Analysis of Financial Statement of Pakistan State Oil
This report is submitted in the
practical acknowledgement of Analysis of Financial statement Subject. This
report is developed from annual reports of Pakistan State oil where we give
the horizontal and vertical analysis along with ratios.
We are heartily thankful to our teacher, Mam
Maria Faisal, whose encouragement, guidance and support from the initial to the
final level enabled us to develop an understanding of the subject and in
writing the report about our subject from we have learn a lot because it is a
demonstration of our ability in research, analysis, and effectiveness of
expression. After writing our report ideally adds to the store of human
knowledge and serves as a contribution to future researchers.
Lastly, we offer our regards and blessings to all of those who supported us in any respect during the completion of the report.
Table of Contents
PREFACE
ACKNOWLEDGEMENT
Pakistan State Oil
Vision
Mission
Industry Profile
Financial Highlights
Financial Performance
Operational Highlights
Financial Highlights
Dividend and other Appropriation
Contribution to National Exchequer
Circular Debt
Financial Charges
Pak Rupee Devaluation
Strategy to Overcome Liquidity Problem
Company Auditors
PSO Ratings
Financial Statement
Share holding Pattern
Horizontal analysis
Vertical analysis
Balance Sheet
VERTICAL ANALYSIS
HORIZONTAL
ANALYSIS
Profit and Loss
Account
VERTICAL ANALYSIS
HORIZONTAL ANALYSIS
Ratio analysis
Current Ratio
Working Capital
Quick Ratio
Profit Margin
Return on Capital employed
Return on Shareholders’ Equity
EBIT margin
Net profit margin
Operating profit margin
Gross profit margin
Operating income Margin
Day’s sales in Receivables
Day’s Sales Inventory
Account Receivable Turnover
Creditors Turnover Ratio
Debtor Turnover Ratio
Cash Ratio
Interest Cover Ratio
Fixed Asset Turnover Ratio
Inventory turnover Ratio
Return on total assets
Total asset turnover
Sales to Fixed Asset
Return to Operating Asset
Fixed Asset to Equity
Inventory Turnover in Days
Debt to Equity Ratio
Debt Ratio
Earnings per share
Market value per share
Price earnings ratio
Dividend per share
Conclusion
References
Attachments
Pakistan State Oil
Pakistan
State Oil starts from mid-70s when the Government of Pakistan amalgamated three
OMCs: Esso Eastern, Pakistan National Oil (PNO) and Dawood Petroleum as part of
its reorganization plan. It is considered as one of the most successful mergers
in the history of Pakistan. The main objective of the Nationalization of POL
Giant was backed by the facilitation of the sensitive national issue of
providing fuel to Defense forces. Because, during the war of 1971, the nation
suffered from the problem that no fuel company was interested to provide fuel
to the Armed forces at that and the sensitivity of the nation was in very
crucial condition. The than Federal government decided to nationalize three
petroleum companies along with management control.
The
company is the only public sector entity in Pakistan that has been competing
effectively with three multinationals companies which are supported technically
by their parent organization.
Pakistan
State Oil Company Ltd; is the largest oil marketing company of Pakistan. It is
engaged in the Storage, Import, Distribution and Marketing of Petroleum
Products, Petrochemicals, Aviation & Bunker Fuels, LPG and CNG Dominates
the Country’s Fuel and Energy Need.
Vision
To
excel in delivering value to customers as an innovative and dynamic energy
company that gets to the future first.
Mission
We are
committed to leadership in 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, working as a team in an environment, which recognizes and rewards
performance, innovation and creativity, and provides 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
·
Extended support to various charitable
organizations in the health & education sector including contribution for
the rehabilitation of IDPs due to the Swat operation
Industry Profile
There
are four main OMCs in Pakistan that includes PSO, Shell, Caltex and Total. PSO
is the market leader by holding overall 67% of market share and with 22% share
Shell Pakistan hold second position.
Financial Highlights
Financial Performance
For the year ended June 30, 2011, the
Company achieved an impressive performance with turnover touching Rs. 975
billion mark compared to Rs. 877 billion in FY10 representing a growth of 11%.
Your Company was able to post highest ever after tax earnings of Rs. 14.78
billion as compared to Rs. 9.05 billion in the previous financial year. The earnings
per share of Rs. 86.17 was also at record level as compared to Rs. 52.76 last
year, representing 63% increase.
Operational Highlights
·
13%
decline in Black Oil segment vs. 2% industry decline mainly due to floods.
(shut down of KAPCO, AES LALPIR & TPS Muzaffargarh)
·
3%
decline in White oil segment vs. 1% industry decline mainly due to reduction in
sales volumes of HSD.
·
10%
decline in HSD volumes vs. 7% industry decline.
·
Positive
volumetric growth of 27% and 2% in Mogas and JP1 (Local) respectively.
·
Market
share declined to 65.6% from 71.1% in FY10.
Financial Highlights
· Highest
ever profit after tax of Rs. 14.78 billion vs. Rs. 9.05 billion in FY10 (EPS:
Rs.86.17 , 2009-10: Rs.52.76)
· Circular
debt continues to put pressure on liquidity of the Company.
· Financial
charges of Rs. 11.9 billion booked during the year.
· GoP
injected Rs. 120 billion in May2011 to reduce circular debt. PSO received Rs.
89 billion out of which Rs. 71 billion were paid to refineries/ taxes
authorities.
· Received
PDC on Mogas amounting to Rs. 1.8 billion in FY2011 and subsequent recovery of
Rs.5 billion in Jul & Aug 2011.
Dividend and other Appropriation
Based on these results, the board
announced a final dividend of Rs. 2 per share. Combined with the earlier interim
dividends aggregating Rs. 8 per share, the total dividend for the year stood at
Rs.10 per share translating into a total payout of Rs. 1.715 billion to the
shareholders.
Contribution to National Exchequer
During FY11, your Company contributed
Rs.197 billion to the government exchequer in the form of corporate taxes,
excise duty, sales tax, import duty and Petroleum Development Levy (PDL).
