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Submit by: Shoaib Mansoor Submitted to: Sir Zaki Class: MBA 6 (Evening)
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CONTENTS
CORPORATE OBJECTIVES
Vision Mission Core values Code of conduct Company Profile Corporate Events 3 3 4 5
CORPORATE GOVERNANCE
Message from the honorable Minister of Petroleum and Natural Resources Message of the Chairman Message of CEO & MD Company Information Profile Board of Management
REPORT TO SHAREHOLDERS
Global and Domestic Business Environment Petroleum industry Overview PSO Performance Key Achievements Financial Performance
FINANCIALS
Statement of compliance with the code of Corporate Governance Review Report Auditors Report Balance Sheet Profit and Loss Account Statement of Comprehensive income Statement of Changes in Equity Cash flow Statement Notes to the Financial Statement PSO at a Glance and Financial Analysis Page 2 of 99
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 an environment which recognizes and rewards performance, innovation and creativity 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
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CORE VALUES
EXCELLENCE
We 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.
COHESIVENESS
We endeavor to achieve higher collective and individual goals through teamwork. This is in calculated in the organization through effective communication
RESPECT
We 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.
INTEGRITY
We uphold our values and Business principles in every matter and decision.
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CODE OF CONDUCT
In line with managements effort to maintain the decorum and ensure an environment that is cohesive to the development and success of our people, a Code of Conduct has been put in place where following activities can result in disciplinary action: 1. 2. 3. 4. Unsatisfactory and negligent job performance Excessive and unauthorized absence from duty Unsatisfactory safety performance Reporting on duty under the influence of drug or intoxicants 5. Absence from duty without notice or permission from the supervisor 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 in fight 9. Incompliance of instructions 10.Acts of horse play on site property For more please visit 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 Oil
PSO witnessed growth as the market share increased to 55.1% in FY12 compared to 54.4% in FY1.
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Balance Sheet
(As at June 30, 2012)
Note 2012 2011 % Change
Assets
Non-Current Assets
Property, Plant and Equipment Intangible Assets Long term Investment Long term loans, advances and receivables Long term deposits and prepayments deferred tax 4 5 6 7 8 9
Rupees in '000
Current Assets
Stores, spare parts and loose tools Stock-in-trade Trade debts Loans and advances Deposits and Short term prepayments Other receivables Taxation - Net Cash and bank balances 16 10 11 12 13 14 15 134,431 88,523,794 218,022,292 526,118 2,528,406 21,122,166 5,314,752 1,624,025 337,795,984 347,427,594 115,339 95,378,393 124,721,832 430,716 1,027,381 22,520,278 6,311,951 2,309,006 252,814,896 262,673,406 16.6% -7.2% 74.8% 22.1% 146.1% -6.2% -15.8% -29.7% 33.6%
17
Total Assets
32.3%
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Non-Current Liabilities
Long term deposits Retirement and other benefits 20 21 1,176,078 2,518,502 3,694,580 1,023,531 2,233,717 3,257,248 14.9% 12.7% 13.4%
Current Liabilities
Trade and other payables Provisions Accrued interest / Markup Short term borrowings 24 22 23 246,767,460 688,512 544,485 45,772,649 293,773,106 191,851,017 688,512 432,133 24,541,511 217,513,173 262,673,406 28.6% 0.0% 26.0% 86.5% 35.1% 32.3%
