KARACHI, Feb 17: Pakistan State Oil, the largest oil marketing company in the country, announced cash dividend at Rs5 per share (50 per cent) for the first half of the year to Dec 31, 2008.

The Board of Management (BoM) of the company, chaired by Sardar Yasin Malik, also unveiled on Tuesday, the financial figures for the six months, evidencing growth in market share by 1.3pc to 71.2pc.

Overall industry sales slipped by 4pc “mainly due to higher retail price and a general slowdown of the economy.”

PSO recorded a substantial increase of 58 per cent in gross sales, which rose to Rs392 billion for the July-Dec period, from Rs248 billion in the corresponding period of the previous year. Product sales stood at 6.03 million tons.

Notwithstanding the top line growth, the company posted loss- after-tax of Rs10 billion, translating into loss per share at Rs58.59 compared with PAT of Rs5.5 billion (earning per share: Rs32) in the corresponding period of the previous year.

The red on the profit and loss account was attributed to inventory loss in the sum of Rs20 billion.

The board distributed Rs858 million in dividend to the shareholders, which was warmly received by investors, with the PSO stock hitting its ‘upper circuit’ with a gain of Rs6.52 to Rs137.01 on Tuesday.

Analyst Farhan Mahmood at JS Global observed that huge inventory losses amid sharp decline in oil prices from their peak level led to gross losses in 1HFY09.

Operating expenses and finance costs also rose drastically by 102 and 597 per cent, respectively, owing to currency devaltuion and higher short-term borrowings.

Analyst said that the increase in finance cost could mainly be attributed to short-term borrowings by the company to cover huge receivables from thermal power plants, including Wapda and Independent Power Plants (IPPs).

In a statement released with the accounts, PSO mentioned that the circular debt remained a serious problem owing to receivables from the power sector (Hubco, Kapco, and Pepco) and PIA which continuously defaulted on payments during the review period.

As on Dec 31, 2008 receivables from those entities stood at Rs70 billion. PSO was making all-out efforts with the help of government of Pakistan for recoveries from these entities to ensure availability of products in the country and to reduce the impact of financial cost on the company.

In Q2FY09, PSO incurred loss after tax amounting to Rs1.6 billion, compared to Rs8.4 billion in Q1 FY09.

“In Q1 FY09 the company had taken an NRV (net realizable value) adjustment for anticipated reduction in inventory value. In addition, the 1QFY09 had also witnessed a Rs3.26 billion exchange loss,” the company stated.

During the first half of FY09, the Opec basket price of crude oil experienced a very sharp decline and touched lowest level of $33 per barrel in December 2008 against the highest level of $141 per barrel in July 2008.

“This significant decline in crude oil prices was one of the uncontrollable external factors which heavily affected the bottom line of the company.

Due to the decline in prices as mentioned above the government was able to roll back the subsidies on fuel prices thus reducing the pressure on the national exchequer,” the Board said in its statement.

For all the vagaries of the outgoing year, the board thought that the company was on its way to recovery.

Effective Feb 09 the margins for OMCs were revised from 3.5pc to 4pc with lower and upper limit of $45-$80 per barrel average price of Arabian Light Crude oil on Gasoline, Kerosene, and light diesel oil. For diesel, the margin was fixed at Rs1.35/ litre.Despite stiff challenges posed by external factors, the company said it had kept sharp focus on customer-oriented products and services.