Circular Debt
Despite being profitable, PSO Company
continued to face severe liquidity problems due to ever-increasing receivables
on account of prevailing circular debt crisis. As of June 30, 2011, major power
generation companies including WAPDA, KAPCO, HUBCO and KESC owe PSO Company an
aggregate amount of Rs.115 billion. Further, GoP owes PSO Company Rs.14.5
billion on account of Price Differential Claim (PDC). This has created such an
acute financial crunch that we had to struggle to meet our import and tax related
payments. Consequently, the Company owed Rs. 55 billion to local refineries and
Rs. 94 billion to international suppliers and hence the Company had to resort
to short-term borrowings to meet its working capital requirements.
Financial Charges
The heavy bank borrowings resulted in
high financial costs to the Company in terms of interest payments, which continues
to depress your Company’s profitability. The Company incurred Rs. 11.9 billion
as financial charges during FY11 as compared to Rs. 9.8 billion in the previous
financial year.
Pak Rupee Devaluation
In addition to heavy financial charges
borne by your Company, Pakistan Rupee devaluation of 0.5% against the US$
resulting in an exchange loss of Rs. 684 million also affected the
profitability of the Company as more than 90% of oil product imports in the
country are carried out by PSO.
Strategy to Overcome Liquidity Problem
Management continues to make stringent
efforts to overcome liquidity problems and has formulated various strategies to
overcome it. These include rigorous monitoring of the net working capital
position of the Company to ensure that current asset - current liability
maturities are adequately matched with temporary mismatches being covered
through short-term borrowings. In addition, constant pursuit for recovery of
receivables from power sector as well as Government of Pakistan (GoP) was made
throughout FY11 to ensure availability of products in the country. As a result
of these measures, the Company received Rs. 179 billion from the power sector
against supplies of Rs. 295 billion in FY11 and Rs. 3.3 billion on account of
delayed payment charges out of Rs. 26 billion recoverable from the power
sector. Further, your Company received Rs.1.8 billion on account of price
Differential Claim (PDC) from GoP in FY11 and Rs. 5 billion subsequent to year
end.
Company Auditors
• KYMG Taseer Hadi & Co.
• M. Yousuf Adil Saleem & Co.
• M. Yousuf Adil Saleem & Co.
PSO Ratings
LONG TERM CREDIT RATING AA+
SHORT TERM CREDIT RATING A1+
RATING BY: THE PAKISTAN CREDIT RATING AGENCY LIMITED (PACRA)
RATING LAST UPDATED : JANUARY 2011
SHORT TERM CREDIT RATING A1+
RATING BY: THE PAKISTAN CREDIT RATING AGENCY LIMITED (PACRA)
RATING LAST UPDATED : JANUARY 2011
Financial Statement
The financial statement of any organization shows the results of its
operation and its position in business. It is a process which involves
reclassification and summarization of information through the establishment of
ratios and trends. The overall objective of financial statement analysis is the
examination of a firm’s financial position. Balance sheet and Income statement
for year 2011, 2010 and 2009 is given at the end of report.
2011
|
2010
|
2009
|
2008
|
2007
|
2006
|
2005
|
||
Sales Volume (Million
Tons)
|
12.9
|
14.2
|
13.2
|
13
|
11.8
|
9.8
|
9.7
|
2011
|
2010
|
2009
|
2008
|
2007
|
2006
|
2005
|
||
Profit & Loss Account
|
||||||||
Sales Revenue
|
974,917
|
877,173
|
719,282
|
583,214
|
411,058
|
352,515
|
253,777
|
|
Net Revenue
|
820,530
|
742,758
|
612,696
|
495,279
|
349,706
|
298,250
|
212,504
|
|
Gross Profit
|
342,80
|
29,166
|
3,010
|
30,024
|
12,259
|
17,207
|
13,746
|
|
Operating Profit / (Loss)
|
25,217
|
21,233
|
-5,577
|
22,451
|
7,950
|
11,264
|
9,340
|
|
Marketing & Administrative Expenses
|
6,690
|
5,181
|
5,113
|
4,425
|
3,748
|
3,428
|
3,219
|
|
Profit / (Loss) before Tax
|
17,974
|
17,963
|
-11,357
|
21,377
|
7,122
|
11,418
|
9,191
|
|
Profit / (Loss) after Tax
|
14,779
|
9,050
|
-6,699
|
14,054
|
4,690
|
7,525
|
5,656
|
|
Earning / (Loss) before Interest, taxes, depreciation &
Amortization (EBITDA)
|
31,017
|
29,028
|
-3,983
|
23,912
|
9,420
|
9,420
|
13,385
|
|
Capex
|
859
|
559
|
694
|
620
|
1,609
|
717
|
1,506
|
2011
|
2010
|
2009
|
2008
|
2007
|
2006
|
2005
|
||
Balance Sheet
|
||||||||
Share Capital
|
1,715
|
1,715
|
1,715
|
1,715
|
1,715
|
1,715
|
1,715
|
|
Reserves
|
40,188
|
27,621
|
19,156
|
29,250
|
19,224
|
19,098
|
