 59% share of White

Oil market. It is engaged in import, storage, distribution and marketing of various POL

products including mogas, high speed diesel (HSD), fuel oil, jet fuel, kerosene, liquified

petroleum gas (LPG),compressed natural gas (CNG) and petrochemicals. PSO also

enjoys around 35% market participation in lubricants and is

blending/marketing Castrol brands, in addition to a wide array of its own.

It is considered as one of the most successful mergers in the history of Pakistan. The

company has retail coverage of over 3,800 outlets, representing 80% participation in

total industry network. The company has been the winner of Karachi Stock Exchange

Top Companies Award for many years and is a member of World Economic Forum.

PSO serves a wide range of customers throughout Pakistan including retail, industrial,

aviation, marine and government/defense sectors. PSO has been meeting the countrys

fuel needs by merging sound business sense with national obligation.
http://en.wikipedia.org/wiki/Government_of_Pakistanhttp://en.wikipedia.org/wiki/Government_of_Pakistanhttp://en.wikipedia.org/wiki/Essohttp://en.wikipedia.org/w/index.php?title=Pakistan_National_Oil&action=edit&redlink=1http://en.wikipedia.org/w/index.php?title=Pakistan_National_Oil&action=edit&redlink=1http://en.wikipedia.org/w/index.php?title=Dawood_Petroleum&action=edit&redlink=1http://en.wikipedia.org/wiki/Royal_Dutch_Shellhttp://en.wikipedia.org/wiki/Caltexhttp://en.wikipedia.org/wiki/Total_S.A.http://en.wikipedia.org/w/index.php?title=Black_oil_(Pakistan)&action=edit&redlink=1http://en.wikipedia.org/w/index.php?title=White_Oil&action=edit&redlink=1http://en.wikipedia.org/w/index.php?title=White_Oil&action=edit&redlink=1http://en.wikipedia.org/wiki/Marketinghttp://en.wikipedia.org/wiki/Mogashttp://en.wikipedia.org/w/index.php?title=High_speed_diesel&action=edit&redlink=1http://en.wikipedia.org/wiki/Fuel_oilhttp://en.wikipedia.org/wiki/Jet_fuelhttp://en.wikipedia.org/wiki/Kerosenehttp://en.wikipedia.org/wiki/Liquified_petroleum_gashttp://en.wikipedia.org/wiki/Liquified_petroleum_gashttp://en.wikipedia.org/wiki/Compressed_natural_gashttp://en.wikipedia.org/wiki/Petrochemicalhttp://en.wikipedia.org/wiki/Castrolhttp://en.wikipedia.org/wiki/World_Economic_Forumhttp://en.wikipedia.org/wiki/World_Economic_Forumhttp://en.wikipedia.org/wiki/Castrolhttp://en.wikipedia.org/wiki/Petrochemicalhttp://en.wikipedia.org/wiki/Compressed_natural_gashttp://en.wikipedia.org/wiki/Liquified_petroleum_gashttp://en.wikipedia.org/wiki/Liquified_petroleum_gashttp://en.wikipedia.org/wiki/Kerosenehttp://en.wikipedia.org/wiki/Jet_fuelhttp://en.wikipedia.org/wiki/Fuel_oilhttp://en.wikipedia.org/w/index.php?title=High_speed_diesel&action=edit&redlink=1http://en.wikipedia.org/wiki/Mogashttp://en.wikipedia.org/wiki/Marketinghttp://en.wikipedia.org/w/index.php?title=White_Oil&action=edit&redlink=1http://en.wikipedia.org/w/index.php?title=White_Oil&action=edit&redlink=1http://en.wikipedia.org/w/index.php?title=Black_oil_(Pakistan)&action=edit&redlink=1http://en.wikipedia.org/wiki/Total_S.A.http://en.wikipedia.org/wiki/Caltexhttp://en.wikipedia.org/wiki/Royal_Dutch_Shellhttp://en.wikipedia.org/w/index.php?title=Dawood_Petroleum&action=edit&redlink=1http://en.wikipedia.org/w/index.php?title=Pakistan_National_Oil&action=edit&redlink=1http://en.wikipedia.org/w/index.php?title=Pakistan_National_Oil&action=edit&redlink=1http://en.wikipedia.org/wiki/Essohttp://en.wikipedia.org/wiki/Government_of_Pakistanhttp://en.wikipedia.org/wiki/Government_of_Pakistan


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INTRODUCTION TO THE PETROLEUM

INDUSTRY

Fy09 witnessed a very sharp fluctuation in international oil prices which touched the

highest level of US$ 141 /bbl in July 2008 against the lowest level of US$ 33/bbl in

December 2008.

