The net consolidated profit of state-owned Pakistan State Oil (PSO) plunged almost 90% to Rs9.82 billion in the financial year ended June 30, 2023, mainly due to a jump in the cost of products sold, increasing its financial vulnerabilities in a challenging inflationary environment.
The consolidated net profit stood at Rs95.72 billion in the prior fiscal year.
The oil marketing company reported on Wednesday that circular debt remained a major cause of concern, impacting its financial health.
“A number of options are under discussion with the government to resolve the issue and reduce the unwarranted onus on PSO’s financials,” it added.
PSO reported in its detailed financial accounts for the first nine months (Jul-Mar) of FY23 that “circular debt continued to be a major concern.
Receivables from Sui Northern Gas Pipelines Limited (SNGPL) increased by 65% from March 31, 2022, increasing PSO’s average borrowings by 157% and finance cost by 995 basis points compared to the same period of last year.” “FY23 continued to be fragile and turbulent on both the global and domestic fronts.
World economies, including Pakistan, continue to battle high inflation and regressed growth with increasing financial vulnerabilities.” The petroleum industry saw a significant decline of 19.6% in sales of white oil, 17.1% in sales of motor gasoline and 24.9% in sales of diesel, mainly due to a slowdown in economic activities and swelling fuel prices.
Additionally, the demand for black oil declined by 32.1% owing to limited furnace oil-based power generation given reduced demand for electricity across the country, it said in the report.
In FY23, the company’s sales spiked almost 40% to Rs3.54 trillion compared to Rs2.54 trillion in FY22.
Sales surged mainly due to a substantial increase in petroleum product prices.
“However, volumetric sales of MS (petrol), HSD (diesel) and furnace oil (FO) declined by 17%, 25% and 94%, respectively, in the year,” Arif Habib Limited analyst Muhammad Iqbal Jawaid said in post-result commentary.
The company in its FY23 financial statement dispatched to the Pakistan Stock Exchange (PSX) reported that earnings per share declined to Rs19.85 compared to Rs194.35 in FY22.
The board of directors recommended a final cash dividend of Rs7.50 per share.
The cost of products sold surged 45% to Rs3.32 trillion in the year compared to Rs2.29 trillion in the prior year, suggesting that 98% revenue was spent on selling the products in FY23.
The cost of products sold stood at 93.5% of the total revenue in FY22, according to the profit or loss account.
Besides, other income declined by 46% to Rs13.50 billion in the year under review compared to Rs24.81 billion in the prior year.
Finance cost surged by a staggering 8.5 times to Rs40.33 billion compared to Rs4.70 billion in FY22, suggesting the piling up of circular debt has increased the company’s reliance on expensive bank financing.
Massive rupee devaluation, a record high interest rate for bank borrowing and a significantly high inflation remained major impediments in the way of transforming high revenues into net earnings in FY23.
Read the full story at the express tribune website.