15,830
|
|
Shareholders' Equity
|
41,903
|
29,336
|
20,871
|
30,965
|
20,939
|
20,813
|
17,545
|
|
Property Plant & Equipment
|
6,114
|
6,411
|
7,056
|
7,567
|
8,138
|
7,674
|
8,256
|
|
Net current assets
|
35,302
|
23,298
|
8,666
|
22,143
|
115,879
|
62,513
|
58,035
|
|
Long Term Liabilities
|
3,257
|
2,836
|
2,528
|
2,409
|
2,412
|
2,299
|
1,999
|
2011
|
2010
|
2009
|
2008
|
2007
|
2006
|
2005
|
||
Profitability Ratios in %
|
||||||||
Gross Profit ratio
|
3.5
|
3.3
|
0.4
|
5.1
|
3
|
4.88
|
5.42
|
|
Net Profit ratio
|
1.5
|
1
|
-0.9
|
2.4
|
1.14
|
2.13
|
2.2 3
|
|
EBITDA margin
|
3.18
|
3.31
|
-0.55
|
4.1
|
2.29
|
3.8
|
41.6
|
|
Return on Shareholders' Equity
|
35.3
|
30.8
|
-32.1
|
45.4
|
22.4
|
36.2
|
32.2
|
|
Return on total assets
|
5.6
|
4.5
|
-4.4
|
11.1
|
6.3
|
10.72
|
10.9
|
|
Return on capital employed
|
66.2
|
86.6
|
-21.9
|
68.1
|
35.4
|
54.1
|
48.9
|
2011
|
2010
|
2009
|
2008
|
2007
|
2006
|
2005
|
||
Asset utilization
|
||||||||
Inventory turnover ratio
|
12.7
|
17.7
|
14
|
12.7
|
11.7
|
11.5
|
11.2
|
|
Debtor turnover ratio
|
8
|
8.9
|
12.6
|
24.6
|
32.5
|
37.8
|
39.9
|
|
Creditor turnover ratio
|
5.7
|
6.1
|
6.3
|
9.6
|
10.8
|
12.5
|
13.5
|
|
Total asset turnover ratio
|
4.19
|
4.93
|
5.13
|
5.78
|
5.7
|
5.76
|
5.37
|
|
Fixed asset turnover ratio
|
155.7
|
130.3
|
98.4
|
74.3
|
52
|
44.4
|
31.7
|
2011
|
2010
|
2009
|
2008
|
2007
|
2006
|
2005
|
||
Leverage
|
||||||||
Interest Cover ratio
|
2.5
|
2.8
|
-0.9
|
16.4
|
6.86
|
12.7
|
25.87
|
|
Current Ratio
|
1.16
|
1.14
|
1.07
|
1.24
|
1.22
|
1.24
|
1.24
|
|
Quick Ratio
|
0.72
|
0.79
|
0.75
|
0.57
|
0.64
|
0.63
|
0.62
|
2011
|
2010
|
2009
|
2008
|
2007
|
2006
|
2005
|
||
Summary of Cash Flow Statement
|
||||||||
Net cash (outflow) / inflow from operating activities
|
(8,419,468)
|
4,957,702
|
(4,828,554)
|
4,116,415
|
3,715,768
|
1,702,598
|
5,307,821
|
|
Net cash (outflow) / inflow from investing activities
|
(396,649)
|
87,504
|
(2,889)
|
(172,926)
|
(707,953)
|
(173,687)
|
(1,219,568)
|
|
Net cash (outflow) / inflow from financing activities
|
(1,944,209)
|
(2,305,594)
|
511,790
|
(9,716,130)
|
(1,589,821)
|
4,035,619
|
(3,087,422)
|
|
Cash & cash equivalents at end of the year
|
(19,531,039)
|
(8,409,328)
|
(11,510,325)
|
(7,190,672)
|
(1,418,031)
|
2,836,025
|
(191,669)
|
2011
|
2010
|
2009
|
2008
|
2007
|
2006
|
2005
|
||
Investment
|
||||||||
Earning per share
|
Rs. (Bn)
|
86.17
|
52.76
|
-39.05
|
81.94
|
27.3
|
43.9
|
33
|
Market value per share (Year End)
|
Rs. (Bn)
|
264.58
|
260.2
|
213.65
|
417.24
|
391.5
|
309
|
386
|
Highest Price
|
Rs. (Bn)
|
313.8
|
342.95
|
428.79
|
539.7
|
418.3
|
452.30
|
490.10
|
Lowest Price
|
Rs. (Bn)
|
236.68
|
218.33
|
96
|
317.5
|
280.5
|
264.65
|
239
|
Break-up value
|
Rs. (Bn)
|
244
|
171
|
121
|
180
|
121.7
|
121
|
101
|
Price earning ratio (P/E)
|
(x)
|
3.1
|
4.9
|
-5.5
|
5.1
|
14.3
|
7
|
11.6
|
Dividend per share
|
Rs. (Bn)
|
10
|
8
|
5
|
23.5
|
21
|
34
|
26
|
Dividend Payout
|
%
|
11.6
|
15.16
|
-12.8
|
28.68
|
76.8
|
77.5
|
78.8
|
Dividend yield
|
%
|
3.78
|
3.07
|
2.34
|
5.63
|
5.36
|
11
|
6.74
|
Dividend cover ratio
|
(x)
|
8.59
|
6.58
|
-7.79
|
3.48
|
1.3
|
1.29
|
1.26
|
Share holding Pattern
Shareholding Pattern
|
|||
No of Shares
|
|||
Government of Pakistan
|
38,505,565
|
22.45
|
|
GOP's Indirect Holding:-PSOCL Emp. Empowerment Trust
|
5,250,759
|
3.06
|
|
NBP (Trustee Dept) & ICP (IDBP)
|
27,897,047
|
16.26
|
|
CEO, Directors and their Spouse
|
1
|
0
|
|
Public Sector Companies & Corporations
|
|||
Banks, DFIs NBFIs, Insurance Companies,
|
|||
Modarbas, Mutual Funds, Foreign Companies
|
|||
and other Organizations
|
71,507,440
|
41.69
|
|
Individuals
|
19,292,085
|
11.25
|
|
Others
|
9,066,004
|
5.29
|
|
TOTALS
|
171,518,901
|
100
|
|
Free
Float Shares as on 31.12.2011
|
|||
TOTAL OUTSTANDING SHARES
|
|||
NAME
|
No. of Shareholders
|
Shares held
|
Holding
|
PROMOTORS/DIRECTORS/ACQUIRERS
|
1
|
1
|
0
|
PERSONS/BODIES WITH "CONTROLLING INTEREST"
|
4
|
40,598,954
|
23.67
|
GOVERNMENT HOLDING AS PROMOTOR/ACQUIRER
|
1
|
38,505,565
|
22.45
|
ASSOCIATED/GROUP COMPANIES (CROSS-HOLDING)
|
0
|
0
|
0
|
SHARES THAT COULD NOT BE SOLD IN THE OPEN
|
0
|
0
|
0
|
MARKET, IN NORMAL
|
|||
SHARES HELD WITH GENERAL PUBLIC
|
12765
|
92,414,381
|
53.88
|
12771
|
171518901
|
100
|
Horizontal analysis
Through this analysis we can
check that what changes with are in years in the items of balance sheet and
profit and loss account. Last year become base for next year. And change can be
easily analyzed.
