Inventory Gains: PSO Profits to go up further

The profits of Pakistan State Oil (PSO) are likely to go up further following inventory gains and a possible reduction in turnover tax.

Inventory gains have contributed up to 45 % to the profitability of state-run oil marketing company-Pakistan State Oil (PSO) in first nine months of the financial year 2021-22.

Experts have seen more inventory gains in the future if oil prices go up further. In addition, the oil industry is looking towards a reduction in turnover tax that would also boost the profits of PSO.

PSO Profits Up due to Inventory Gains

As per the management, inventory gains for PSO were around 40–45% of the profitability in 9MFY22, driven by a sharp rise in oil prices, reveals a report compiled by Topline Research.

Pakistan State Oil (PSO), being the National Oil Marketing Company, ensures a smooth supply of fuel across the country even at times when other private players are unwilling to supply fuel.

This helped PSO gain market share during 9MFY22 when private OMC players were reluctant to supply fuel products due to price differential claims (PDC).

 PSO’s market share in the White Oil Market improved from 45% in 9MFY21 to 48% in 9MFY22. On the other hand, PSO’s market share in the Black Oil Market improved from 53% in 9MFY21 to 57% in 9MFY22.

The management of PSO further stated that the government has completely settled PDC for PSO as of now.

The company gets a credit of around 30–40 days for payment against imported fuel and a credit of around 20 days for the procurement of products from local refineries.

In 9MFY22, the company registered strong volumetric growth of 16% and 27% in petrol and diesel, respectively.

The company would strive to continue with the growth momentum in FY23. However, a sharp rise in product prices could slow down growth. 

Demand for furnace oil (FO) will be dependent upon the outlook on alternative fuel sources (LNG, coal) availability and prices going forward. 

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The company still awaits details on the implementation of the super tax and the reduction in turnover tax for Oil Marketing Companies (OMCs).

Turnover Tax

If turnover tax is reduced for OMCs, it will be positive for the company as it has been a key demand by the industry.    

 PSO, being the largest shareholder of Pakistan Refinery Limited (PRL), will continue supporting the company in its expansion plans. 

 PSO reported the highest ever consolidated profits of Rs69bn (EPS of Rs147.6) in 9MFY22 as against Rs18bn (EPS of Rs38.9) during the same period last year.

The increase in the profitability of PSO was due to strong growth in volumes and huge inventory gains during the period.