During FY 09, a number of internal and external challenges threatened Pakistans

economy, and a shortfall in the energy sector, mainly driven by circular debt, was

among the major problems. During the year under review, supply and consumptions ofenergy in different sectors remained lower then the previous year. This was mainly due

to the overall slow down of our economy caused by inflation coming from very high

energy product prices. This, in particular, had an adverse impact on the performance of

the PSO large scale manufacturing sector.

The Consumption of petroleum products in the country during FY 09 decreased by 1%

compared to the preceding year. Mogas and JPI showed a volumetric growth of 4.2%

and 3.2% respectively, whereas HSD and SKO experienced a downward trend with anegative growth of 7.4% and 21.7% respectively.

On the CNG side, Pakistan became the largest CNG consumer in the worl with 2,700

CNG stations catering to about 2.0 million vehicles as compared to 1.7 million vehicles

during the preceding year, showing an increase of 17.6%.

The consumption of black oil grew to 8.2 million tons. During FY 09, local refineries

produced 9.6 million tons whilst the deficit requirement of around 9.8 million tons was

imported. A significant reduction in the refining capacity of different refineries was

witnessed mainly due to the mounting circular debt.

During FY09, PSO sold 12.9 million tons of POL products (excluding exports of 0.17

million tons) as compared to 13 million tons (excluding exports of 0.11 million tons)


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during the preceding year. The Company was able to maintain its sales despite the

overall economic slowdown and the decline in petroleum products consumption in the

white oil segment.

The Pakistan Credit Rating Agency Limited PARCA has rated Pakistan State OilCompany limited as AA+/A1+ .These ratings denote a very strong capacity for the

timely payment of financial commitments.

RESULTS OF FY 09

Profitability Ratios

Pakistan state oil posted a Lost after tax RS 6,699 million in FY 09 which was 147.66

percent less then the previous year. In the previous year the company reported profit

after tax of 14,054 million.

Moving forth, an assessment of the Profitability shows that the company earned Rs 719

billion revenues in FY09 compared to Rs 583 billion in FY08. This increase can be

accounted to the heavy reliance on PSO for provision of furnace oil. However, despite

-10000

-5000

0

5000

10000

15000

20092008

20072006

Profit after tax


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the higher sales the loss after tax stood at Rs 6.7 billion in FY09 vis-a-vis a profit of Rs

14 billion in FY08. It was due to the gross profit margin crashed from 5.15 in FY08 to

0.42 in FY09. The impact on net profit margin was more crucial by all standards as it

plunged from 2.41 to -1.09 owing to heavy inventory losses and exorbitant financial

charges. Financial charges escalated by 356% between FY08 and FY09 as they rose

from previous Rs 1.6 million to Rs 6.3 million. The virtually four fold increase in the

financial charges during the period under observation was a step taken to meet the

liquidity crunch caused by the severe circular debt that had accumulated. In addition to

the heavy inventory losses and the steep financial charges recorded during the FY09,

the devaluation in rupee value was another significant contributor to the fall in

profitability. A 19% depreciation of rupee against the dollar during the FY09

exaggerated the dent in the profitability of PSO as the company imports approximately

80% of the country's POL imports.

0

200

400

600

800

2009 2008

revenue

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2

4

6

2009 2008

Gross profit margin

-2

-1

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1

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2009 2008

Net profit margin


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The Return on asset in FY09 was ( 4.36%) as compared to 11.1 % in Fy 08. The return

on owners equity was also very less ( 32.09%) during FY 09 as compared to 45.4 % in

FY 08. The decline in both the returns can be attributed to the loss after tax.

Liquidity Ratios

An overview of the liquidity position of the company shows that the liquidity has dipped

by 13.7% from 1.24 in FY08 to 1.07 in FY09. This problem with liquidity was proactively

addressed by PSO as they introduced various strategies to ensure a better match

between the current assets and current liabilities of the company. In the short-term

however, the current liabilities were covered by short-term borrowings. Furthermore,

PSO recovered Rs. 167 billion from the power sector and another Rs. 39 billion on

account of the Petroleum Development Levy (PDL) from the GOP. These short and

long-term measures were taken to streamline the liquidity stature of the company.