Vertical analysis
In vertical analysis of balance sheet the
percentage of each item of statement is calculated to total and then the change
in the percentages is checked with in years.
Balance Sheet |
||||||||||||||||
VERTICAL ANALYSIS |
2011
|
2010
|
2009
|
2008
|
2007
|
2006
|
2005
|
|||||||||
Property, plant and
equipment
|
2.33%
|
3.17%
|
4.60%
|
5.95%
|
10.89%
|
10.94%
|
15.78%
|
|||||||||
Long term investments
|
0.88%
|
1.00%
|
1.40%
|
2.13%
|
4.00%
|
4.67%
|
4.43%
|
|||||||||
Long term loans, advances
and receivables
|
0.12%
|
0.16%
|
0.26%
|
0.38%
|
0.84%
|
0.99%
|
1.47%
|
|||||||||
Long term deposits and
prepayments
|
0.06%
|
0.06%
|
0.05%
|
0.06%
|
0.09%
|
0.11%
|
0.20%
|
|||||||||
Deferred tax
|
0.36%
|
0.00%
|
3.28%
|
0.32%
|
0.54%
|
0.58%
|
0.24%
|
|||||||||
Total Non-Current Assets
|
3.75%
|
4.39%
|
9.60%
|
8.84%
|
16.36%
|
17.29%
|
22.13%
|
|||||||||
Current Assets
|
||||||||||||||||
Stores, spares and loose
tools
|
0.04%
|
0.06%
|
0.07%
|
0.09%
|
0.17%
|
0.18%
|
0.25%
|
|||||||||
Stock-in-trade
|
36.31%
|
28.97%
|
26.53%
|
49.06%
|
39.55%
|
40.14%
|
39.35%
|
|||||||||
Trade debts
|
47.48%
|
58.10%
|
52.48%
|
26.67%
|
18.20%
|
16.70%
|
12.98%
|
|||||||||
Loans and advances
|
0.16%
|
0.20%
|
0.27%
|
0.31%
|
0.49%
|
0.39%
|
0.41%
|
|||||||||
Deposits and short term
prepayments
|
0.39%
|
0.18%
|
0.36%
|
0.32%
|
2.12%
|
1.84%
|
1.39%
|
|||||||||
Other receivables
|
8.57%
|
7.20%
|
8.35%
|
12.34%
|
21.08%
|
20.75%
|
19.80%
|
|||||||||
Taxation - net
|
2.40%
|
0.02%
|
0.46%
|
0.00%
|
0.00%
|
0.00%
|
0.00%
|
|||||||||
Short Term Investments
|
0.00%
|
0.00%
|
0.00%
|
0.00%
|
0.00%
|
0.02%
|
||||||||||
Cash and bank balances
|
0.88%
|
0.88%
|
1.88%
|
2.37%
|
2.04%
|
2.71%
|
3.67%
|
|||||||||
Total Current Assets
|
96.25%
|
95.61%
|
90.40%
|
91.16%
|
83.64%
|
82.71%
|
77.87%
|
|||||||||
Net Assets
|
100.00%
|
100.00%
|
100.00%
|
100.00%
|
100.00%
|
100.00%
|
100.00%
|
|||||||||
EQUITY AND LIABILITIES
|
||||||||||||||||
Share Capital
|
0.65%
|
0.85%
|
1.12%
|
1.35%
|
2.29%
|
2.44%
|
3.28%
|
|||||||||
Reserves
|
15.30%
|
13.66%
|
12.49%
|
23.01%
|
25.72%
|
27.22%
|
30.26%
|
|||||||||
Total Shareholders’
Equity
|
15.95%
|
14.51%
|
13.60%
|
24.36%
|
28.02%
|
29.66%
|
33.54%
|
|||||||||
Long term deposits
|
0.39%
|
0.47%
|
0.56%
|
0.66%
|
1.03%
|
1.06%
|
1.29%
|
|||||||||
Retirement and other
service benefits
|
0.85%
|
0.93%
|
1.09%
|
1.24%
|
2.20%
|
2.22%
|
2.53%
|
|||||||||
Total Long term
Liabilities
|
1.24%
|
1.40%
|
1.65%
|
1.90%
|
3.23%
|
3.28%
|
3.82%
|
|||||||||
Trade and other payables
|
73.04%
|
77.15%
|
71.78%
|
63.78%
|
55.44%
|
52.47%
|
49.30%
|
|||||||||
Provisions
|
0.26%
|
0.34%
|
0.45%
|
0.57%
|
0.92%
|
1.11%
|
1.44%
|
|||||||||
Accrued interest /
mark-up
|
0.16%
|
0.16%
|
0.36%
|
0.17%
|
0.18%
|
0.17%
|
0.12%
|
|||||||||
Short term borrowings
|
9.34%
|
6.44%
|
12.16%
|
8.65%
|
12.13%
|
10.90%
|
9.20%
|
|||||||||
Taxes payable
|
0.00%
|
0.00%
|
0.00%
|
0.57%
|
0.09%
|
2.42%
|
2.57%
|
|||||||||
Total Current Liabilities
|
82.81%
|
84.09%
|
84.75%
|
73.74%
|
68.76%
|
67.06%
|
62.64%
|
|||||||||
100%
|
100%
|
100%
|
100%
|
100%
|
100%
|
100%
|
||||||||||
Balance Sheet
|
||||||||||||||||
HORIZONTAL ANALYSIS |
2011
|
2010
|
2009
|
2008
|
2007
|
2006
|
2005
|
|||||||||
Property, plant and
equipment
|
74%
|
78%
|
85%
|
92%
|
99%
|
93%
|
100%
|
|||||||||
Total Non-Current Assets
|
85%
|
77%
|
127%
|
97%
|
106%
|
105%
|
100%
|
|||||||||
Stock-in-trade
|
463%
|
285%
|
198%
|
303%
|
144%
|
137%
|
100%
|
|||||||||
Trade debts
|
1837%
|
1730%
|
1186%
|
499%
|
200%
|
173%
|
100%
|
|||||||||
Other receivables
|
217%
|
141%
|
124%
|
151%
|
152%
|
141%
|
100%
|
|||||||||
Cash and bank balances
|
120%
|
93%
|
150%
|
157%
|
79%
|
99%
|
100%
|
|||||||||
Total Current Assets
|
621%
|
475%
|
340%
|
284%
|
153%
|
142%
|
100%
|
|||||||||
Total Assets
|
502%
|
387%
|
293%
|
243%
|
143%
|
134%
|
100%
|
|||||||||
Share Capital
|
100%
|
100%
|
100%
|
100%
|
100%
|
100%
|
100%
|
|||||||||
Reserves
|
254%
|
174%
|
121%
|
185%
|
121%
|
121%
|
100%
|
|||||||||
Total Shareholders’
Equity
|
239%
|
167%
|
119%
|
176%
|
119%
|
119%
|
100%
|
|||||||||
Total Long term
Liabilities
|
163%
|
142%
|
126%
|
121%
|
121%
|
115%
|
100%
|
|||||||||
Trade and other payables
|
744%
|
605%
|
427%
|
314%
|
161%
|
143%
|
100%
|
|||||||||
Horizontal Analysis shows that trade
debt are increasing every year which is the actual problem of PSO. To make
their process smooth line PSO must have to solve the problem of Circular Debt
in order to gain more profit in coming years.
