Pakistan State Oil Ltd (PSO) announced its 2QFY24A financial result, reporting an unconsolidated LAT of PkR14.14bn (LPS: PkR30.12), representing a significant decline from PAT of PkR21.8bn (EPS: PkR46.62) witnessed in the quarter before.

·         The result came in below our expectations of LPS of PkR14.35, where-in major deviations occurred due to lower gross profits (possibly attributable to higher inventory losses) alongside higher finance costs. Inventory losses are estimated to have clocked in at ~PkR27.2bn (PkR58/sh), as ex-refinery prices for MS/HSD fell by 25%/26%QoQ from their respective 1QFY24 closings, subsequently resulting in gross margins for the quarter to turn negative (-ve 0.4% vs. 6.4% in 1QFY24A).

·         Topline of the company stood at PkR907.2bn, changing by –1%/+8% on a QoQ/YoY basis during the period, as total POL offtakes for the quarter stood at 1.93mn tons, up 1%QoQ.

·         On the non-operating front, finance costs came in higher than expectations, amounting to PkR15.09bn (up 47%/97% QoQ/YoY). The rise may be attributed to higher markup expenses on short-term financing, as well as elevated late payment surcharges on payables during the period.

·         On the taxation front, effective taxes turned negative, resulting in tax reversal of PkR2.1/bn, possibly due to utilization of previously owed deferred tax assets (PkR22.3bn as per 1QFY24 financials).

 Courtesy – AKD Research