KARACHI – The financial cost of Pakistan State Oil (PSO) is expected to record a rise of nine percent in quarterly terms to Rs 3.25 billion in the second quarter FY11, mainly on account of rising trade payables, which witnessed a six percent in the quarter according to the latest financial data.
However, the company is expected to receive Rs 1.0 billion as interest incurred by Independent Power Producers (IPP) on overdue receivables. PSO is due to release its 1st Half of Financial Year 2011 financial results on February 9, in which the company is expected to indicated that it earned profit after tax (PAT) of Rs 6,134 million with earning per share (EPS) of Rs 35.76 compared to Rs 5.08 billion with EPS of Rs 29.64 in corresponding period last year, projecting a 21 percent annual growth.
This was mainly on account of tax adjustment after the reversal of turnover tax to 0.5 percent from 1.0 percent, resulting in an EPS impact of Rs 21.69. In 2QFY11 alone, the company is expected to report PAT of Rs 5.3 billion with EPS of Rs 31.04, exhibiting growing by more than 600 percent, when compared with Rs 810 million with EPS of Rs 4.72 in 1QFY11. Besides tax reversals, inventory gains of Rs 3.4/share and a 28 percent quarterly recovery in High Speed Diesel (HSD) volumes would be the major contributors to the profitability.
PSO is likely to achieve a 14 percent quarterly growth in net sales during 2QFY11, mainly on account of five percent and eight percent hike in HSD and FO prices, respectively. Though, PSO suffered a 12 percent contraction in Furnace Oil (FO) volumes with a 28 percent Quarter on Quarter improvement in the HSD volume is likely to mitigate the decline in FO volumes.
Despite positive results, the company is likely to suffer a three percent drop in gross profit in quarterly terms, due to lowering FO volumes as it offers higher margins compared to the fixed Rs 1.35 per liter margin on HSD. This is likely to contract gross margin to 3.4 percent in 2QFY11 from 3.9 percent in 1QFY11.
The ever mounting circular debt continues to add to the cash flow constraints for the company, said Syed Abid Ali at Arif Habib, adding that it is feared that the government’s decision to keep petroleum prices and power subsidies unchanged, will further intensify the circular debt problem.
