‘Life is not that simple’

January 06, 2014

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The country’s largest oil marketing company, Pakistan State Oil, is poised to hit the Rs1.5 trillion sales revenue mark at the end of this fiscal year, on the back of robust international oil prices.

This is based on the assumption that international prices remain more or less in the same band, or that any drop is compensated through higher petrol consumption due to gas shortage and the company’s improved market share.

In the first five months (July–November 2013) of the current fiscal, PSO posted sales turnover of approximately Rs621 billion, against Rs525 billion in the same period last year, showing a growth of more than 18 per cent. Its sales volumes increased by about nine per cent.

Over the next couple of weeks, the company would be firming up its half-yearly performance report to come up with its profit and loss situation. In the first quarter of FY14, the company reported an after-tax profit of Rs7.8 billion, compared with Rs4.3 billion in the same period last year, showing a healthy growth of 81 per cent.

That apparently suggests that the company is now on a path to a modest recovery, if seen in the context of last year. During FY13, the company posted sales revenue of Rs1.295 trillion, up only nine per cent from Rs1.2 trillion in FY12, which was 23 per cent higher from FY11.

Despite being in search for a full-time managing director, PSO has managed to maintain its position as market leader, having an overall market share of about 63.8 per cent in the first quarter, as its share in black oil and white oil stood at 75.9 per cent and 52.4 per cent respectively.

Interestingly, the company’s liquid fuel sales grew by a meagre 4.3 per cent when compared with substantially higher growth posted by smaller retailers. Sales volume of furnace oil grew by only 6.7 per cent despite continued power shortages, but this could be attributed to the lag affect of circular debt.

On the other hand, sales volume of motor gasoline grew by 17.4 per cent, mainly because of shortage of gas for the transport sector. But sales volume of high speed diesel (HSD) dropped by 6.4 per cent.

Additionally, over the first five months of this fiscal, the company’s market share in various products witnessed significant month-on-month growth. From August onwards, PSO’s share in the HSD market rose from 50 per cent to 57 per cent, while that in motor gasoline remained static at 50 per cent, due to tough competition from smaller companies.

PSO’s share in the lubricant market also rose from 16 per cent to 28 per cent amongst oil marketing companies across Pakistan within a period of just three months. This is significant, given the fact that private international companies had well positioned their product range through brand names.

According to PSO’s Acting MD Amjad Pervez Janjua, the company’s focus in recent months has been on better quality checks. “An increased check on product quality and quantity being provided to customers at PSO’s retail outlets has helped substantially reduce short deliveries and product failures from July to December 2013.”

He said there was not a single bank default on account of non-payment of letters of credit due to prudent fund management, compared with four defaults during the preceding five months (February to June 2013).

But that would be claiming too much credit for prudent management, and, in fact, discrediting the government. Everyone now knows that last fiscal year’s defaults were due to a build-up of over Rs500 billion in circular debt. This did not happen this year, because of the clearance of this amount by the federal government as part of the federal budget for FY14.

After the clearance of circular debt, the company was able to meet furnace oil requirements of the public sector and private power producing units during July to November 2013. As a result of gas shortfall, motor gasoline imports by PSO increased by 30 per cent over the same period last year.

But critics claim that Mr Janjua’s argument about no default and improved furnace oil and gasoline supply is sort of his image building exercise amid an ongoing selection process for the full-time appointment of PSO managing director.

A recent human resource development initiative for capacity building and leadership development, i.e. signing of a MoU with the Suleman Dawood School of Business of the Lahore University of Management Sciences (LUMS), is being quoted by critics as an attempt to win over sympathies of a member of the high powered commission appointed by the government to select heads of public sector corporations.

The induction of a former personnel staff officer of the chairman of the same commission as security chief at PSO is being quoted as another example, but Mr Janjua brushed aside such insinuations. “Life is not that simple,” he smiles. Hopefully, there are no question marks when the leader of the country’s largest oil marketing company is finally selected by the government.