KARACHI: Pursuant to the Notification from the Ministry of Petroleum & Natural Resources (MPNR), dated February 12, 2015 whereby PSO was informed by the MPNR that the Federal Government in exercise of the powers under Section 7 of the Marketing of Petroleum Products (Federal Control) Act, 1974 “the Act” has dissolved/de-notified the BOM with immediate effect. The above-referred Notification also stated that the Managing Director, PSO shall exercise and perform all the powers and functions of the Board under Section 6(4) of the Act till a new BOM is appointed by the Government of Pakistan.
During the period under review, the company’s profitability has been adversely affected by the sharp decline of 51% in the OPEC basket price of crude oil, USD 109 per barrel in July 2014 (July 2013: USD 100 per barrel) to USD 53 per barrel in March 2015 (March 2014: USD 104 per barrel). This significant decline in crude oil prices, an uncontrollable external factor, together with the inventory levels/management of the Company to prevent any dry out situation in the country has resulted in significant inventory losses during the second and third quarters of Financial Year 2015 (FY2015). However, there has been an increasing trend of crude oil prices subsequent to the period end and the Company expects that inventory gains will reverse the earlier such losses thereby contributing positively to PSO’s profitability.
The 51% decline in crude oil prices has also resulted in a 20% reduction (9MFY2014: 10% growth) in the sales turnover to Rs. 824 billion (9MFY2014: Rs. 1,023 billion). During the third quarter FY2015, the Company witnessed an overall volumetric growth of 9% (3QFY2014: 5% decline) net 14% positive shift over the SPLY.
During the third quarter, PSO’s market share for Motor Gasoline was 48% (FY2014: 47.5%), for HSD was 49.4% (FY2014: 51.4%) and for Furnace Oil was 63.1% (FY2014: 68.1%).
The Company has reported a Profit After Tax of Rs. 3.2 billion (9MFY2014: Rs. 19.4 billion) during the period under review. The main factors for this decline being the lesser receipts of late payment surcharge of Rs 3.4 billion (9MFY2014: Rs 11.9 billion) and inventory losses of Rs 8.3 billion (9MFY2014: Rs 6.1 billion gain). Cash flows and earnings of the Company now remain under pressure only as a consequence of the inability of the power and aviation sectors to pay for the very significant dues for supplies of furnace oil and aviation fuel made by the Company. Other than these over due amounts, the Company is debt free.
The Company’s commitment to the energy security of Pakistan has been enhanced by the diversification into LNG as a fuel for power generation and other sectors. PSO is currently in negotiations for entering into a medium / long term Sales Purchase Agreement with Qatargas for the import of LNG into Pakistan. Other avenues for additional supplies of LNG are being explored as well by the Company.
With the commissioning of Pakistan’s first LNG Terminal in end March 2015, after almost 15 years of trying, LNG is finally here, supplied by PSO, Alhamdolillah. This process change is a defining moment for PSO’s future growth resulting in savings of billions of US dollars for Pakistan.
In the period under review, the Managing Director, exercising the powers of the Board vested in him, has declared an interim cash dividend of Rs. 6.00 per share (9MFY2014: cash dividend @ Rs 4 per share, Bonus @ 10%), despite the inventory losses faced by the company. In comparison to this, no dividends were issued in the same period last year.
The Company, takes this opportunity to express gratitude to its shareholders, customers, business partners and other stakeholders for their trust and confidence in the Company and to the Government of Pakistan, especially the Ministry of Petroleum & Natural Resources for their continuous guidance and support. The Managing Director records the Company’s thank you to team PSO for their ceaseless efforts to ensure uninterrupted supplies of fuel oils despite all the challenges.