PSO financial statement analysis

ACCOUNTING

Financial Statements Analysis

PSO-Pakistan State Oil

SUBMITTED TO

Ma’am Arooj Anwar

SUBMITTED BY

Sehrish Afzal

Hafsa Shahbaz

Hanza Maqbool

Asma Farrukh

Samiya-tu-Zahra

Introduction:

Pakistan State Oil is a multi-million and global competitive state-

owned megacorporation and the leading oil market presiding entity

in Pakistan. Headquartered in Karachi, Sindh Province of Pakistan,

it has several state divisions in the different cities in Pakistan, with

administrative management business network infrastructure well

expanded, and built at par with international standards, represents

82% of country’s national energy sources.

The PSO is horizontally integrated and is the largest state-owned

energy megacorporation active in every area of the oil and gas

industry, including exploration and production, refining, distribution

and marketing, petrochemicals, power generation and trading. The

PSO conducts major renewable energy activities, including in

biofuels, hydrogen, solar, nuclear and wind power as well as

defence management. The megacorporation is the largest entity in

the country, with well expanded business presence in abroad.

The PSO has a primary listing at the Karachi Stock Exchange

(KSE), and is a constituent of the KSE-30 Index. The PSO is the

third largest entity to be placed in the KSE, ranking behind the Shell

Pakistan— a subsidiary of Royal Dutch Shell.

History:

The creation of Pakistan State Oil (PSO) can be traced back to the

year 1974, when on January 1st; the government took over and

merged Pakistan National Oil (PNO) and Dawood Petroleum

Limited (DPL) as Premiere Oil Company Limited (POCL).

Soon after that, on 3rd June 1974, Petroleum Storage Development

Corporation (PSDC) came into existence. PSDC was then renamed

as State Oil Company Limited (SOCL) on August 23rd 1976.

Following that, the ESSO undertakings were purchased on 15th

September 1976 and control was vested in SOCL. The end of that

year (30th December 1976) saw the merger of the Premier Oil

Company Limited and State Oil Company Limited, giving way to

Pakistan state Oil (PSO).

After PSO’s inception, the corporate culture underwent a

comprehensive renewal program which was fully implemented in

2004. This program over the years included the revamping of the

organizational architecture, rationalization of staff, employee

empowerment and transparency in decision making through cross

functional teams. This new corporate renewal program has divided

the company’s major operations into independent activities

supported by legal, financial, informative and other services. In

order to reinforce and monitor this structural change, related check

and balances have been established by incorporating monitoring and

control systems.

Human Resource Development became one of the main priorities

on the company’s agenda under this corporate reform.

It is due to this effective implementation of corporate reform and

consistent application of the best industrial practices and business

development strategies, that PSO has been able to maintain its

market leadership in a highly competitive business environment.

For the past 35 years, Pakistan State Oil has been fuelling the needs

of the nation. Acknowledged as the leading Public Sector Company

of Pakistan, PSO has been driving the wheels of the national

economy and is the first public company to pass the 1 Trillion rupee

revenue mark.

Currently the Company is engaged in the marketing and distribution

of various POL products including Motor Gasoline , High Speed

Diesel (HSD), Furnace Oil (FO), Jet Fuel (JP-1), Kerosene, CNG,

LPG, Petrochemicals and Lubricants. PSO has the most wide-

spread retail network in the country with over 3,500 retail outlets

and is also the major fuel supplier to aviation, railways, power

projects, armed forces, marine and agriculture sectors. The

Company also possesses the country’s largest storage capacity

representing nearly 74% of the nation's total storage capacity.

PSO is now on the road to becoming a fully integrated firm

encompassing facets of exploration, refining, transportation and

shipping. Through this plan, PSO will not only reduce operational

costs, it will also be able to reduce dependence on external supply

sources and develop self-sufficiency in the energy sector. The

Company’s future plans also include exploring new product

markets, expanding the lubricants product range, further expansion

of the company retail network, and reducing product movement

costs.

