Pakistan State Oil (PSO) is a Pakistani oil company. The company has a history of poor performance. Its financial performance has been affected by political instability in Pakistan, which has limited its growth. Pakistan also has a weak economy, one of the lowest in the world. In addition, PSO’s state-owned status exposes it to endemic corruption. This has impacted the company’s decision-making process, with major corporate decisions frequently being taken for political reasons.
PSO’s performance in FY21
The Performance of PSO Pakistan State Oil in FY 21 was quite satisfactory. The oil company continued to increase its volumetric sales despite a decline in petroleum prices. The company also increased its revenue through the sale of gasoline and diesel. It also introduced Euro 5 standard fuels. PSO invested in technology and infrastructure to boost its sales volume and improve its retail presence. Its earnings were also boosted by a growth in late payment surcharge revenue and lower finance costs.
PSO recorded a robust performance in FY21, with record operating profits and growth in all major product lines. In FY21, PSO increased its topline by nine percent year-on-year, mainly due to volumetric growth. During FY21, PSO increased its sales volume by 24 percent, thanks to an increase in furnace oil demand. The company also increased its market share in the white-oil segment by more than 140 bps.
The oil company also increased its profitability by more than four percent, despite the challenging environment. Its new high-octane 97 Euro 5 fuel was a game changer for the industry. In addition, PSO prioritized investments in high-margin products and lubricants, adding significant revenue to its bottom-line. Moreover, PSO launched the first EV charging station in the country’s capital, a significant step towards enhancing its competitiveness in the energy industry.
PSO is a multi-national oil marketing company headquartered in Pakistan. Its business includes marketing, retailing, and distributing petroleum products. PSO has a network of more than 3,600 retail outlets in the country. It also has a presence in the aviation and chemical industries. In addition, it has strategic investments in marketing companies and pipelines.
In FY21, PSO Pakistan State Oil recorded a strong increase in sales volume. The company’s volumes grew 24% YoY and 25 percent MoM. This was primarily due to a major increase in the sales of High-Speed Diesel. Moreover, PSO maintained a significant market share in all three petroleum products.
Its largest competitor
Until recently, PSO, Pakistan State Oil’s largest competitor, was a government-owned company that dominated the retail fuel market in Pakistan. It outpaced other competitors and reached a market share of 85 percent in the 1980s. It developed an expanding retail network. It also began selling liquid natural gas and became the industry leader in this sector. It also built up a fleet of 2,500 tank trucks and 1,000 railway tankers. PSO also launched its own pre-paid fuel cards.
With a market share of over 25 percent, PSO is facing increasing competition from multinational companies. Major players in the country include Shell and Total. Local refinery operators include Attock and Caltex. The company has engaged in a strategy of vertical integration and is backing the construction of a new refinery.
PSO has a diverse business portfolio and more than 3,800 retail outlets. In addition to gas stations, it also has convenience stores and auto-car-wash facilities. Additionally, the company operates business centers with Internet facilities. In 2012, PsO also introduced loyalty and pre-paid cards, which has helped it gain a larger market share.
In FY22, PSO increased its operating profits by 183 percent year-on-year, mainly due to higher volumes. Its margins were also improved by improving its product mix. In FY21E, it is projected that LNG will account for 54% of volumetric sales. Sales of MOGAS and HSD will grow at a 2.5% CAGR, due to increased consumer demand and favorable macros, including massive growth in automobiles and CPEC-related business activity. However, the unavailability of CNG is likely to hamper growth in MOGAS.
Another important milestone for PSO is its new project in the Balochistan region, where it is planning to build a 5000-acre bio-diesel plant. This project is expected to generate jobs for local residents, and save the country almost Rs. 3 billion in foreign exchange. This project should help PSO overcome the tough times that it has faced in recent years. PSO is also planning to invest in a mobile wallet operator and start a digital bank. In addition, it is allocating 1 billion rupees to start a venture capital fund.
PSO has the largest retail network in Pakistan, with over 3,800 outlets. Its retail coverage exceeds 80 percent of the total industry network. In addition, it has been named a Karachi Stock Exchange Top Company for many years. Its stock price currently trades around Rs. 335 per share. It serves a wide range of consumers in the country, with a national obligation to the people of Pakistan.
Its focus on RLNG
PSO is one of the largest companies in Pakistan by revenue and has a network of over 3,500 service stations. It has been one of the fastest growing markets for liquefied natural gas (LNG) in recent years. The country uses the fuel mainly for electricity generation. Its economic situation has been difficult this year because of a fuel price spike and has been hit by devastating floods caused by climate change. In response, the government secured a bailout from the IMF last month and agreed to increase the price of domestic fuel.
PSO’s operating profit increased 183 percent year-on-year in FY17, with higher sales revenues and higher other income offset by lower cost of goods sold and higher interest income. The company reported a rise in its bottom-line in FY17 thanks to an eight-percent growth in volume, higher prices, and increased market share.
PSO has increased its market share from 44.3 percent in FY20 to 46.3 percent in FY21. It has also increased its market share in RLNG by 140 basis points. Moreover, the company’s profit after tax decreased by 15.2 percent year-on-year, mainly due to a one-time reversal of deferred tax assets. PSO’s three main products also increased their volumetric volumes by around twenty-one and 37 percent, respectively.
In September, Pakistan State Oil announced plans to build a US$500 million LNG terminal. It also launched a digital integrated oil storage and dispatch terminal. It has also signed a MoU with the Pak Arab Pipeline Company and the Pak Arab Refinery Limited to develop a petroleum product supply chain.
A number of universities in Pakistan have been working on biofuels, namely Jatropha. Pakistan State Oil has a state-of-the-art transesterification device for biodiesel production. It has tested B-10 biodiesel’s engine efficiency. The results showed that the PSO biodiesel was more effective in terms of engine output than its Jatropha cousin. However, the resulting biofuels did not have the same calorific value as the mineral equivalent.
Its increased assortment amid low demand
PSO Pakistan State Oil has increased its assortment in the retail sector despite low demand. The company saw a decline in furnace oil volume during FY20 but an increase in retail petrol volumes during FY21. The company’s profit after tax also decreased year-on-year, mainly due to lower other income and exchange losses, along with a one-time reversal of deferred tax asset. However, its retail footprint has increased and it has increased its market share.
Sales of petroleum products were robust in FY22, and increased prices boosted the company’s revenue. Sales volumes increased by 15%, 26%, and 62 percent, respectively, and this helped PSO maintain its market share in all three products. However, the company still faces challenges in meeting the demands of the public and private sector.
To address the situation, PSO is pursuing a proactive strategy. It is pursuing nation-wide pipeline projects and building up its storage capacity. With the completion of CPEC, more transport activity will follow. In addition, PSO is aligned with the China Pakistan Economic Corridor (CPEC), which aims to improve the country’s economy and the energy sector.
PSO has made several investments in technology, as well as in the community. It has upgraded its fuel quality to Euro 5 standards and launched the country’s first EV charging facility. It also increased its retail presence and increased its storage capacity. It also saw an increase in late payment surcharge income, which is an important measure in reducing finance costs.
PSO is Pakistan’s largest fuel supplier, supplying more than 80% of the fuel needed by independent and public power producers. It also serves agriculture units and maritime-related businesses as well as aviation fuel stations. The company also has a strong retail customer base, as it serves both the public and private sectors.