Profit and Loss Account |
|||||||
VERTICAL ANALYSIS |
2011
|
2010
|
2009
|
2008
|
2007
|
2006
|
2005
|
Sales
|
100%
|
100%
|
100%
|
100%
|
100%
|
100%
|
100%
|
Sales Tax
|
14.15%
|
13.52%
|
13.54%
|
12.73%
|
12.75%
|
12.63%
|
12.90%
|
IFEM/Levies
|
1.68%
|
1.81%
|
1.28%
|
2.35%
|
2.17%
|
2.76%
|
3.39%
|
Net sales
|
84.16%
|
84.67%
|
85.18%
|
84.92%
|
85.07%
|
84.61%
|
83.74%
|
Cost of products sold
|
80.65%
|
81.35%
|
84.76%
|
79.77%
|
82.09%
|
79.73%
|
78.32%
|
Gross Profit
|
3.52%
|
3.33%
|
0.42%
|
5.15%
|
2.98%
|
4.88%
|
5.42%
|
Operating Costs
|
|||||||
Transportation
|
0.08%
|
0.07%
|
0.07%
|
0.06%
|
0.09%
|
0.10%
|
0.12%
|
Administrative &
Marketing Expenses
|
0.69%
|
0.59%
|
0.71%
|
0.76%
|
0.91%
|
0.97%
|
1.27%
|
Depreciation
|
0.12%
|
0.13%
|
0.17%
|
0.20%
|
0.28%
|
0.31%
|
0.39%
|
Other operating expenses
|
0.23%
|
0.28%
|
0.56%
|
0.57%
|
0.18%
|
0.70%
|
0.42%
|
Total Operating Costs
|
1.12%
|
1.07%
|
1.50%
|
1.59%
|
1.46%
|
2.08%
|
2.20%
|
2.40%
|
2.25%
|
1.09%
|
-3.56%
|
-1.52%
|
-2.80%
|
3.21%
|
|
Other / Other Operating
income
|
0.61%
|
0.86%
|
0.31%
|
0.29%
|
1.93%
|
0.40%
|
0.55%
|
Profit / (Loss) from
Operations
|
3.01%
|
3.12%
|
-0.78%
|
3.85%
|
1.93%
|
3.20%
|
3.68%
|
Finance cost
|
1.22%
|
1.13%
|
0.87%
|
0.23%
|
0.28%
|
0.25%
|
0.15%
|
Share of Profit of
Associates
|
0.05%
|
0.06%
|
0.06%
|
0.05%
|
0.08%
|
0.29%
|
0.09%
|
Profit / (Loss) before
taxation
|
1.84%
|
2.05%
|
-1.58%
|
3.67%
|
1.73%
|
3.24%
|
3.62%
|
Taxation
|
0.33%
|
-1.02%
|
0.65%
|
1.26%
|
0.59%
|
1.10%
|
1.39%
|
Net Profit / (Loss)
|
1.52%
|
1.03%
|
-0.93%
|
2.41%
|
1.14%
|
2.13%
|
2.23%
|
Vertical Analysis show that the cost of
goods sold in year 2011 in lass then previous year on other hand we have more
sale in 2011 which means that 2011 is good financial year for the PSO. Net
profit in 2011 is more than 2010 which is good sign for future.