Principal Divisions:

Audit Department; Aviation Marine; Corporate Planning; Imports;

Industrial Consumer; IT Achievement; Lube Sales & Agency; Lubricants;

Non Fuel Retail; Operations Department; Power Projects; Product

Movement; Product Storage; PSO Cards; Quality Assurance; Retail

Departments; Retail News; Security Services.

Principal Competitors:

Shell remains PSO's largest competitor in the country, with a

market share of more than 25 percent. Shell Pakistan Limited; Total

Parco Pakistan Limited; Attock Oil Company Limited; Caltex Oil

Pakistan Limited

Vision:

To excel in delivering value to customers as an innovative and

dynamic energy company that gets to the future

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.

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 endeavour to achieve higher collective and individual goals

through team. This is inculcated 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

individuals and teams. Individual contributions are recognized

through our reward and recognition program.

Integrity:

We uphold our values and Business Ethics principles in every

action and decision. Professional and personal honesty, dedication

and commitment are the landmarks of our success. Open and

transparent business practices are based on ethical values and

respect for employees, communities and the environment.

Innovation:

We are committed to continuous improvement, both in New

Product and Processes as well as those existing already. We

encourage Creative Ideas from all stakeholders.

Corporate Responsibility:

We promote Health, Safety and Environment culture both internally

and externally. We emphasize on Community Development and

aspire to make society a better place to live in.

Upcoming Initiatives:

Establishment of Refinery in Khyber Pakhtunkhwa:

An important step in PSO's efforts to secure the national energy

supply chain, the Company plans to establish a state-of-the-art

(EURO IV) refinery with a capacity of 40,000 barrels per day in

Khyber Pakhtunwa.

By establishing this refinery, PSO will be able to diversify its

business offerings, improve availability of POL products in the

country, reduce supply lines and transport costs for the northern

region as well as help save substantial foreign exchange savings for

the national exchequer. This project will also help drive economic

growth in the region by offering job opportunities for both skilled

and unskilled labor as well as increase foreign investment in the

area.

BALANCE SHEET

As per Audited for last 5 years

2012 2011 2010 2009 2008 2007

Rupees in '000

ASSETS Non- Current Assets Property, plant and

equipment 5831993 6084731 637523 6987025 7460549 8012317 Intangibles 299991 28822 36250 68872 105502 126212 Long term investments 1968073 2314168 2019270 2153514 2701097 2990591 Long term loans, advances and receivables 385497 324554 317889 405780 477745 627972 Long term deposits and prepayments 123740 148748 125951 83655 79098 65913 Deferred tax 1202316 957487 5033273 407337 401037

9631610 9858510 8874593 14732119 11231328 12224042

Current Assets Stores, spare parts and loose

tools 134431 115339 113863 112143 115814 127891 Stock-in-trade 88523794 95378393 58598668 40698209 62360067 29562055 Trade debts 218022292 124721832 117501074 80509830 33904728 13599966 Loans and advances 526118 430716 409987 418015 396220 365974 Deposits and short term prepayments 2528406 1027381 367378 551803 401433 1583913 Other receivables 2122166 2252028 14557542 12806779 15681790 15751198 Taxation –net 5314752 6311951 46580 709627

Cash and bank balances 1624025 2309006 1778056 2883118 3018640 1522276

337795984 252814896 193373148 138689524 115878692 62513273

Net Assets in Bangladesh - - - - - -

total Assets 347427594 262673406 202247741 153421643 127110020 74737315

EQUITY AND LIABILITIES Share Capital 1715190 1715190 1715190 1715190 1715190 1715190

Reserves 48244718 40187795 27620868 19155595 29249864 19224027

49959908 41902985 29336058 20876785 30965054 20939217

Non-Current Liabilities Long term deposits 1176078 1023531 948476 854718 834598 768308

