Pakistan State Oil’s (PSO) financial performance has witnessed a dramatic slump, with the company’s net consolidated profit plummeting almost 90% to Rs9.82 billion for the year ending on June 30, 2023. This substantial decline from the previous Rs95.72 billion last fiscal year is largely attributed to escalating costs associated with product sales in an inflationary landscape.
The Impact of Circular Debt and External Factors
Circular debt has persistently troubled PSO, compromising its financial resilience. The company conveyed its intent to liaise with the government for potential remedies, emphasizing the gravity of the situation. Sui Northern Gas Pipelines Limited (SNGPL) receivables surged by 65%, culminating in a 157% increase in PSO’s average borrowings and a rise in finance cost by 995 basis points YOY. Furthermore, the global and domestic financial climates remained volatile. PSO highlighted a 19.6% dip in white oil sales, 17.1% in motor gasoline, and 24.9% in diesel sales, consequences of economic deceleration and rocketing fuel costs. Black oil demand also nosedived by 32.1% due to a shift from furnace oil power generation.
Financial Overview
Despite the bleak environment, PSO saw a nearly 40% hike in sales, reaching Rs3.54 trillion in FY23, primarily spurred by heightened petroleum product prices. Yet, the volume of primary products like petrol and diesel declined by 17% and 25% respectively. The EPS (earnings per share) sank to Rs19.85 from Rs194.35 in FY22, with a final cash dividend of Rs7.50 per share proposed by the board. Product costs escalated by 45%, constituting 98% of the FY23 revenue, as opposed to 93.5% in FY22. Other revenue streams dwindled, with other income descending by 46% and finance costs ballooning by 8.5 times. These adverse financial metrics underscore the challenges of rupee depreciation, towering interest rates, and inflation.