Profit and Loss Account
|
|||||||
HORIZONTAL ANALYSIS |
2011
|
2010
|
2009
|
2008
|
2007
|
2006
|
2005
|
Sales
|
384%
|
346%
|
283%
|
230%
|
162%
|
139%
|
100%
|
Sales Tax
|
422%
|
363%
|
298%
|
227%
|
160%
|
136%
|
100%
|
IFEM/Levies
|
191%
|
184%
|
107%
|
159%
|
104%
|
113%
|
100%
|
374%
|
326%
|
258%
|
213%
|
149%
|
131%
|
100%
|
|
Net sales
|
386%
|
350%
|
288%
|
233%
|
165%
|
140%
|
100%
|
Cost of products sold
|
396%
|
359%
|
307%
|
234%
|
170%
|
141%
|
100%
|
Gross Profit
|
249%
|
212%
|
22%
|
218%
|
89%
|
125%
|
100%
|
Operating Costs
|
|||||||
Transportation
|
259%
|
202%
|
164%
|
108%
|
118%
|
117%
|
100%
|
Administrative &
Marketing expenses
|
208%
|
161%
|
159%
|
137%
|
116%
|
107%
|
100%
|
Depreciation
|
116%
|
120%
|
121%
|
113%
|
116%
|
110%
|
100%
|
Other operating expenses
|
208%
|
225%
|
371%
|
312%
|
70%
|
229%
|
100%
|
Total Operating Costs
|
195%
|
168%
|
193%
|
166%
|
108%
|
131%
|
100%
|
287%
|
242%
|
-96%
|
254%
|
77%
|
121%
|
100%
|
|
Other / Other Operating
Income
|
502%
|
639%
|
188%
|
144%
|
144%
|
118%
|
100%
|
Profit / (Loss) from
operations
|
314%
|
293%
|
-60%
|
240%
|
85%
|
121%
|
100%
|
Finance cost
|
3211%
|
2666%
|
1681%
|
369%
|
312%
|
239%
|
100%
|
195%
|
195%
|
-132%
|
235%
|
76%
|
116%
|
100%
|
|
Share of Profit of
Associates
|
233%
|
233%
|
204%
|
133%
|
149%
|
468%
|
100%
|
Profit / (Loss) before
taxation
|
196%
|
195%
|
-124%
|
233%
|
77%
|
124%
|
100%
|
Taxation
|
90%
|
252%
|
-132%
|
207%
|
69%
|
110%
|
100%
|
Net Profit / (Loss)
|
261%
|
160%
|
-118%
|
248%
|
83%
|
133%
|
100%
|
There is a good increase in the year
2011 as compared to previous years so the net profit in 2011 in a lot more than
2010 which so really good growth in the profit of the company. Finance cost is
increasing every year which is not a good sign for the company in long term
this will decrease the profit of the company so here the company needs to solve
their circular debt problem.
Ratio analysis includes
method of interpreting financial ratios to access the performance of any
organization. The basic input to ratio analysis is profit and loss account and
balance sheet. Ration analysis of any organization is in interest of its creditors,
employees, shareholders and of its management as well. Both existing and
prospective customer are interested in the ratio analysis of organization
Ratio analysis is a valuable aid to management
in the discharge of its basic functions such as planning, forecasting, control
etc. these ratios describe the relationship with the functioning of the
business and helpful for controlling cost of goods manufactured. The great
advantage of ratio analysis is that it reduces raw data of widely varying
magnitude to a common comparative basis. Thus, ratio analysis is the most
meaningful to compare financial information regarding a giving company.
Current Ratio
Formula: Current ratio= Current assets
Current liabilities
2011
|
2010
|
2009
|
|
Current Ratio
|
1.16
|
1.14
|
1.07
|
Interpretation
An increase in the
current ratio represents improvement in the liquidity position of company while
a decrease in the current ratio indicates that there has been deterioration in
the liquidity position of the company. Current ratio in following years is increasing
which is a positive indication to the company.
Working Capital
Formula:
Current Asset- Current Liabilities
2011
|
2010
|
2009
|
|
Working Capital
|
-2,011
|
-2,010
|
-2,009
|
Interpretation
A measure of both
a company's efficiency and its short-term financial health. Positive
working capital means that the company is able to pay off its short-term
liabilities. Negative working capital means that a company currently
is unable to meet its short-term liabilities with its current
assets (cash, accounts receivable and inventory). As shown the company
needs to bring its WC ratio in positive so that meet obligations.
Quick Ratio
Formula:
Quick Ratio = Current
asset – inventories / Current Liabilities
2011
|
2010
|
2009
|
|
Quick Ratio
|
0.72
|
0.79
|
0.75
|
Interpretation
Quick ratio is the most
liquidity form which shows that the company is ability to pay its liabilities.
The company is maintaining a low ratio of its quick ratio; the reason could be
that the company may get its assets unutilized if it maintains more assets.
Profit Margin
Formula:
Profit Margin = Net income/ Sales revenue
2011
|
2010
|
2009
|
|
Profit margin
|
0.02
|
0.01
|
-0.01
|
Interpretation
The profit margin ratio
is the percentage of income on every dollar sale, there is seen an increasing
trend of the profit margin of the PSO company.
Return on Capital employed
Formula:
Return
on capital employed = Net income/ Capital Employed
2011
|
2010
|
2009
|
|
Return on capital employed
|
66.2
|
86.6
|
-21.9
|
Interpretation
A ratio
that indicates the efficiency and profitability of a company's capital
investments. ROCE should always be higher than the rate at which the
company borrows; otherwise any increase in borrowing will reduce shareholders'
earnings. The decrease in the year 2011 is due to the increase in the debt the
company borrowed.
Return on Shareholders’ Equity
Formula:
Return on Equity = Net Income/Shareholder's
Equity
2011
|
2010
|
2009
|
|
Return on Shareholders' Equity
|
35.3
|
30.8
|
-32.1
|
Interpretation
This shows the earning
of the shareholders equity, which are the priorities of the companies to give
advantage to the shareholders. After a huge decline or a loss the company has
jumped to a positive equity ratio.
EBIT margin
Formula:
Revenue - Expense
2011
|
2010
|
2009
|
|
EBITDA margin
|
3.18
|
3.31
|
-0.55
|
Interpretation
The EBIT ratio shows the
companies strength to pay its stock holder the dividend and debt expenditure.
Above three ratios is fair enough to meet these expenditure of the company. The
greater the ratio the ability to pay this expenditure will increase.
Net profit margin
Formula:
Net profit margin= Earnings
available for common stock holder/ Sales
2011
|
2010
|
2009
|
|
Net Profit ratio
|
1.5
|
1
|
-0.9
|
Interpretation
Though there is a decrease
in the operating margin of the company in 2011 but the net profit shows that
the company avail a profit in this year after paying all the expenses including
the dividend and taxes, which is also a sign of the strength of the company
Operating profit margin
Formula:
Operating profit margin = Operating
profit/ Sales
2011
|
2010
|
2009
|
|
Operating profit margin
|
0.43
|
0.69
|
0.11
|
Interpretation
Operating profits are pure because they measure only the profits earned
on operations and ignore interest, taxes and preferred stock dividend. A higher
operating profit margin is preferred. Operating profit margin a little has a
decreasing sign in 2011, its is due to the sales promotion of the company which
cost more than in 2010.