Retirement and other service

benefits 2518502 2233717 1887751 1673020 1574148 1644063

3694580 3257248 2836227 2527738 2408746 2412371

Current liabilities Trade and other payables 246767460 191851017 156035716 110123702 81067565 41431075

Provosions 688512 688512 688312 688512 726116 688512 Accrued interest / mark-up 544485 432133 3330213 5556380 217928 131961 Short term borrowings 45772649 24541511 13021015 18654526 10997908 9064781 Taxes payable - - - - 726703 79398

293773106 217513511 170075456 130023120 93736220 51385727

Total equity And Liabilities 347427594 262973406 20247741 153421643 127110020 74737315

PROFIT AND LOSS ACCOUNT As per audited for last 5 years

2012 2011 2010 2009 2008 2007

Rupees in '000

Sales - net of trade discounts and allowances 1199927902 974917064 877173254 71982176 583213959 411057592

Less:

- Sales tax -163861410 -

137969158 -

118563577 -97386723 -

742494721 -52418310 - Inland freight equalization margin -11642892 -16417542 -15851726 -9199864

-136859541 -8932956

-175504302

-154386700 134415303

-106586587

-879354261 -61351266

Net sales 1024423605 820530364 742757951 612695589 495278533 349706326

Cost of products sold -990101083 -

786250059 -

713591707 -

609685478 -

465254907 -

337446896

Gross profit 24322522 34280305 29166244 3010111 30023626 12259430

BALANCE SHEET

VERTICAL ANALYSIS

2012 2011 2010 2009 2008 2007 2006

Other operating income 2133994 1815951 1479054 1451666 1396527 1278932

Operating costs Transportation costs -1205394 -810423 -631849 -513673 -337886 -369328

Distribution and marketing expenses -5863170 -5178233 -4055238 -3960953 -3264599 -2745289 Administrative expenses -1659530 -1514532 -1125891 -1151793 -116074 -1002712 Depreciation -1127587 -1120999 -1137637 -1141698 -1119137 -1098157 Amortisation -15491 -18210 -44752 -52615 -47689 -41908

Other operating expenses -9272048 -2239725 -2416518 -3994389 -3352969 -755420

-19143220 -10879122 -9411885 10815121 -9283021 -6012814

Profit From Operations 17313296 25217134 21233413 -6353344 313860 424238

Other Income 7550581 4143710 6095348 776686 22450992 7949786 Finance costs -11658928 -11903162 -9882010 -6232056 -1367898 -1158112

13204949 17457682 17446751 -11808714 21083694 6791674

ùShare of profit of associates 469468 516752 516401 451850 294318 330306 Profit before taxation 13674417 17974434 17963152 -11356864 21377412 7121980 Taxation -4618362 3195120 -8913556 4658329 -7323617 -2432182

Profit for the year 9056055 14779314 9049596 -6698535 14053795 4689798

In Rupees Earnings per share - basic and diluted 52.8 86.17 52.76 -39.05 81.94 27.34

Property,Pla

nt &

Equipment

1.69% 2.33% 3.17% 4.60% 5.95% 10.89

%

10.94

%

Longterm

Inv.

0.57% 0.88% 1.00% 1.40% 2.13% 4.00% 4.67%

Longterm

Loans,Adv.

&

Receivables

0.11% 0.12% 0.16% 0.26% 0.38% 0.84% 0.99%

Longterm

Deposits &

Prepayments

0.04% 0.06% 0.06% 0.05% 0.06% 0.09% 0.11%

Deffered Tax 0.37% 0.36% 0.00% 3.28% 0.32% 0.54% 0.58%

Total

noncurrent

Assets

2.77% 3.75% 4.39% 9.60% 8.84% 16.36

%

17.29

%

Other

Current

Assets

Stores,

Spares &

Loose Tools

0.04% 0.04% 0.06% 0.07% 0.09% 0.17% 0.18%

Stock in

Trade

25.48

%

36.31

%

28.97

%

26.53

%

49.06

%

39.55

%

40.14

%

Trade Debts 62.75

%

47.48

%

58.10

%

52.48

%

26.67

%

18.20

%

16.70

%

Loans &

Adv.

