Pakistan: PSO and KAPCO announce remarkable financial results

PSOPakistan State Oil Company (PSO) has posted profit after tax of Rs12,558 million (EPS: Rs50.84) for the financial year ended June 30, 2013 (FY13) as against net profit of Rs9,056 million (EPS: Rs36.67) for FY12, registering a growth of 39%YoY. The FY13 results were in line with market expectations. Alongside the result, PSO announced a final cash dividend of Rs2.5/share.

Key highlights of PSO’s FY13 result included: 1) revenue growth of 7%YoY to Rs1,100 billion led mainly by a 25%YoY growth in motor gasoline volumes and higher prices, 2) gross margin remained marginally lower at 3.3% on account of lower gross margin during 4QFY13 due to inventory losses, and 3) finance cost reduced by a substantial 35%YoY to Rs7,591 million mainly due to contained penal markup.

Going forward, while core business fundamentals are expected to remain strong profitability and payout capacity largely depends on liquidity across the energy chain. While analysts expect benefits of an increase in power tariff to flow to PSO, potential risks in the form of higher exchange losses from a depreciating Pak Rupee could counter additional earnings from interest on the recently issued PIBs. Having gained 61%CYTD, PSO traded a discount of 36%.

Kot Addu Power Company (KAPCO) has posted profit after tax of Rs7,354 (EPS: Rs8.35) for FY13 as against net profit of Rs6,071 (EPS: Rs6.90) for FY12, depicting a growth of 21%YoY. The FY13 results were in line with analysts’ forecast of Rs7,712 million (EPS: Rs8.76). Alongside the result, KAPCO announced a cash payout of Rs4.5/share, taking cumulative payout for the year to Rs7.5/share.

Key highlights of the FY13 result include 1) revenue declined by 3%YoY to Rs97.7 billion due to lower load factor during the year, 46% vs. 52% for FY12, 2) finance cost reduced by 18%YoY to Rs8.0 billion as a result of lower short-term borrowing during the year, and 3) ‘other income’ reduced by 23%YoY to Rs5.89 billion, where analyst expect penal markup income at Rs690 million. Going forward, risks to exchange rate parity and an expected higher generation in FY14F could lead to earnings growth while potentially lower borrowing requirements could pave the way for higher payouts.



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