-40.00%

-30.00%

-20.00%

-10.00%

0.00%

10.00%

20.00%

30.00%

40.00%

50.00%

2009 2008

Return on asset

Return on equity


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The inventory turnover during FY09 was 24.36 days as it was 10.1 days during FY 08 it

was about 10.1 days. The asset turnover during FY09 was 4.96 times as it was 5.8

times during FY08.

Debt Management Ratios

The debt to asset ratio rose from 75.64 in FY08 to 84.74 in FY09. The debt to equity

ratio and the long-term debt to equity ratios both rose with the debt to equity ratio

growing by 104% as it rose from 310.5 to 635.10. This spike in the debt to equity ratio

was due to severe accumulation of circular debt on accounts of Company's like

HUBCO, KAPCO, PEPCO, and PIA who defaulted on their payments and created acute

liquidity problems. Receivables from these companies amounted to Rs 79 billion and inan attempt to service its obligations to refineries, PSO has to resort to short term

borrowing amounting to Rs 64 billion.

1

1.05

1.1

1.15

1.2

1.25

2009 2008

current ratio

70.00%

75.00%

80.00%

85.00%

90.00%

2009 2008

DEBT TO ASSET RATIO


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However, this cycle of circular debt led to excessive short term borrowing and piling of

financial charges - factors which tarnished the profitability of the company. The Time

Interest Earned (TIE) ratio crashed from 16.4 to -0.89 due to the hike in financial

charges on account of short term borrowings to meet due financial obligations.

The Gearing ratio During FY 09 was 12.11% and it was 7.78% during FY 08. As the

gearing ratio measures the riskiness of the company. So it tells that the company is not

so risky however its gearing ratio has increased by 55.65 percent.

0.00%

100.00%

200.00%

300.00%

400.00%

500.00%

600.00%

700.00%

2009 2008

Debt to equity

-5

0

5

10

15

20

2009 2008

Time Interest Earned

Ratio

0.00%

5.00%

10.00%

15.00%

2009 2008

Gearing ratio


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Owners Equity Ratios

The Dividend Yield ratio during FY 09 was around 2.34% as compared to 5.6 % in FY08 which shows the rate of return received by the shareholders was around 58% less as

compared to FY08.

The price earning ratio during FY 09 was (5.47). As it were 5.1 during FY08. This shows

however the willingness of investors to pay the price of Company share have came

down as compared to the last year.

.

0.00%

1.00%

2.00%

3.00%

4.00%

5.00%

6.00%

2009 2008

Dividend Yield Ratio

-10

-5

0

5

10

2009 2008

Price earning ratio


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The market value per share of Pakistan State Oil during FY09 was around 213.65 which

were also decreased as it was 417.2 during FY 08. The dividend per share during FY09

was around Rs5 which was Rs 23.5 in FY 08 which shows that it is also decreased by

around 78.72%.

Balance Sheet Growth

The total assets of the company grew by 20.7% in FY 09 as compared to FY08 while

the total liabilities grew by 37.86% as compared to FY 08 whereas the Equity of the

company declined by 32.6% as compared to FY 08.

0

5

10

15

20

25

2009 2008

Dividend per share

0

50

100

150

200

250

300

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2009 2008

Market value per share


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Future outlook

Pakistan State Oil geared towards addressing and meeting the energy challenges of the

country in the face of the limited domestic refining capacity that has resulted in the

import of refined products. The future energy demand in Pakistan is expected to grow,

which is largely due to the expected natural gas constraints for the powe generation

0

50000000

100000000

150000000

200000000

2009 2008

Total Assets

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100000000

150000000

2009 2008

Total Liabilities

0

5000000

10000000

15000000

20000000

25000000

30000000

35000000

2009 2008

Total Equity


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sector and reduction in hydro electric potential. In an economic environment that is

marred by mounting circular debt, the company is successful in fulfilling the energy

demand of the country with its prudent utilization of resources.

Pakistan State Oils future performance will be reliant on cost savings, increased salesand high operating efficiencies. In the long term the Company will continue to enhance

its brand equity with aggressive and focused marketing efforts that will utilize the print

and electronic media and will strengthen the companys visibility.

