Pakistan State Oil (PSO) closed FY2026 with profit after tax of PKR15.1 billion, down 28% from the previous year, while earnings per share stood at PKR32.1.
Despite the decline in annual earnings, the company’s board recommended a final cash dividend of PKR10 per share.
Fourth Quarter Turns Sharply Negative
PSO’s fourth-quarter performance was significantly weaker than its full-year results.
The company reported a loss after tax of approximately PKR23 billion for the June quarter, translating into a loss per share of PKR49.1.
The quarterly loss was more than five times larger than the loss reported in the same period a year earlier. According to Taurus Securities, however, the result was still better than some market forecasts.
Net sales remained broadly stable at around PKR809 billion, but gross margin fell to negative 4%.
Inventory Losses Drive Quarterly Pressure
The major drag on fourth-quarter earnings came from inventory losses following a sharp decline in ex-refinery prices.
Oil marketing companies can face significant earnings volatility when product prices fall rapidly because inventory purchased at higher prices has to be valued against lower prevailing prices.
PSO also handled considerably fewer cargoes during the quarter. The company processed only six cargoes, with no cargo activity recorded in April, compared with 28 cargoes during the same period a year earlier.
The combination of inventory losses and weaker cargo activity placed substantial pressure on quarterly profitability.
Full-Year Sales Soften On Market Share
For FY2026, PSO’s net sales declined 3% year on year to PKR3.05 trillion.
The company attributed the softer top line primarily to a reduction in market share.
Despite lower sales, gross profit increased 3% to nearly PKR100 billion. Operating profit, however, declined 7% as operating expenses increased and other income weakened.
Finance costs provided some relief, falling 24% to PKR25.7 billion during the year.
Profit before tax consequently increased 3% to PKR54.2 billion. A higher tax charge subsequently reduced the amount flowing through to net profit, leaving annual PAT at PKR15.1 billion.
Dividend Held At PKR10 Per Share
Despite the weaker annual earnings and substantial fourth-quarter loss, PSO’s board maintained the final cash dividend at PKR10 per share.
The payout provides shareholders with a cash return while the company navigates the earnings volatility associated with oil prices, inventory valuations and changes in market share.
The dividend will also remain relevant for investors focused on income from oil marketing companies.
Inventory Risk Remains A Key Watchpoint
PSO’s FY2026 results highlight the sensitivity of oil marketing company earnings to sudden movements in product prices.
Stable sales do not necessarily translate into stable profits when inventory values move sharply. A rapid decline in ex-refinery prices can create significant inventory losses and compress margins within a relatively short period.
For FY2027, the key operating indicators will include PSO’s ability to recover market share and the direction and volatility of petroleum product prices.
Until those factors become clearer, earnings could remain volatile even if the company maintains a relatively stable revenue base.