Annual Report pSO by Shoaib Mansoor.docx

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    Pakistan State Oils Annual Report 2012

    Submit by: Shoaib Mansoor

    Submitted to: Sir Zaki

    Class: MBA 6 (Evening)

    Subject: Analysis of F inancial Statement

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    VISION:To excel in delivering value to the customer as an innovative and dynamic energy company thats

    gets to the future first.

    MISSION:We are committed to leadership in the energy market through competitive advantage in

    providing the highest quality petroleum products and services to our customers, based on:

    Professionally trained, high quality, motivated workforce that works as a team in anenvironment which recognizes and rewards performance, innovation and creativityprovides for personal growth and development

    Lowest cost operations and assured access to long-term and cost-effective supply sources Sustained growth in earnings in real terms Highly ethical, safe, environment-friendly and socially responsible business practices

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    CORE VALUESEXCELLENCEWe believe that excellence in our core activities emerges from a

    passion for satisfying our customers needs in terms of total

    quality management. Our foremost goal is to retain our

    corporate leadership.

    COHESIVENESSWe endeavor to achieve higher collective and individual goals

    through teamwork. This is in calculated in the organization

    through effective communication

    RESPECTWe are an Equal Opportunity Employer, attracting and

    recruiting the finest people from around the country. We value

    contribution of individual teams. Individual contribution is

    recognized through our reward and recognition programme.

    INTEGRITYWe uphold our values and Business principles in every matter

    and decision.

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    CODE OF CONDUCTIn line with managements effort to maintain the decorum and

    ensure an environment that is cohesive to the development an

    success of our people, a Code of Conduct has been put in place

    where following activities can result in disciplinary action:

    1. Unsatisfactory and negligent job performance

    2. Excessive and unauthorized absence from duty

    3. Unsatisfactory safety performance

    4. Reporting on duty under the influence of drug or

    intoxicants

    5. Absence from duty without notice or permission from thsupervisor unless the cause of absence prevents giving

    notice

    6. Using influence for promotion, transfer or posting

    7. Conduct that violates common decency and morality

    8. Engaging in fight or any provoking activity which results

    fight

    9. Incompliance of instructions

    10.Acts of horse play on site property

    For more please visitwww.psopk.com

    http://www.psopk.com/http://www.psopk.com/http://www.psopk.com/http://www.psopk.com/
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    Black Oil:PSOs market share in the black oil sector increased to 78.2% in FY12 due to striving efforts made

    by PSO to ensure uninterrupted supply of furnance oil to power sector despite mounting the

    circular debt.

    White OilPSO witnessed growth as the market share increased to 55.1% in FY12 compared to 54.4% in

    FY1.

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    WISE VOLUME ND M RKET SH RE

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    Financials of Pakistan State Oil

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    Balance SheetAs at June 30, 2012)