PSO AT A GLANCE

Rs. Million (unless noted)

2009 2008 2007 2006 2005 2004 2003

Sales Volume

(Million Tons)13.2 13.0 11.8 9.8 9.7 8.6 10.8

Profit & Loss Account

Sales Revenue 719,282 583,214 411,058 352,515 253,777 195,130 206,376

Net Revenue 612,696 495,279 349,706 298,250 212,504 161,538 172,446

Gross Profit 3,010 30,024 12,259 17,207 13,746 9,191 8,955

Operating

(Loss) / Profit(5,577) 22,451 7,950 11,264 9,340 6,452 6,484

Marketing &Administrative

Expenses

5,113 4,425 3,748 3,428 3,219 2,634 2,465

(Loss) / Profit

before Tax(11,357) 21,377 7,122 11,418 9,191 6,263 6,209

(Loss) / Profit

after Tax(6,699) 14,054 4,690 7,525 5,656 4,212 4,030

Earning beforeInterest, taxes,

depreciation &

Amortization

(EBITDA)

(3,983) 23,912 9,420 13,385 10,546 7,244 7,113

Copex 694 620 1,609 751 1,506 2,096 1,643

Balance Sheet

Share Capital 1,715 1,715 1,715 1,715 1,715 1,715 1,715

Reserves 19,156 29,250 19,224 19,098 15,830 13,731 11,348

Shareholders' 20,871 30,965 20,939 20,813 17,545 15,446 14,264


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Equity

Property Plant& Equipment

7,056 7,567 8,138 7,674 8,256 7,738 6,437

Net current

assets8,666 22,143 11,128 10,978 7,970 6,309 4,531

Long TermLiabilities

2,528 2,409 2,412 2,299 1,999 1,636 1,358

Profitabiltiy Ratios

Gross Profit

ratio% 0.42 5.15 2.98 4.88 5.42 4.71 4.34

Net Profit ratio % (0.93) 2.41 1.14 2.13 2.23 2.16 1.95

EBITDAmargin

% (0.55) 4.10 2.29 3.80 4.16 3.71 3.45

Return onShareholders'

Equity

% (32.10) 45.39 22.40 36.16 32.24 27.27 30.85

Return on total

assets% (4.37) 11.06 6.28 10.72 10.81 9.93 12.46

Return on

capitalemployed

% 15.5 68.1 35.4 54.1 48.9 40.8 44.90

Asset utilization

Inventory

turnover ratio

(x) 13.9 10.1 11.7 11.5 11.2 13.1 19.7

Debtor

turnover ratio

(x) 12.6 24.6 32.5 38.1 39.9 40.1 35.4

Creditor

turnover ratio

(x) 6.3 9.6 10.8 12.5 13.5 12.2 15.1

Total assetturnover ratio

(x) 5.13 5.78 5.67 5.76 5.36 5.22 6.34

Fixed assetturnover ratio

(x) 98.4 74.3 52.0 44.3 31.7 27.5 36.4

Investment

Earning per

share

Rs. (39.05) 81.94 27.34 43.87 32.98 24.56 23.50

Market valueper share (YearEnd)

Rs. 213.65 417.24 391.45 309.00 386.00 256.75 228.40

Highest Price Rs. 428.79 539.70 418.30 452.30 490.10 316.60 239.50

Lowest Price Rs. 96.00 317.50 280.50 264.65 239.00 232.75 109.90

Break-up value Rs. 121 180 122 121 102 90 76

Price earningratio (P/E)

(x) (5.5) 5.1 14.3 7.0 11.7 10.5 9.7


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Dividend per

share

Rs. 5.0 23.5 21.0 34.0 26.0 17.5 16.0

Bonus share % - - - - - - -

Dividend

payout

% - 28.68 76.81 77.50 78.84 71.25 68.09

Dividend yield % 2.34 5.63 5.36 11.00 6.74 6.82 7.01Dividend cover

ratio

(x) - 3.49 1.30 1.29 1.27 1.40 1.47

Leverage

Debt : Equity

ratio- - - - - - -

Interest Coverratio

(x) - 16.4 6.9 12.7 25.2 34.1 23.6

Current Ratio 1.07 1.24 1.22 1.23 1.24 1.25 1.25

Quick Ratio (x) 0.75 0.57 0.64 0.63 0.62 0.66 0.79

Contribution

Employees as

remuneration2,872 2,438 2,006 1,857 1,870 1,474 1,403

Government astaxes

161,388 85,208 68,096 58,822 38,823 50,942 53,699

Shareholders asdividends

858 4,031 3,602 5,831 4,459 3,002 2,744

Retainedwithin the

business

- 1,100 1,900 1,230 1,210 1,290

Financialcharges to

providers offinance

6,232 1,368 1,158 884 371 189 275


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analysis of financial stetement pso

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