20000118

PSO declares

90pc cash dividend,

20pc bonus:

profits swell to

Rs 2.67 bn

RECORDER REPORT

KARACHI: Pakistan State Oil has declared 90 percent cash dividend and 20 percent bonus for the fiscal 1998-99, as profits rose 45 percent to Rs 2.67 billion.

The company declared 60 percent final cash dividend and bonus of 20 percent on Monday in a meeting in Islamabad. It has already disbursed a 30 percent interim cash dividend. The profit before tax and net profit of the company amounted to Rs 3.532 billion and Rs 2.671 billion, respectively.

The profit was up because of a tax write-bank and petroleum price increase. The government during the last fiscal year raised petroleum prices by almost 36 percent following the hike in international oil prices which touched $28 per barrel.

According to an analyst at Taurus Securities, the outlook of the company is quite optimistic despite the fact that it has lost significant market share to Shell over the past five-year.

But, the new managers at the petroleum ministry are working for the restructuring of the company, which will include change in top management.

Moreover, an expected revision in distributor's margin can be a major source of higher earnings for PSO. The analyst said that a revision of distributor's margin on petroleum products from current levels to three percent of selling price could add Rs 1.011 billion to PSO's 2000-2001 net profits. In such a case, the fair value estimate for company's share might rise sharply from the existing Rs 161 to Rs 273.

Muhammad Suhail of IP Securities said that currently oil market firms operated on an average margin of around 2 percent and the last revision of 0.5 percent was made in February 1995. Although, the previous governments promised to increase this margin gradually to four percent on the condition that the companies would invest in building storage and transportation facilities, no one implemented it mainly due to the government's huge reliance on taxes.

He said that this government's reliance on deregulation and margin rationalisation to attract foreign investment was a silver lining for this sector. He pointed out that the government steps to increase margins and deregulate the oil sector would continue to support PSO's share prices.

The government last month announced plans to rationalise margins for oil marketing companies and deregulate the sector.