Pakistan: PSO posts better than expected results

PSOPakistan State Oil (PSO) announced its 1QFY14 result on Monday, posting higher than expected profit after tax of PkR7.8 billion (EPS: PkR31.57), a growth of 83%YoY. The deviation from expectations is mainly due to higher than expected other income of PkR10 billion. While analysts believe the company has booked irregular interest income received from the power sector post circular debt retirement in June’13, they await guidance from the management in this regard, and will update investors accordingly.

Other highlights of the 1QFY14 result include: 1) revenue growth of 11%YoY to PkR307 billion on the back of increased motor gasoline and furnace oil volumes, 2) increase in operating costs to PkR7.3 billion due to a 7% currency devaluation during the quarter resulting in higher foreign exchange losses, and 3) increase in financial charges by 10%YoY to PkR3.1 billion.

Going forward, while PSO’s core operations should normalize (given a stable US$/Pak Rupee parity going forward), there is a need to closely monitor circular debt build-up post the recent power tariff hikes to ascertain future liquidity conditions of the company.

Any increase in the margins of oil marketing companies (OMCs) is likely to bode well for PSO should also prove to be a key upside for the company going forward. Analysts are currently in the process of re-visiting investment case for PSO and will release updated estimates shortly, which will be shared with the readers.




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