347,427,594
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23%
Net sales
Cost of product sold 26
1,024,423,605
(990,101,083) 34,322,522
(786,250,059) 34,280,305
26% 0%
Gross Profit
Other Operating Income 27
2,133,994
1,815,951
18%
Operating Cost
Transportation Costs Distribution and Marketing Expenses Administrative Expenses Depreciation Amortization of intangible assets Other operating expenses 28 29 30 4.1 5 31 (1,205,394) (5,863,170) (1,659,530) (1,127,587) (15,491) (9,272,048) (19,143,220) (810,423) (5,175,233) (1,514,532) (1,120,999) (18,210) (2,239,725) (10,879,122) 25,217,134 49% 13% 10% 1% -15% 314% 76% -31%
17,313,296
32 33
7,550,581 (11,658,928)
4,143,710 (11,903,162)
82% -2%
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13,204,949 Share of Profit Associates Profit before taxation 6.1.1 469,468 13,674,417
Taxation
34
(4,618,362) 9,056,055
45% -39%
35
52.80
86.17
-39%
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9,056,055
14,779,314
-0.38725
(144,903)
(11,844)
3,366 (141,537)
5,516 (6,328)
8,914,518
14,796,674
-0.39753
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Rupees in '000 36 (13,525,483) (60,943) 25,008 152,547 (3,955,992) (3,138,027) (824,170) 5,617,109 (6,655) (22,797) 75,055 (10,417,978) (3,182,997) (478,081)
(21,327,060)
(8,416,354)
-153%
4,692
(399,763)
101%
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1,414,898 (19,531,039)
(11,121,711) (8,409,328)
37 (18,116,141)
(19,531,039)
7%
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PSO at a Glance
Profit & Loss Account Analysis
2012
Sales Volume (Million Tons)
Sales Revenue Net Revenue Gross Profit Operating Profit/ (Loss) Marketing & Administrative Expense Profit / (Loss) Before Tax Profit / (Loss) after Tax EBITDA Capex
2011
2010
2009
2008
12.4 1,199,928 1,024,424 34,323 17,313 7,523 13,674 9,056 26,476 894
12.9 974,917 820,530 34,280 25,217 6,690 17,974 14,779 31,017 862
14.2 877,173 742,758 29,166 21,233 5,181 17,963 9,050 29,028 559
13.2 719,282 612,696 3,010 (5,577) 5,113 (11,357) (6,699) (3,983) 694
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Comment:
Profit and loss account
Companys 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
Share Capital Reserves Shareholders' Equity Property Plant & Equipment Net Current Assets Long Term Liabilities 1,715 48,245 49,960 5,862 44,023 3,695
2011
1,715 40,188 41,903 6,114 35,302 3,257
2010
1,715 27,621 29,336 6,411 23,298 2,836
2009
1,715 19,156 20,871 7,056 8,666 2,528
2008
1,715 29,250 30,965 7,567 22,143 2,409
Shareholders' Equity
60,000 50,000 Rupees in Million 40,000 30,000 20,000 10,000 2012 2011 2010 Years 2009 2008 2012 2011 2010 2009 2008
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Commentary:
Balance sheet
As 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
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PSO at a Glance
Profitability Ratios
2012
Profitability Ratios Gross Profit Ratio Net Profit Ratio EBITDA Margin Return on Shareholders' Equity Return on Total Assets Return on Capital Employed % % % % % % 2.9 0.8 2.2 18.1 2.6 47.2
2011
3.5 1.5 3.2 35.3 5.6 66.2
2010
3.3 1 3.3 30.8 4.5 86.6
2009
0.4 -0.9 -0.6 -32.1 -4.40 (21.9)
2008
5.1 2.4 4.1 45.4 11.1 68.1
Profitability Ratios
12 10 8 6 Times 4 2 0 -2 -4 -6 2012 2011 2010 2009 Gross Profit Ratio Net Profit Ratio EBITDA Margin Return on Total Assets
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Commentary:
Profitability Ratios
The profitability 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 in profitability 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