0.15% 0.16% 0.20% 0.27% 0.31% 0.49% 0.39%

Deposits &

Short term

Prepayments

0.73% 0.39% 0.18% 0.36% 0.32% 2.12% 1.84%

Other

Receivables

6.08% 8.57% 7.20% 8.35% 12.34

%

21.08

%

20.75

%

Taxation-net 1.53% 2.40% 0.02% 0.46% 0.00% 0.00% 0.00%

Cash &

Bank

Balances

0.47% 0.88% 0.88% 1.88% 2.37% 2.04% 2.71%

Total 97.23 96.25 95.61 90.40 91.16 83.64 82.71

Current

Assets

% % % % % % %

Total Assets 100% 100% 100% 100% 100% 100% 100%

Equity &

Liabilities

Share

Capital

0.49% 0.65% 0.85% 1.12% 1.35% 2.29% 2.44%

Reserves 13.89

%

15.30

%

13.66

%

12.49

%

23.01

%

25.72

%

27.22

%

Total

Shareholder’

s Equity

14.38

%

15.95

%

14.51

%

13.60

%

24.36

%

28.02

%

29.66

%

Longterm

Deposits

0.34% 0.39% 0.47% 0.56% 0.66% 1.03% 1.06%

Retirement

& Other

Service

Benefits

0.72% 0.85% 0.93% 1.09% 1.24% 2.20% 2.22%

Total

Longterm

Liabilities

1.06% 1.24% 1.40% 1.65% 1.90% 3.23% 3.28%

Trades &

Other

Payables

71.03

%

73.04

%

77.15

%

71.78

%

63.78

%

55.44

%

52.47

%

Provisions 0.20% 0.26% 0.34% 0.45% 0.57% 0.92% 1.11%

Accrued

Int./Mark-up

0.16% 0.16% 0.16% 0.36% 0.17% 0.18% 0.17%

Short term

Borrowings

13.17

%

9.34% 6.44% 12.16

%

8.65% 12.13

%

10.90

%

Taxes

Payable

0.00% 0.00% 0.00% 0.00% 0.57% 0.09% 2.42%

Total

Current

Liabilities

84.56

%

82.81

%

84.09

%

84.75

%

73.74

%

68.76

%

67.06

%

100% 100% 100% 100% 100% 100% 100%

HORIZONTAL ANALYSIS

TREND ANALYSIS

Property,

Plant &

Equipment

76% 80% 84% 92% 99% 106% 100%

Total non-

current

Assets

79% 81% 73% 121% 93% 101% 100%

Stock in trade 314% 339% 208% 144% 221% 105% 100%

Trade Debts 1861% 1065% 1003% 687% 289% 116% 100%

Other

Receivables

145% 155% 100% 88% 108% 108% 100%

Cash & Bank

Balances

88% 122% 94% 152% 159% 80% 100%

Total

Current

Assets

582% 436% 333% 239% 200% 108% 100%

Total Assets 495% 374% 288% 219% 181% 1075% 100%

Share Capital 100% 100% 100% 100% 100% 100% 100%

Reserves 253% 210% 145% 100% 153% 101% 100%

Total

Shareholder’s

Equity

240% 201% 141% 100% 149% 101% 100%

Total Long

term

Liabilities

161% 142% 123% 110% 105% 105% 100%

Trade &

Other

Payables

670% 521% 424% 299% 220% 113% 100%

Total

Current

Liabilities

624% 462% 361% 276% 199% 109% 100%

Total Equity

& Liabilities

495% 374% 288% 219% 181% 107% 100%

DOLLAR CHANGE & PERCENTAGE CHANGE

2012 2011

Dollar

Change

Percentage

Change

Dollar

Change

Percentage

Change

Property, plant and equipment

-252738 4.1% 5447208 854.4%

Intangibles 271169 940.8% -7428 -20.4%

Long term investments

-346087 -14% 294898 14.60%

Long term loans, advances and receivables

60943 18% 6665 2.09%

Long term deposits and prepayments

-25008 -16.8% 22797 18.0%

Deferred tax 244829 25.56% 957487 0%

-226900 -0.023% 983917 11.08%

Current Assets

Stores, spare parts and loose tools

19092 16.5% 1476 1.29%

Stock-in-trade

-6854599 -7.18% 367797 62.76%

Trade debts 93300460 74.8% 7220758 6.14%