    Note 2012 2011 % Change

    Assets Rupees in '000

    Non-Current Assets

    Property, Plant and Equipment 4 5,831,993 6,084,731 -4.2%

    Intangible Assets 5 29,991 28,822 4.1%

    Long term Investment 6 1,968,073 2,314,168 -15.0%

    Long term loans, advances and receivables 7 385,497 324,554 18.8%

    Long term deposits and prepayments 8 123,740 148,748 -16.8%

    deferred tax 9 1,292,316 957,487 35.0%

    9,631,610 9,858,510 -2.3%

    Current Assets

    Stores, spare parts and loose tools 10 134,431 115,339 16.6%

    Stock-in-trade 11 88,523,794 95,378,393 -7.2%

    Trade debts 12 218,022,292 124,721,832 74.8%

    Loans and advances 13 526,118 430,716 22.1%

    Deposits and Short term prepayments 14 2,528,406 1,027,381 146.1%

    Other receivables 15 21,122,166 22,520,278 -6.2%

    Taxation - Net 5,314,752 6,311,951 -15.8%

    Cash and bank balances 16 1,624,025 2,309,006 -29.7%

    337,795,984 252,814,896 33.6%

    Net Assets in Bangladesh 17 - -

    Total Assets 347,427,594 262,673,406 32.3%

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    Equity and Liabilities

    Share Capital 18 1,715,190 1,715,190 0.0%

    Capital Reserves 19 351,652 493,189 -28.7%

    Revenue Reserves 19 47,893,066 39,694,606 20.7%

    49,959,908 41,902,985 19.2%

    Non-Current Liabilities

    Long term deposits 20 1,176,078 1,023,531 14.9%

    Retirement and other benefits 21 2,518,502 2,233,717 12.7%

    3,694,580 3,257,248 13.4%

    Current Liabilities

    Trade and other payables 22 246,767,460 191,851,017 28.6%

    Provisions 23 688,512 688,512 0.0%

    Accrued interest / Markup 544,485 432,133 26.0%

    Short term borrowings 24 45,772,649 24,541,511 86.5%

    293,773,106 217,513,173 35.1%

    Total Equity and Liabilities 347,427,594 262,673,406 32.3%

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    Profit & Loss AccountFor the year ended June 30, 2012)

    Note 2012 2011 % Change

    Rupees in '000

    Sales 1,199,927,907 974,917,064 23%

    less:

    Sales Tax 163,861,410 137,969,158 19%

    Inland freight equalization margin 11,642,892 16,417,542 -29%

    175,504,302 154,386,700 14%

    Net sales 1,024,423,605 820,530,364 25%

    Cost of product sold 26 (990,101,083) (786,250,059) 26%

    Gross Profit 34,322,522 34,280,305 0%

    Other Operating Income 27 2,133,994 1,815,951 18%

    Operating Cost

    Transportation Costs 28 (1,205,394) (810,423) 49%

    Distribution and Marketing

    Expenses 29 (5,863,170) (5,175,233) 13%

    Administrative Expenses 30 (1,659,530) (1,514,532) 10%

    Depreciation 4.1 (1,127,587) (1,120,999) 1%

    Amortization of intangible assets 5 (15,491) (18,210) -15%

    Other operating expenses 31 (9,272,048) (2,239,725) 314%

    (19,143,220) (10,879,122) 76%

    Profit from operations 17,313,296 25,217,134 -31%

    Other income 32 7,550,581 4,143,710 82%

    Finance Cost 33 (11,658,928) (11,903,162) -2%

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    13,204,949 17,457,682 -24%

    Share of Profit Associates 6.1.1 469,468 516,752 -9%

    Profit before taxation 13,674,417 17,974,434 -24%

    Taxation 34 (4,618,362) (3,195,120) 45%

    Profit for the year 9,056,055 14,779,314 -39%

    (Rupees)

    Earnings Per share -

    basic and diluted 35 52.80 86.17 -39%

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    Statement of Comprehensive Income(For the year ended June 30, 2012)

    2012 2011 % Change

    (Rupees in '000)

    Profit for the year 9,056,055 14,779,314 -0.38725

    Other Comprehensive Income

    Unrealized (loss) / gain due to change in fair value of

    other long term investments (144,903) (11,844)

    Share of unrealized gain due to change in fair values

    of available for sale investment associates 3,366 5,516

    (141,537) (6,328)

    Total comprehensive income for the

    year 8,914,518 14,796,674 -0.39753

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    Cash flow StatementFor the year ended June 30, 2012)

    2012 2011 % Change

    Cash Generated From

    Operating Activities Rupees in '000Cash (used in) generated fromoperations 36 (13,525,483) 5,617,109

    (Increase) in long term-loans, advances

    and receivables (60,943) (6,655)

    Decrease / (Increase) in long-term

    deposits and prepayments 25,008 (22,797)

    Increase in long-term deposits

    received 152,547 75,055

    Taxes paid (3,955,992) (10,417,978)

    Finance cost paid (3,138,027) (3,182,997)

    Retirement benefits paid (824,170) (478,081)

    Net cash used in operating

    activities (21,327,060) (8,416,354) -153%

    Cash Flow from Investing Activities

    Purchase of property, plant and

    equipment (877,017) (851,555)

    Purchase of intangible assets (16,660) (10,782)

    Proceeds from disposal of operating

    assets 14,847 56,764

    Dividend received 883,522 405,810

    Net cash generated from /

    (used in) investing

    activities 4,692 (399,763) 101%

    Cash Flows From Financing Activities

    Short-term finances obtained /

    (repaid) 23,331,017 (132,165)

    Dividend paid (593,751) (2,173,429)

    Net cash used in financing activities 22,737,266 2,305,594

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    Net increase / (decrease)

    in cash and cash

    equivalents 1,414,898 (11,121,711)

    Cash and cash equivalents at beginning

    of the year (19,531,039) (8,409,328)

    Cash and cash equivalents

    at the end of the year 37 (18,116,141) (19,531,039) 7%

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    Financial Analysis of Pakistan State Oil

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    Comment:

    Profit and loss accountCompanys after tax profitability has declined by 39% in Financial Year (2012) as compared to 2011.

