KARACHI, March 15: By some accounts, Pakistan State Oil as the market leader in oil marketing companies, had an overall market share of 65 per cent in the financial year 2003. Shell took the second place with 12.1 per cent and Caltex followed with seven per cent of the market.

Other players that shared the remaining seven per cent of the leftovers, included Attock Petroleum, Total and Pearl (Parco). PSO has 3,800 outlets spread all through the country.

During the first half of the FY-04 (ended December 31, 2003), the company sold around four million tons of POL products, which translated into sales revenue of Rs89 billion.

Pre-tax profit for six months (July-December 2003) improved 12 per cent to Rs3,247 million, up from Rs2,904 million in the corresponding period of the previous year. After tax profit increased by 2.8 per cent to Rs2,122 million, from Rs2,066 million.

Earning per share (eps) - basic and diluted - worked out at Rs12.37 for the six months under review. The PSO stock is trading at around Rs293. On the current 172 million outstanding shares, the share is on price-to-earnings (p/e) multiple of 23.7x. In the 15 months since January 2003, the PSO stock has climbed by Rs92 or 46 per cent, from Rs201 to Rs293.

The board also announced interim cash dividend at Rs7 per share, which meant a payout of Rs1.2 billion to the shareholders, Re1 per share more than the sum paid in the same period last year.

Directors said that the improvement in the period under review was made possible owing to increased operating efficiency, additional sales of high-margin products like Mogas and HSD to the tune of around 140,000 tons and the cost cutting measures undertaken by the company during the current fiscal year.

Cost of products sold decreased by Rs10 billion during the period under review to Rs69 billion, from Rs79 billion in the same time last year. In Mogas, the company elevated its share by two per cent to 43.5 per cent, in HSD, participation was raised to 60.5 per cent.

In Jet A-1, PSO said it had registered growth of 1.5 per cent and the overall market share in white oil stood at 59 per cent. Black oil did not display as much healthy a picture during the six months under review. Industry fuel consumption continued to recede.

"PSO, being the major stakeholder in this business segment, took up the major portion of recession, recording a decline of 57 per cent over the last year, which was almost in line with the industry drop," the directors said.

Financial charges also stood cut to a half at Rs85 million, from Rs179 million in the first six months of FY2003, which helped in posting improved bottom line.

Merrill Lynch in its March 11, 2004 comment on the company stated that furnace oil consumption had recorded a decline of 53 per cent year-on-year from July-December 2003.

"The drop in consumption is mainly driven by increased gas availability, which we expect to rise by 8-10 per cent in FY04. PSO, with the largest market share (77 per cent) in the furnace oil business, is likely to be most affected player," said the international brokerage firm.

It also reported that PSO had managed to increase market share in the retail fuel segment, which exceeded previous estimates. The company raised its market share by 2-3 per cent in high-speed diesel and motor gasoline fuel markets.

Looking forward, Merrill Lynch commented that FY04 was proving to be "a mixed bag" for the company. It was said to be dealing with reduced volumetric sales due to a massive decline in furnace oil consumption. However, PSO was gearing up to compete with other OMCs in the retail fuel segment.

The privatization of PSO is an important issue on everybody's mind. But the Privatization Commission appears now to be focused more on divesting government stakes in companies through the stock exchange.

The recent examples are divestment of 10 per cent government stake, each, in OGDCL and SSGC. So, for the time being the commission seems to have put privatization of PSO on the back burner.