Inventory turnover ratio Debt Turnover Ratio Creditor Turnover Ratio Total asset turnover ratio Fixed asset turnover ratio 12.7 24.6 9.6 5.78 74.3
2009
14 12.6 6.3 5.13 98.4
2010
17.7 8.9 6.1 4.93 130.3
2011
12.7 8 5.7 4.19 155.7
2012
13 7 5.4 3.9 200.4
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Commentary:
Asset Utilization Ratios
As of June 30, 2012, overall trend asset utilization ratios have remained flat as compared to last year except for fixed asset turnover ratio which has increased on account of increase in turnover and less capitalization of property plan and equipment as compared to last year
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PSO at a Glance
Investment Oriented Ratios
2012
Earnings per share Market value per share (Year End) Highest Price Lowest Price Break-Up Value Price Earnings Ratio Dividend per share Bonus share Dividend Pay out Dividend yield Dividend cover ratio Rs. Rs. Rs. Rs. Rs. x Rs. % % % x 53 236 271 206 290 4.5 5.5 20 14.2 2.3 9.6
2011
86 265 314 237 244 10 11.6 3.8 8.6
2010
53 260 343 218 171 8 15.2 3.1 6.6
2009
-39 214 429 96 121 5 -12.8 2.3 -7.8
2008
82 417 540 318 180 23.5 28.7 5.6 3.5
Break-Up Value
350 300 250 2012 200 150 100 50 0 2012 2011 2010 2009 2008 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
Interest Coverage Ratio Current Ratio Quick ratio x x x 2.17 1.15 0.84
2011
2.51 1.16 0.72
2010
2.77 1.14 0.79
2009
-0.89 1.07 0.75
2008
16.41 1.24 0.57
Commentary:
Leverage Ratios
No significant fluctuations in leverage ratios as compared to last year, however, the short term borrowings have 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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Assets FY 12
Stock-in-trade 26%
Other Receivables 6%
Assets FY 12
Trade Debts 34% 43% Stock-in-trade Other Receivables Cash & Bank Balances Other Current Assets Property, Pland and Equipment 1% 0% 4% 18% Long term Investments
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Assets FY 12
Stock-in-trade 36%
Other Receivables 9%
Other Property, Current Plant and Long term Assets Equipment Investments 2.00% 1% 3%
Assets FY 11
1%3% 2% 1% 9% Trade Debts Stock-in-trade Other Receivables 48% Cash & Bank Balances Other Current Assets Property, Pland and Equipment 36% Long term Investments
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1% 14% 1% Trade paybles and other shorterm liabilities Short term borrowings 13% Share Capital Reserves 71% Total Long term liabilities
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Share Capital 1%
Reserves 15%
1% 15% 1% 10% Share Capital Reserves Total Long term liabilities Trade paybles and other shorterm liabilities Short term borrowings
73%
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Vertical/Horizontal Analysis
Vertical Analysis of Balance Sheet 2012
Property, Plant and Equipment Long term investments Long term loans, advances and receivables Long term deposits and prepayments Deferred tax Total Non-Current Assets Other Current Assets Stores, spares and loose tools Stock-in-trade Trade debts Loans and advances Deposits and short term prepayments Other receivables Taxation-net Cash and bank balances Total Current Assets Total Assets Equity and Liabilities Share Capital Reserves Total Shareholders Equity Long term deposits Retirement and other benefits Total long term liabilities Trade and other payables Provisions Accrued interest/Mark-up Short term borrowings Tax payables Total Current Liabilities 1.69% 0.57% 0.11% 0.04% 0.37% 2.78%
2011
2.33% 0.88% 0.12% 0.06% 0.36% 3.75%
2010
3.17% 1% 0.16% 0.06% 0.00% 4.39%
2009