    According to the industry and market analysis we have found that this decline was mainly due to the fact

    that company had suffered heavy exchange losses amounting to Rs. 8.6 billion versus Rs. 0.7 billion last

    year. Heavy exchange losses were suffered on account of sharp rupee devaluation by 10% approx. as

    Rupee hit historic low of Rs. 94.38 against US dollar as of June 30, 2012. Furthermore, in FY 2011, there

    was one time tax reversal of Rs. 2.3 billion on account of reinstatement of turnover tax from 1% to 0.5%

    by tax authorities.

    According to the figures the performance of Pakistan State Oil is declined FY 12. PSO has done a

    remarkable job in sales but unfortunately the cost of goods sold was too high because of the same issue

    PSOs performance shows a declining trend and if the conditions of fx rates remain the same then we can

    forecast more decline in future.

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    PSO at a Glance

    Balance sheet Analysis

    2012 2011 2010 2009 2008

    Share Capital 1,715 1,715 1,715 1,715 1,715

    Reserves 48,245 40,188 27,621 19,156 29,250

    Shareholders' Equity 49,960 41,903 29,336 20,871 30,965

    Property Plant & Equipment 5,862 6,114 6,411 7,056 7,567

    Net Current Assets 44,023 35,302 23,298 8,666 22,143

    Long Term Liabilities 3,695 3,257 2,836 2,528 2,409

    -

    10,000

    20,000

    30,000

    40,000

    50,000

    60,000

    2012 2011 2010 2009 2008

    Rupees

    inMillion

    Years

    Shareholders' Equity

    2012

    2011

    2010

    2009

    2008

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    Commentary:

    Balance sheetAs of June 30, 2012, total assets of the Company increased by 32% as compared to last year. This was

    primarily due to variance in trade debts balances on account of ever increasing circular debt related

    receivables. Shareholders equity rose by 19% to Rs. 50 billion as of June 30, 2012 versus Rs, 42 billion in

    2011. The net income generated during the year was the main contributor of this development.

    Increase in reserves

    Increase in Shareholders equity

    Increase in Net current assets

    Increase in long term liabilities

    Decrease in Property, Plant and Equipment

    The increase in the reserves shows that company is expecting some shortage of fuel in near future it means

    the company may bear some price fluctuations or uncertain situation so its good news for speculators not

    for investor.

    Similarly increase in shareholders equity is because of net income as described by the auditors above.

    Increase in net current assets is due to the companys borrowing which results in the increase of liabilities.

    As we know that liabilities inversely affect shareholders equity so as described above its a bad news for

    investors and we can forecast the same negative trend in companys stock price also.

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    PSO at a Glance

    Profitability Ratios

    2012 2011 2010 2009 2008

    Profitability Ratios

    Gross Profit Ratio % 2.9 3.5 3.3 0.4 5.1

    Net Profit Ratio % 0.8 1.5 1 -0.9 2.4

    EBITDA Margin % 2.2 3.2 3.3 -0.6 4.1

    Return on Shareholders' Equity % 18.1 35.3 30.8 -32.1 45.4

    Return on Total Assets % 2.6 5.6 4.5 -4.40 11.1

    Return on Capital Employed % 47.2 66.2 86.6 (21.9) 68.1

    -6

    -4

    -2

    0

    2

    4

    6

    8

    10

    12

    2012 2011 2010 2009

    Times

    Profitability Ratios

    Gross Profit Ratio

    Net Profit Ratio

    EBITDA Margin

    Return on Total Assets

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    Commentary:

    Profitability Ratios

    Theprofitability ratios measure the firms ability to generate profit by using its capital and assets

    efficiently to provide the maximum return to the shareholders. The ratios show a declining trend inprofitability ratios. The reason for decline is discussed above but these ratios showing that the company is

    just not performing well in cost cutting of the product even company is not using its assets efficiently as

    well. The return on capital is also decreased it means the capital applied today in 2012 generates low

    returns as compare to previous year.