Gross profit margin
Formula:
Gross
profit margin = Sales-cost of goods sold / Sales
2011
|
2010
|
2009
|
|
Gross Profit ratio
|
3.5
|
3.3
|
0.4
|
Interpretation
Gross profit margin measures the percentage of each sales rupee remaining
after the organization has paid for its goods. The higher the gross profit
margin, the better (that is the lower the relative cost of merchandise sold).
There is seen a high jump of the gross margin of the company as compared to
2009 and 2011. This is no doubt a huge improvement in the company performance.
Operating income Margin
Formula:
Operating income/Net sales
2011
|
2010
|
2009
|
|
Operating income Margin
|
3.07
|
2.85
|
-0.88
|
Interpretation
The
operating income margin shows the income after the company had paid the
operating expenses, but still taxes and dividend are payable into this margin.
The year comparison of this ratio shows that the company has gone toward a
positive income margin as it was negative in 2009 comparatively.
Day’s sales in Receivables
Formula:
Gross Sales/ (net receivables/365)
2011
|
2010
|
2009
|
|
Days’ sales in receivables
|
46.69
|
48.89
|
47.56
|
Interpretation
This
ratio measure that the company’s cash is stuck in receivables, this ratio needs
a better consideration so that the company soon has its cash and utilizes it
and maintain a good liquidity position.
Day’s Sales Inventory
Formula:
Ending Inventory/ (CGS/365)
2011
|
2010
|
2009
|
|
Days’ sales in inventory
|
42
|
26
|
35
|
Interpretation
A
financial measure of a company's performance that
gives investors an idea of how long it takes a company to
turn its inventory (including goods that are work in progress,
if applicable) into sales. Generally, the lower (shorter) the DSI the better, there
is seen an improvement in the company’s sales in inventory ratio, attract the
investors.
Account Receivable Turnover
Formula:
Sales/ Average Gross Receivable
2011
|
2010
|
2009
|
|
Account Receivable turnover
|
8.55
|
6.18
|
5.17
|
Interpretation
An
accounting measure used to quantify a firm's effectiveness in extending credit
as well as collecting debts. The receivables turnover ratio is an
activity ratio, measuring how efficiently a firm uses its assets.
Creditors Turnover Ratio
Formula:
Inventory Turnover Ratio = Cost of goods sold /
Average inventory at cost
2011
|
2010
|
2009
|
|
Creditor turnover ratio
|
5.7
|
6.1
|
6.3
|
Interpretation
In 2011 PSO using their
resources very well that their credit turnover ratio is less than previous year
which means that they are using their asset very well, in future this thing
will be more profitable for the company.
Debtor Turnover Ratio
Formula:
Debtors
Turnover Ratio = Net Credit Sales / Average Trade Debtors
2011
|
2010
|
2009
|
|
Debtor turnover ratio
|
8
|
8.9
|
12.6
|
Interpretation
The
debt turnover ratio, also called the debtors turnover ratio or the accounts
receivable ratio, indicates how effective a company is at selling on credit and
collecting debt. The company needs to consider it debtor turnover ratio because
its seen a decline in this ratio in the current year.
Cash Ratio
Formula:
Cash or Cash Equivalent /Current Liabilities
2011
|
2010
|
2009
|
|
Cash Ratio
|
1.06
|
1.04
|
1.01
|
Interpretation
The
ratio of a company's total cash and cash equivalents to its current liabilities. The cash ratio
is most commonly used as a measure of company liquidity. It can therefore
determine if, and how quickly, the company can repay its short-term
debt. A strong cash ratio is useful to creditors when deciding how much debt,
if any, they would be willing to extend to the asking party. The
calculated ratio shows that the company should increase it cash ratio, which is
low comparatively.
Interest Cover Ratio
Formula:
Interest Cover ratio =
EBIT / Interest Expense
2011
|
2010
|
2009
|
|
Interest Cover ratio
|
2.5
|
2.8
|
-0.9
|
Interpretation
The company is to pay
what it financed from external sources; it is also liable to pay the taxes.
This ratio is calculated to check that the company is capable enough to pay the
taxes and debt cost. The calculated ratio shows that the company is able to pay
because the ratio is greater than 1.
Fixed Asset Turnover Ratio
Formula:
Fixed
Assets Turnover Ratio = Cost of Sales / Net Fixed Assets
2011
|
2010
|
2009
|
|
Fixed asset turnover ratio
|
155.7
|
130.3
|
98.4
|
Interpretation
Fixed assets are costly
to the company so the company should not underutilize its fixed assets rather
it should maximally utilize it and gain the advantage on these assets.
Inventory turnover Ratio
Formula:
Inventory Turnover Ratio = Cost of goods sold /
Average inventory at cost
2011
|
2010
|
2009
|
|
Inventory turnover ratio
|
12.7
|
17.7
|
14
|
Interpretation
This ratio shows the how
many times the company is converting its inventory into sale. The higher the
inventory turnover ratio the more the company gets advantage of its sale. And
pay less cost on inventory. The PSO should improve its turnover ratio as seen a
decline in the following years.
Return on total assets
Formula:
Return on assets= Earnings available to common stock holder/
Total assets
2011
|
2010
|
2009
|
|
Return on total assets
|
5.6
|
4.5
|
-4.4
|
Interpretation
Return
on assets often called the return on investment. It measures the overall
effectiveness of management in generating profit with its available assets. The
higher the firm’s return on total assets, the better. The company is utilizing
its assets and getting a good return which is 5.6 in the current year.
Total asset turnover
Formula:
Total asset turnover = sales/
Total assets
2011
|
2010
|
2009
|
|
Total asset turnover ratio
|
4.19
|
4.93
|
5.13
|
Interpretation
Higher the total asset
turnover the more efficiently its assets have been used. This measure is
probably of greatest interest to management, because it indicates whether the
efficient operations have been financially efficient. However the turnover
ratio has a fall in the following years which needs management consideration.
