In our today’s morning briefing we would discuss the performance of Pakistan State Oil (PSO) in 1HFY15 and would give recommendation to the investors.

Bottom-lines dips 73% YoY in 1HFY15: Primarily owing to significant decline in international crude oil prices that resulted in heavy inventory losses, the cumulative profit after taxation (PAT) of the company dropped 72.9% YoY in 1HFY15 to Rs 4,283 million (EPS: Rs 15.76) versus a PAT of Rs 15,799 million (EPS: Rs 58.15) in 1HFY14. Apart from lower crude oil prices, the bottom-line was also affected by decline in other income and hike in finance costs. The other income dropped by 54.2% YoY during the period under review owing to lower penal interest income from IPPs.

More severe loss in 3QFY15: The performance of the company was more depressive in 2QFY15 alone where it went through a loss after taxation of Rs 960 million (LPS: Rs 3.53) versus a PAT of Rs 8,001 million (EPS: Rs 29.45) in 2QFY14 resulting in a negative growth of 88% YoY. This heavy decline in earning was also owing to record decline in international crude oil prices which dropped 55% YoY in 2QFY15. The lower penal interest income due to which other income went down and higher finance cost too had a negative impact on the profitability of the company.

Major dent by lower revenues:  As a result of heavy decline in international oil prices and 10.6% YoY lower sales volume, the net revenue of the company decreased to Rs 508,287 million in 1HFY15 which is 16.9% YoY less from net revenue of Rs 611,912 million in the similar period in FY14. The cost of sales came down to Rs 495,779 million in 1HFY15 which is 15.8% YoY down from Rs 588,860 million in 1HFY14. Therefore the gross profit witnessed a gigantic decline of 45.7% YoY in 1HFY15 to Rs 12,508 million versus Rs 23,052 million in 1HFY14

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