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    PSO at a Glance

    Asset Utilization Ratios

    2008 2009 2010 2011 2012

    Inventory turnover ratio 12.7 14 17.7 12.7 13

    Debt Turnover Ratio 24.6 12.6 8.9 8 7

    Creditor Turnover Ratio 9.6 6.3 6.1 5.7 5.4

    Total asset turnover ratio 5.78 5.13 4.93 4.19 3.9

    Fixed asset turnover

    ratio 74.3 98.4 130.3 155.7 200.4

    0

    5

    10

    15

    20

    25

    30

    2008 2009 2010 2011 2012

    Tim

    es

    Asset Utilisation Ratios

    Inventory turnover ratio

    Debt Turnover Ratio

    Creditor Turnover Ratio

    Total asset turnover ratio

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    PSO at a Glance

    Investment Oriented Ratios

    2012 2011 2010 2009 2008

    Earnings per share Rs. 53 86 53 -39 82

    Market value per share (Year End) Rs. 236 265 260 214 417

    Highest Price Rs. 271 314 343 429 540

    Lowest Price Rs. 206 237 218 96 318

    Break-Up Value Rs. 290 244 171 121 180

    Price Earnings Ratio x 4.5

    Dividend per share Rs. 5.5 10 8 5 23.5

    Bonus share % 20 - - - -

    Dividend Pay out % 14.2 11.6 15.2 -12.8 28.7

    Dividend yield % 2.3 3.8 3.1 2.3 5.6

    Dividend cover ratio x 9.6 8.6 6.6 -7.8 3.5

    0

    50

    100

    150

    200

    250

    300

    350

    2012 2011 2010 2009 2008

    Break-Up Value

    2012

    2011

    2010

    2009

    2008

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    Commentary:

    Investment Oriented Ratios

    As of June 30, 2012, investment ratios have shown a stable trend as compared to last year. Breakup value

    increased 19% from Rs. 290 per share versus Rs. 244 per share in 2011 mainly on account of reinvestment

    of major portion of net earnings in order to meet the tight working capital requirement due to prevailing

    circular debt situation.

    Investment ratios suggest that the company is reliable to invest in and the capital return will provide the

    enough return. According to the position of PSO in 2012 almost all the investment oriented ratios showing

    negative trend in growth which also reflects in the stock price as well, so investing in PSO according to

    2012 investment ratios is not recommended while short sell will be a good option.

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    PSO at a Glance

    Leverage Ratios

    2012 2011 2010 2009 2008

    Interest Coverage Ratio x 2.17 2.51 2.77 -0.89 16.41

    Current Ratio x 1.15 1.16 1.14 1.07 1.24

    Quick ratio x 0.84 0.72 0.79 0.75 0.57

    Commentary:

    Leverage Ratios

    No significant fluctuations in leverage ratios as compared to last year, however, the short term borrowingshave increased by 86% as compared to last year.

    The current ratio and quick ratio measures the firms ability to meet its short term liabilities. The current

    ratio of Pakistan State Oil is declined it means its ability to pay short term debt is declined which a

    negative indication for a company. On the other hand the companies quick ratio is increased it means the

    most liquid current assets are still shower upward trend as compare to previous years.

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    Composition of Balance Sheet

    Assets FY 12 Trade Debts Stock-in-trade

    Other

    Receivables

    Cash &Bank

    Balances

    OtherCurrent

    Assets

    Property,Plant and

    Equipment

    Long term

    Investmen

    63% 26% 6% 0.50% 0.20% 2% 0.5

    43%

    18%

    4%0%0%1%

    34%

    Assets FY 12

    Trade Debts

    Stock-in-trade

    Other Receivables

    Cash & Bank Balances

    Other Current Assets

    Property, Pland and Equipment

    Long term Investments

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    Composition of Balance Sheet

    Assets

    Assets FY 12 Trade Debts Stock-in-trade

    Other

    Receivables

    Cash &Bank

    Balances

    OtherCurrent

    Assets

    Property,Plant and

    Equipment

    Long term

    Investmen

    48% 36% 9% 1.00% 2.00% 1% 3

    48%

    36%

    9%

    1%2%1%3%

    Assets FY 11

    Trade Debts

    Stock-in-trade

    Other Receivables

    Cash & Bank Balances

    Other Current Assets

    Property, Pland and Equipment

    Long term Investments

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    Equities and Liabilities

