The history of PSO dates back to 1974, but it was nearly three years later that the company received the "Pakistan State Oil Company Limited" name, following a couple of mergers in the oil sector. From there, PSO evolved to become the largest energy company in Pakistan.
The company is engaged in storage, distribution and marketing of various petroleum products such as motor gasoline (Mogas), furnace oil (FO), high speed diesel (HSD), kerosene, LPG, jet fuel, CNG, petrochemicals and lubricants. It has the largest network of retail outlets that serves the automotive sector and supplies fuel to the railways, aviation industry, armed forces, power projects and the agriculture sector.
The company's distribution network comprises of 3,754 outlets, with 3,565 serving the retail sector while 189 cater bulk consumers. Under its New Vision Retail Program, the company claims to have upgraded most of these outlets with up-to-date facilities. PSO also supplies to over 2,000 industrial units, business house, power plants and airlines.
The oil marketer also has Pakistan's largest storage infrastructure, stretching from Karachi to Gilgit. The company can store around a million metric tons, representing around two-thirds of the country's capacity.
Amid acute deficit in supply, bulk of the country's oil demand is fulfilled through imports. From the 12.4 million metric tons imported by Pakistan last year, PSO accounted for 90 percent (11.2 million). To put things in perspective, the company's total sales in FY14 were 13.2 million tons. Because the company supplies for the bulk of Pakistan's oil needs, it has a huge top line - over Rs 1.4 trillion in FY14. With global oil prices under pressure for over 12 months now, this top line shrank considerably in the recently concluded period.
Recent Performance PSO's revenue shrank 21 percent in FY15 (ended June 30) to Rs 1.11 trillion, while the sales volume remained roughly the same (13 million metric tons). In the four years before that, the company's top line grew at a compound annual growth rate of around 13 percent.
Margins, however, have trended downwards over the years. PSO's gross margin slid 49 basis points to 2.12 percent in FY15 as the company faced heavy inventory losses following the oil price dip. In 2011, the metric came out to be 3.52 percent. Net margin deteriorated even further over the course of this year, from 1.55 percent in FY14 to 0.62 percent In FY15, as after-tax profit plummeted around 70 percent to Rs 6.94 billion.
The story of lackluster profitability goes beyond just the plunging oil prices. Other income declined 28 percent in the fiscal year, owing to low receipt of interest income from IPPs. Heavy short term borrowings in recent years, because of increasing circular debt escalated the company's finance cost from Rs 9.5 billion to Rs 11 billion in FY15.
PSO encountered losses in the second and third quarters of the fiscal year. In the quarter ended June 2015, improvement in white and black oil sales volumes and an inventory gain due to stability of oil prices ensured an after-tax profit of Rs 3.69 billion.
Liquidity scenario remained weak for the oil giant in fiscal'15. The company saw a net outflow of Rs 29.5 billion from operating activities, which actually came down from last year on account of decrease in stock in trade balances. PSO also saw a net outflow in financing activities courtesy of repayment of short term financing.
In wake of a tough fiscal year, PSO's stock took a beating over the past year. After trading at over Rs 400 a share in mid-2014, the stock currently trades for around Rs 315-mark. The bleak picture is not expected to continue for long however. Although it is hard to predict the timing of an oil price hike, many analysts believe the journey will only be northwards from here for crude prices, something that PSO will eagerly be waiting to see.