4.60% 1.40% 0.26% 0.05% 3.28% 9.59%
2008
5.95% 2.13% 0.38% 0.06% 0.32% 8.84%
0.04% 25.48% 62.75% 0.15% 0.73% 6.08% 1.53% 0.47% 97.23% 100.00%
0.04% 36.31% 47.48% 0.16% 0.39% 8.57% 2.40% 0.88% 96.23% 100.00%
0.06% 28.97% 58.10% 0.20% 0.18% 7.20% 0.02% 0.88% 95.61% 100.00%
0.07% 26.53% 52.48% 0.27% 0.36% 8.35% 0.46% 1.88% 90.40% 100.00%
0.18% 49.06% 26.67% 0.31% 0.32% 12.34% 0.00% 2.37% 91.25% 100.00%
0.49% 13.89% 14.38% 0.34% 0.72% 1.06% 71.03% 0.20% 0.16% 13.17% 0.00% 100.00%
0.65% 15.30% 15.95% 0.39% 0.85% 1.24% 73.04% 0.26% 0.16% 9.34% 0.00% 99.99%
0.855 13.66% 14.51% 0.47% 0.93% 1.40% 77.15% 0.34% 0.16% 6.44% 0.00% 100.00%
1.12% 12.49% 13.61% 0.56% 1.09% 1.65% 71.78% 0.45% 0.36% 12.16% 0.00% 100.01%
1.35% 23.01% 24.36% 0.66% 1.24% 1.90% 63.78% 0.57% 0.17% 8.65% 0.57% 100.00%
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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
Property, Plant and Equipment Total Non-Current Assets Stock-in-trade Trade debts Other receivables Cash and bank balances Total Current Assets Total Assets Share Capital Reserves Total Shareholders Equity Total long term liabilities Trade and other payables Total Current Liabilities Total Equity & Liabilities 76% 79% 314% 1861% 145% 86% 582% 495% 100% 253% 240% 161% 670% 624% 495%
2011
80% 81% 339% 1065% 155% 122% 436% 374% 100% 210% 201% 142% 521% 462% 374%
2010
84% 73% 208% 1003% 100% 94% 333% 288% 100% 145% 141% 123% 424% 361% 288%
2009
92% 121% 144% 687% 88% 152% 239% 219% 100% 100% 100% 110% 299% 276% 219%
2008
99% 93% 221% 289% 108% 159% 200% 181% 100% 149% 149% 105% 220% 199% 181%
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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 in the 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
Vertical Analysis of Income Statement
2012
Sales Sales Tax IFEM/Levies Net sales Cost of product sold Gross Profit Operating Costs Transportation Administrative & Marketing Expenses Depreciation Other operating expenses Total Operating Cost 100% 13.66% 0.97% 85.37% 82.51% 2.86% 0.10% 0.63% 0.10% 0.77% 1.60% 1.26% 0.81% 2.07% 0.97% 0.04% 1.14% -0.38% 0.75%
2011
100% 14.15% 1.68% 84.17% 80.65% 3.52% 0.08% 0.69% 0.12% 0.23% 1.12% 2.40% 0.61% 3.01% 1.22% 0.05% 1.84% -0.33% 1.52%
2010
100% 13.52% 1.81% 84.67% 81.34% 3.33% 0.07% 0.59% 0.13% 0.28% 1.07% 2.26% 0.86% 3.12% 1.13% 0.06% 2.05% -1.02% 1.03%
2009
100% 13.54% 1.28% 85.18% 84.76% 0.42% 0.07% 0.71% 0.17% 0.56% 1.51% -1.09% 0.31% -0.78% 0.87% 0.06% -1.58% 0.65% -0.93%
2008
100% 12.70% 2.35% 84.95% 79.77% 5.18% 0.06% 0.71% 0.20% 0.57% 1.59% 3.56% 0.29% 3.85% 0.23% 0.05% 3.67% -1.26% 2.41%
Other / Other operating income Profit / (Loss) from Operations Finance cost Share of profit associates Profit / (Loss) before Taxation Taxation Net Profit / (Loss)
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Vertical/Horizontal Analysis
Horizontal Analysis of Income Statement
Sales Sales Tax IFEM/Levies Net Sales Cost of products sold Gross Profit Operating Cost Transportation Administrative & Marketing Expenses Depreciation Other operating expenses Total Operating Costs
330% 219% 106% 377% 261% 154% 695% 221% 1319% 127% 45% 120% 119% 120%
222% 195% 105% 91% 148% 237% 428% 261% 1346% 168% 50% 15% 82% 196%
173% 151% 109% 98% 128% 200% 543% 243% 1118% 168% 50% 157% 229% 120%
140% 149% 110% 162% 147% -79% 160% -50% 705% -144% 43% -99% -120% -89%
92% 129% 108% 136% 127% 210% 123% 199% 155% 203% 28% 187% 188% 187%
Other/ Other Operating Income Profit/ (Loss) from operations Finance cost
Share of Profit of Associates Profit / (Loss) before taxation Taxation Net Profit/loss
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