    FY 12

    Trade payables and other shorterm

    liabilities Short term borrowings

    Share

    Capital Reserves

    Total Long term

    liabilities

    71% 13% 1% 14% 1%

    71%

    13%

    1%

    14%

    1%

    Equities and Liabilities FY 12

    Trade paybles and other shorterm

    liabilities

    Short term borrowings

    Share Capital

    Reserves

    Total Long term liabilities

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    Equity & Liabilities

    FY 11

    Trade payables and other short term

    liabilities Short term borrowings

    Share

    Capital Reserves

    Total Long

    term

    liabilities

    73% 10% 1% 15% 1%

    73%

    10%

    1%

    15%

    1%

    Equities and Liabilities FY 11

    Trade paybles and other shorterm

    liabilities

    Short term borrowings

    Share Capital

    Reserves

    Total Long term liabilities

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    Property, Plant and Equipment:

    Decreased: It shows that the company is not in a plan to expend the business

    Long term investments:

    As property, plant and equipment decreased so the long term investments also decreased which confirms the above

    forecast and analysis

    Total Non-Current Assets

    As there is a decreased in property, plant and equipment and long term investments so overall non current assets

    proportion is also decreased which shows the negative sign.

    Total Current Assets

    The total current asset increased but this is because of the highest increase in trade debts in

    a decade.

    Total Shareholders Equity

    Decreased which show the negative trend.

    Short-term Borrowings

    Short term borrowing is increased which again show the negative trend towards the

    performance of the company.

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    Vertical/Horizontal Analysis

    Horizontal Analysis of Balance Sheet

    2012 2011 2010 2009 2008Property, Plant and Equipment 76% 80% 84% 92% 99%

    Total Non-Current Assets 79% 81% 73% 121% 93%

    Stock-in-trade 314% 339% 208% 144% 221%

    Trade debts 1861% 1065% 1003% 687% 289%

    Other receivables 145% 155% 100% 88% 108%

    Cash and bank balances 86% 122% 94% 152% 159%

    Total Current Assets 582% 436% 333% 239% 200%

    Total Assets 495% 374% 288% 219% 181%

    Share Capital 100% 100% 100% 100% 100%

    Reserves 253% 210% 145% 100% 149%Total ShareholdersEquity 240% 201% 141% 100% 149%

    Total long term liabilities 161% 142% 123% 110% 105%

    Trade and other payables 670% 521% 424% 299% 220%

    Total Current Liabilities 624% 462% 361% 276% 199%

    Total Equity & Liabilities 495% 374% 288% 219% 181%

    Note: The base year for the analysis is 2006

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    Property, Plant and Equipment:

    In 2012 PSO has faced the lowest position of PP&E and the trend shows continues

    declining trend with respect to its position in PP&E.

    Total Assets:

    The firms total assets show the highest position in 2012 as compare to the previous

    years. This is mainly because of the increase in trade debts.

    Total Equity & Liabilities:

    The total equity & liability show an upward trend this is mainly because of the

    increase in short term borrowing of the company and as companys net income is

    increased, the shareholders equity is also increased by the same.

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    Net Sales and Cost of Product Sold:

    The net sales performance achieved remains highest as compare to last three years

    but on the other hand cost of goods sold is also increases which eventually results inthe lower gross profit as compare to the previous year.

    Total Operating Cost:

    The other operating cost has increased by 77% which directly affect the PBIT and

    because of the same the PBIT has decreased from 2.40% to 1.26% which clearly a

    sharp decline in profits.

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    Vertical/Horizontal Analysis

    Horizontal Analysis of Income Statement

    2012 2011 2010 2009 2008

    Sales 340% 277% 249% 204% 165%

    Sales Tax 368% 310% 266% 219% 167%

    IFEM/Levies 120% 169% 163% 95% 141%

    323% 285% 248% 196% 162%

    Net Sales 343% 275% 249% 205% 166%

    Cost of products sold 352% 280% 254% 217% 166%

    Gross Profit 199% 199% 169% 17% 174%

    Operating Cost

    Transportation 330% 222% 173% 140% 92%

    Administrative & Marketing Expenses 219% 195% 151% 149% 129%

    Depreciation 106% 105% 109% 110% 108%

    Other operating expenses 377% 91% 98% 162% 136%

    Total Operating Costs 261% 148% 128% 147% 127%

    154% 237% 200% -79% 210%

    Other/ Other Operating Income 695% 428% 543% 160% 123%

    Profit/ (Loss) from operations 221% 261% 243% -50% 199%

    Finance cost 1319% 1346% 1118% 705% 155%

    127% 168% 168% -144% 203%

    Share of Profit of Associates 45% 50% 50% 43% 28%