Loans and advances

95402 22.14% 20729 5.05%

Deposits and short term prepayments

1501025 146.10% 660003 1.79%

Other receivables

-129862 -5.76% -12305514 -84.5%

Taxation –net

-997199 -15.79% 6265371 13450.7%

Cash and bank balances

-684981 -29.66% 530950 29.86%

84981088 33.61% 2334775748 1207.3%

Net Assets in Bangladesh

total Assets 84754188 322.6% 60425665 29.8%

EQUITY AND LIABILITIES

Share Capital 0 0% 0 0%

Reserves 8056923 20.04% 12566927 45.9%

8056923 20.04% 12566927 45.9%

Non-Current Liabilities

Long term deposits

152547 14.90% 75055 7.91%

Retirement and other service benefits

284785 12.74% 345966 18.32%

437332 13.42% 421021 14.8%

Current liabilities

Trade and

other payables

54916443 28.62% 35815301 22.9%

Provosions 0 0% 200 0.02%

Accrued interest / mark-up

112352 25.99% -2898080 -0.87%

Short term borrowings

21231138 86.51% 11520496 88.47%

Taxes payable

76259595 35.05% 47438055 27.8%

Total equity And Liabilities

84454188 32.11% 242725665 1198.77%

Share Holders’ Equity

Total share holders’ equity has increased by 196% over the years mainly

due to retention of profits in the business in order to overcome liquidity

problems faced by the company due to circular debt crisis during the years

2009 to 2012.

Trade & other payables

Trade & other payables have shown unusual increase over the years when

compared with 2007 mainly due to circular debt issue. The balances were

highest as of June 30, 2012, however, since then they have gone down due

to improvement in PSO’s liquidity position for certain reasons.

Total Non-Current Assets

Total Non-Current Assets decreased from 2009 to 2012 because

investments made by the company are decreasing with every passing year.

Trade debts

Trade debts have shown unusual increase over the years when compared

with 2007 mainly due to an increase in circular debt related balances The

trade debts were highest as of June 30, 2012.

Stock in Trade

Stock in trade has increased by 259% over the years when compared with

2007 as per Horizontal Analysis mainly due to increase in stock levels to

keep pace with increase in industry demand of POL products and overall

increase in oil prices.

The Vertical Analysis depicts that the share of stock in trade in total assets

fluctuate mainly with increase or decrease in oil prices, the share being

highest in 2008 due to a phenomenal surge in oil prices during FY 2008.

PROFIT & LOSS A/C

VERTICAL ANALYSIS

2012 2011 2010 2009 2008 2007 2006

Sales 100% 100% 100% 100% 100% 100% 100%

Sales tax 13.66

%

14.15

%

13.52

%

13.54

%

12.7% 12.8% 12.6%

IFEM/Levies 0.97% 1.68% 1.81% 1.28% 2.35% 2.17% 2.76%

Net sales 85.37

%

84.16

%

84.67

%

85.18

%

84.92

%

85.07

%

84.61

%

CGS 82.51

%

80.65

%

81.34

%

84.76

%

79.77

%

82.09

%

79.73

%

Gross Profit 2.86% 3.52% 3.33% 0.42% 5.15% 2.98% 4.88%

Operating

cost

Transportati

on

0.10% 0.08% 0.07% 0.07% 0.06% 0.09% 0.10%

Admn. &

Marketing

Exp.

