Pakistan State Oil Company Limited, the largest state owned oil marketing company in the country has achieved a historic milestone with gaining all time high profit before tax of Rs 8.2 billion and profit after tax of Rs 5.5 billion in the first half of financial year 2007-08. This was achieved owing to 13 percent higher sales volume as well as due to inventory gains during the period.

The Board of Management of the company, in its meeting held here on Friday declared second interim cash dividend for the financial year ending June 30, 2008 at the rate of Rs 6 per share ie 60 percent. This is in addition to first interim dividend already declared at Rs 5.00 per share ie 50 percent.

Sardar M Yasin Malik, BoM Chairman, presided over the meeting. According to the financial results, PSO's profit for the period surged to Rs 5,487.962 million in the six-month period ended December 31, 2007 as compared to Rs 1,136,739 million earned in the corresponding period last year.

The company's earning per share increased to Rs 32.00 in the period under review against Rs 6.62 per share in the same period a year back. The company in its announcement said that despite intense domestic competition PSO was able to sell over 6.2 million tons of POL products, showing a 13 percent growth and translating into an all time high sales turnover of Rs 248 billion - an increase of 25 percent over prior year.

The all time high profit before tax of Rs 8.2 billion and profit after tax of Rs 5.5 billion was achieved owing to 13 percent higher sales volume as well as due to inventory gains during the period. PSO has approximately 80 percent of the country's storage capacity and has recorded gain or loss on its stock depending upon international oil price movement. Last year the company had an inventory loss during the same period.

Based on the improved performance, the Board of Management announced the second interim cash dividend of Rs 6 per share, in addition to the first interim dividend of Rs 5 per share translating into a cash payout of Rs 1.9 billion to its shareholders, which is Rs 5 per share more than the prior year period.

During the first half of FY08, international crude oil prices averaged over $78/bbl as against $61/bbl in 1HFY07. The trend of increase in crude price witnessed in the first quarter of FY08 continued during the second quarter, with Opec basket price peaking at $92/bbl during the first half as compared to $73/bbl during the same period last year.

Throughout the first half the company continued to face liquidity problems due to ever-increasing receivables from the government resulting in galloping financial cost. Despite the rising international prices, government continued to provide the subsidy in diesel, which touched its highest ever level at Rs 17.14 per litre in December 2007. At this level of subsidy the sale price of diesel would have been Rs 54.87 per litre vs current price of Rs 37.73 in the market.

The subsidy accumulation on account of Price Differential Claims (PDC) reached a level of Rs 26 billion at the end of November, however, a reimbursement of Rs 12 billion was received through financing arrangement with a syndicate of banks, thus mitigating the cash flow crunch to some extent. The company is pursuing another similar arrangement to address the increasing PDC receivable.

Following a 13 percent growth in sales volume PSO was able to enhance its overall market share to approximately 70 percent compared to 67.4 percent in the same period last year. The company outperformed its competitors by recording 14 percent increase in White Oil sales volume against industry growth of 10 percent, whereas Black Oil sales increased by 11 percent versus a single digit industry growth of 6 percent.

Consequently, the company improved its market share in Motor Gasoline from 46.3 percent to 50.1 percent, while High Speed Diesel market share increased to 62.9 percent. Similarly, Jet A-i market share increased to 63.6 percent vs 62.8 percent in the same period last year. In fuel oil, the company maintained its leadership with 81.5 percent market share.

PSO has been maintaining strong focus on enhancement of Non-fuel retail business. Accordingly ATMs were installed in collaboration with leading banks at selected retail outlets. The company also established food outlet as part of its Quick Service Restaurant (QSR) network plan in collaboration with a foreign fast food chain at one of its retail outlet, which is the first internationally recognised Quick Service Restaurant (QSR) established at any OMC's forecourt in Pakistan. PSO customers can now experience state-of-the-art car cleaning solution 'Wash Express' which has been introduced at selected outlets.

In order to maintain its leadership position in aviation industry, PSO developed exclusive aviation, consumer and retail facilities at the newly developed Sialkot International Airport (SIAL) inaugurated by the President of Pakistan in December 2007. PSO's refuelling facility at SIAL is fully capable of providing services to larger body aircraft as per international Aviation Quality Control & Safety Standards.

The Pakistan Credit Rating Agency (Pacra) assigned your company a long-term and short-term entity ratings of 'AAA' and A1+ which is the highest credit ratings in Pacra's rating scale.

During the period under review, PSO also won the Pakistan Society of Human Resource Management (PSHRM) Most Preferred Local Company Award thus moving towards becoming the 'Employer of Choice.' The company also won ICAP-ICMAP 'Best Corporate Report Award 2006 in Fuel and Energy sector. The Board expressed its confidence that the management remains well poised to meet anticipated market challenges and continue to deliver improved performance.