PSO Other Expenses Jump 310% on Doubtful Debts

Pakistan State Oil (PSO) reported a 310% year-on-year increase in other expenses to PKR 6.5 billion during the first quarter of FY27, likely reflecting higher provisioning for doubtful debts. Despite the sharp rise in costs, the oil marketing company recorded a strong improvement in earnings, supported primarily by substantial inventory gains amid higher fuel prices.

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PSO’s profit reached PKR 26 billion, up 172% from the same period last year, while earnings per share (EPS) stood at PKR 54.4.

Inventory Gains Drive Profit Growth

The company’s improved bottom line was primarily driven by inventory gains of approximately PKR 37 billion. Rising petroleum prices boosted the value of PSO’s fuel inventories, helping offset the increase in other expenses.

Motor spirit prices increased 65% year-on-year, while high-speed diesel prices rose 49%, supporting the company’s reported earnings during the quarter.

PSO recorded gross profit of PKR 57.5 billion, benefiting from elevated fuel prices. However, the company did not declare a dividend for the quarter.

Finance Costs and Borrowings Increase

PSO’s finance costs rose 6% year-on-year to PKR 6.3 billion during the quarter. Higher short-term borrowings also pushed total debt up by PKR 19.5 billion to PKR 343 billion as the company managed its liquidity requirements.

The increase in borrowings highlights the continued pressure on the company’s working capital and cash flows, despite stronger reported profitability.

Receivables Reflect Continuing Liquidity Pressures

PSO’s trade debts declined to PKR 416 billion from PKR 425 billion a year earlier, indicating a reduction in outstanding trade receivables.

Other receivables moved in the opposite direction, increasing to PKR 179 billion from PKR 139 billion, mainly because of higher petroleum development levy (PDC) receivables.

Meanwhile, other income stood at PKR 4.3 billion, slightly below the level recorded in the corresponding period last year.

The combination of rising other receivables and higher borrowings underscores the importance of timely recoveries and progress on outstanding sector payments for PSO’s liquidity position.

PSO Outlook Hinges on Margins and Circular Debt

Looking ahead, revisions in oil marketing company margins, changes in fuel prices and progress in resolving circular debt remain important factors for PSO’s financial performance.

The unwinding of government-to-government discounts is also expected to influence the company’s competitive position. PSO’s market share is projected to recover towards its historical level of around 50%, compared with approximately 43% currently, potentially supporting sales volumes and earnings.

However, the sustainability of the company’s profitability will depend on market conditions, inventory movements, margin adjustments and improvements in the recovery of outstanding receivables.