0.63% 0.69% 0.59% 0.71

%

0.76% 0.91% 0.97%

Depreciation 0.10% 0.12% 0.13% 0.17% 0.20% 0.28% 0.31%

Other

operating

exp.

0.77% 0.23% 0.28% 0.56% 0.57% 0.18% 0.70%

Total

Operating

Cost

1.60% 1.12% 1.07% 1.50% 1.59% 1.46% 2.08%

1.27% 2.40% 2.25% -

1.09%

3.56% 1.52% 2.80%

Other/other 0.81% 0.61% 0.86% 0.31% 0.29% 1.93% 0.40%

operating

income

Profit/(Loss)

from

Operations

2.07% 3.01% 3.12% -

0.78%

3.85% 1.93% 3.20%

Finance Cost 0.97% 1.22% 1.13% 0.87% 0.23% 0.28% 0.25%

Share of

profit of

Associates

0.04% 0.05% 0.06% 0.06% 0.05% 0.08% 0.29%

Profit/(Loss)

before

taxation

1.14% 1.84% 2.05% -

1.58%

3.67% 1.73% 3.24%

Taxation -

0.38%

-

0.33%

-

1.02%

0.65% -

1.26%

-

0.59%

-

1.10%

Net

Profit/(Loss)

0.75% 1.52% 1.03% -

0.93%

2.14% 1.14% 2.13%

HORIZONTAL ANALYSIS

TREND ANALYSIS

2012 2011 2010 2009 2008 2007 2006

Sales 368% 310% 266% 219% 167% 118% 100%

Sales tax 120% 169% 163% 95% 141% 92% 100%

IFEM/Levies 323% 285% 248% 196% 162% 113% 100%

Net sales 343% 275% 249% 205% 166% 117% 100%

CGS 352% 280% 254% 217% 166% 120% 100%

Gross Profit 199% 199% 169% 17% 174% 71% 100%

Operating

costs

Transportation 330% 222% 173% 140% 92% 101% 100%

Adm. &

Marketing

Exp.

219% 195% 151% 149% 129% 109% 100%

Depreciation 106% 105% 109% 110% 108% 105% 100%

Other

operating exp.

377% 91% 98% 162% 136% 31% 100%

Total

Operating

Cost

261% 148% 128% 147% 127% 82% 100%

154% 237% 200% -79% 210% 63% 100%

Other/other

operating

income

695% 428% 543% 160% 123% 122% 100%

Profit/(Loss)

from

Operations

221% 261% 243% -50% 199% 71% 100%

Finance Cost 1319% 1346% 1118% 705% 155% 131% 100%

127% 168% 168% -

114%

203% 65% 100%

Share of profit

of Associates

45% 50% 50% 43% 28% 32% 100%

Profit/(Loss)

before taxation

120% 157% 157% -99% 187% 62% 100%

Taxation 119% 82% 229% -1205 188% 62% 100%

Net

Profit/(Loss)

120% 196% 120% -89% 187% 62% 100%

DOLLAR CHANGE & PERCENTAGE CHANGE

2012 2011

Dollar

Change

Percentage

Change

Dollar

Change

Percentage

Change

Sales

Revenue

225011 23% 97744 11.14%

Net Revenue 203894 24% 77772 10.47%

Gross Profit 43 0.125% 5114 17.53%

Operating

Profit

-4497 -15.3% 2033 7.44%

Marketing

& Adm. exp.

1178 13.63% 1643 23.48%

Finance cost -244 -2.05% 2021 20.45%

Other

Operating

exp.

7032 313.95% -177 -7.3%

Profit /

(Loss)

before tax

-4300 -23.92% 11 0.06%

Profit /

(Loss) after

tax

-5723 -38.72% 5729 63%

Earnings/

(Loss)before

int. , tax,

dep. &

amortization

-4540 -14.64% 1988 6.85%

Gross Sales Revenue:

Gross Sales revenue has grown from 2007 to 2012. This increase in

revenue over the periods is attributable to both volume and price increase.

