Pakistan State Oil’s Third Quarter Earnings Decline Amid Lower Offtakes

Karachi: Pakistan State Oil Ltd. (PSO) reported a 28% year-on-year decline in its third-quarter earnings, posting a profit after tax of PkR4.1 billion. The company’s earnings per share stood at PkR8.71, which came in slightly below analysts’ expectations. Despite the quarterly downturn, PSO’s net profit for the first nine months of the fiscal year rose by 14% to PkR15.3 billion.

During the third quarter, PSO’s net sales amounted to PkR711 billion, reflecting a 16% decrease from the same period last year. This decline was attributed to a 14% reduction in offtakes and lower fuel prices. The company’s total offtakes fell to 1.57 million tons, with motor spirit and high-speed diesel offloading decreasing by 13% and 15%, respectively.

PSO’s gross profitability also saw a drop, reaching PkR22.5 billion compared to PkR25 billion in the previous year, marking a 9% decrease. This was primarily due to the absence of inventory losses experienced in the same quarter of the previous fiscal year.

On a more positive note, PSO’s other income increased by 122% year-on-year to PkR4.8 billion, although it declined by 32% on a quarter-on-quarter basis. The increase in other income is attributed to a 1.8 times year-on-year rise in cash and short-term investments, which stood at PkR61 billion.

The company’s finance costs showed a significant improvement, dropping by 49% year-on-year to PkR7.7 billion, marking the lowest level in nine quarters. This reduction was driven by a decrease in short-term borrowings and the impact of declining interest rates.

Additionally, PSO’s trade receivables continued to decline, ending the period at PkR451 billion, down 14% year-on-year. The estimated gas receivables collection ratio improved to 105%, reflecting the change in trade receivables.

Analysts have issued a ‘BUY’ rating on PSO’s stock, with a target price of PkR729 per share by December 2025, suggesting an upside potential of 109% from the last close. The positive outlook is supported by a strengthening liquidity situation, anticipated growth in oil marketing company volumes, CPI-linked margins, and the upgradation of its refinery subsidiary.