Sales to Fixed Asset
Formula
Net Sales/ Average Net Fixed Asset
2011
|
2010
|
2009
|
|
Sales to fixes Asset(times per Year)
|
144.97
|
129.61
|
112.8
|
Interpretation
The sales to fixed assets ratio is
often called the asset turnover ratio. A
low sales to
fixed assets ratio means inefficient utilization or obsolescence of
fixed assets, which may be caused by excess capacity or interruptions in the
supply of raw materials. However there is not any such situation in the
company, PSO is maintaining and utilizing its fixed assets well as calculated
ratio show.
Return to Operating Asset
Formula
Operating Income/ Average Operating Asset
2011
|
2010
|
2009
|
|
Return to operating Asset
|
4.4
|
3.7
|
2.9
|
Interpretation
The return
on operating assets measure only includes in the denominator those assets
actively used to create revenue. This focuses management attention on the
amount of assets actually required to run the business, so that it has a
theoretical targeted asset level to achieve. A typical result of this
measurement is an ongoing campaign to eliminate unnecessary assets.
Fixed Asset to Equity
Formula
Fixed Asset/ Stockholder Equity
2011
|
2010
|
2009
|
|
Fixed Asset to Equity
|
3.54
|
3.71
|
3.12
|
Interpretation
Computation
that indicates the company's ability to satisfy long-term debt. The ratio
equals fixed assets divided by equity capital. A ratio greater than 1 means
that some of the fixed assets are financed by debt. PSO position to satisfy
these need is satisfactory after analyzing these ratios calculated above.
Inventory Turnover in Days
Formula:
Inventory/ (CGS/365)
2011
|
2010
|
2009
|
|
Inventory turnover in days
|
33.55
|
33.16
|
30.12
|
Interpretation
A ratio
showing how many times a company's inventory is sold and replaced
over a period. The days in the period can then be divided by
the inventory turnover formula to calculate the days it takes to sell the
inventory on hand or "inventory turnover days".
Debt to Equity Ratio
Formula:
Total liabilities/total equity
2011
|
2010
|
2009
|
|
Debt to Equity Ratio
|
5.27
|
5.89
|
0.00
|
Interpretation
A
measure of a company's financial leverage calculated by dividing its total
liabilities by stockholders' equity. It indicates what proportion of
equity and debt the company is using to finance its assets. The company has
just jumped toward the debt and has a high leverage currently.
Debt Ratio
Formula:
Debt Ratio = Total liabilities/
Total assets
2011
|
2010
|
2009
|
|
Debt ratio
|
0.84
|
0.85
|
0.85
|
Interpretation
The
debt ratio measures the proportion of total assets by the creditors. The
greater this ratio the greater the amount of other people’s money being used to
generate profits. The higher this ratio greater the degree of indebtedness and
more financial leverage. PSO is maintaining less than half portion of its
financing from the debt, and positively decreased in the ratio.
Earnings per share
Formula:
Earnings per share = net income – Dividend on
prefer share /Average outstanding share
2011
|
2010
|
2009
|
|
Earnings per share
|
86.17
|
52.76
|
-39.05
|
Interpretation
After paying dividend on
the preferred stocks, company’s current EPS is 86 and moving toward a positive
increasing sign, which attracts the new investors to put on their money the
company
Market value per share
2011
|
2010
|
2009
|
|
Market value per share (Year End)
|
264.58
|
260.2
|
213.65
|
Interpretation
Market value per share
shows the company value overall, though in the year 2009 the company suffered a
huge loss but didn’t loss the market value and in the following years the
company has an increase in the value as shown above.
Price earnings ratio
Formula:
Price earnings ratio = Market Value per Share/
Earnings per Share (EPS)
2011
|
2010
|
2009
|
|
Price earnings ratio (P/E)
|
3.1
|
4.9
|
-5.5
|
Interpretation
A
valuation ratio of a company's current share price compared to its per-share
earnings. PSO as compared to last year has less price earning share however the
company is to improve its share price and its value to attain a positive image
for the future.
Dividend per share
Formula:
DPS = dividend/ No of Shares
2011
|
2010
|
2009
|
|
Dividend per share
|
10
|
8
|
5
|
Interpretation
It’s
the regular income of the investor which attain from their investment. The
company’s dividend payment is mandatory as shown and also a positive indication
as an increase the value of the dividend from 5 to 10.
The adverse liquidity position
primarily due to rising circular debt is adversely affecting financial
performance of energy related corporate companies including oil marketing
companies PSO. In this respect, Pakistan State Oil has deferred announcement of
dividend due to prevailing circular debt situation, however PSO’s management
continues to constantly pursue the IPPs as well as the Government for recovery
of its outstanding receivables touching Rs189 billion marks as of Dec.31, 2011.
The Circular debt crisis
continued to play a major role in holding back your Company in FY11 and
resulted in a delay in plans for brand repositioning, capacity-building and
enhancement of the storage network. Moreover, other investment and expansion
projects had to be withheld due to the mounting circular debt.
The continuous non-payment by the power sector has
made PSO severely cash strapped. As a result, the company has defaulted on
local refineries payments, which has adversely affected local production.
Furthermore, the company is constantly struggling to meet its international
payment obligations, as any default on the part of PSO to its international
suppliers would disrupt supplies with their resumption
Higher financial charges in the
wake of increased borrowing continue to mar the bottom-line performance of the
company. PSO has to resort to short-term borrowing amounting to Rs. 64 billion.
However, this cycle of circular debt led to excessive short-term borrowing and
piling of financial charges, which tarnished the profitability of the company.
During this financial year, PSO
once again took the lead in providing for the nation’s future energy needs by
becoming the first OMC in Pakistan to launch a fully operational LPG Auto gas
station under the brand name of “Smart Gas”.
The company further enhanced
its product range with the introduction of new lubricant variants for
generators, automotive and marine engines during this time period. PSO also
received 2nd position in the Fuel and Energy Sector, at the “Best Corporate Report”
award ceremony organized by ICAP and ICMAP.
2) PSO
Report to Shareholder 2011
3) Corporate
Governance Report 2011
4) Corporate
Objective Report 2011
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