Gross Profit:

Gross profit has also increased in line with revenues and has registered an

increase over the years. Decline in Gross Profit for FY 2009 was due to a

sharp decrease in international oil prices resulting in abnormal inventory

losses.

The gross profit percentage has remained in range of 3%, with the

exception of years 2008 % 2009 where an unusual variation was due to

abnormal upward & downward trend of POL prices.

Total Operating Cost

Total operating cost has grown over the years registering an increase. This

increase is mainly due to an increase in cost of doing business &

inflationary pressure with rupee devaluation.

Finance Cost

Finance cost has shown an unusual increase over the years when compared

with FY 2007. This is mainly due to increase in mark up on borrowings

and delayed payment charges on account of prevailing circular debt

situation. The finance cost touched the highest level in FY 2011 & FY

2012, however, it has gone down during the current FY due to settlement

of circular debt issue.

Profit / (Loss) After Tax

Profit after tax has shown increase in comparison with FY 2007 due to

certain reasons. The PAT percentage has remained in range of 1% over the

years except for the years 2008 & 2009 due to certain reasons.

RATIO ANALYSIS

Profitability Ratios:

Ratios 2012 2011 2010 2009 2008 2007

Net

Profit

Margin

0.7% 1.5% 1.0% (0.9%) 2.4% 1.1%

Return

on Total

assets

2.6.% 5.6% 4.4% (4.3%) 11% 6.2%

Return

on

Common

Equity

18% 35% 30% (32%) 45% 22%

Total

Asset

3.45 3.71 4.3 4.6 4.58 5.50

Turnover

Calculations and Interpretations

Net Profit Margin: Net Profit

Sales

Net Profit Margin for 2012 = 9056055 = 0.7%

1199927907


974917064


877173254

Net Profit Margin for 2009 = (6698535) = -0.9%

719282176


583213959


411057592

Graph:

Interpretations:

Net Profit Ratio indicates how much of Sales PSO has secured as profit

or in other words it is the actual earning of PSO. The margin is 0.7% in

2012 which is less than that of 2011 i.e. 1.5%. Similarly 2011 can be

compared with 2010’s value that is 1.0% and so on up to 2007’s value.

The lower values are due to higher COGS which is due to increasing

prices of petroleum. The lower value indicates the less efficient

operations and thus leads to lesser reserves and low earning available

for stockholders.

Return on Total Assets :Earnings available for common stockholders

Total Assets

Return on Total Assets for 2012 = 9056055 = 2.6%

347427594


0.7

1.51

-0.9

2.4

1.1

-2

-1

0

1

2

3

2012 2011 2010 2009 2008 2007

Net Profit Margin

Net Profit Margin

262673406


202247741

Return on Total Assets for 2009 = (6698535) = 4.3%

153421643

Return on Total Assets for 2008 = 14053795 = 11%

127110020


74737315

Graph:

Interpretations:

2.6

5.6

4.4

-4.3

11

6.2

-6

-4

-2

0

2

4

6

8

10

12

2012 2011 2010 2009 2008 2007

Return on total Assets

Return on total Assets

This indicates how effectively a company is using its assets. The values

for 2012 is 2.6% which is low as compared to 5.6% of 2011. This

indicates that in 2012 the total assets are not used effectively as

compared to 2011, although total assets were more in 2012. Higher

COGS is one of the major reason for this result. Similarly the later years

can be compared relatively. However the most efficient one was 2008

where maximum output was taken from the total assets.

The collective trend is shown in table.

Return on Common Equity : Earnings available for common stockholders

x 100

Common Stock Equity

Return on Common Equity for 2012 = 905605500 = 18%

49959908


41902985


29336058

Return on Common Equity for 2009 = (6698535) = -32%

20870785


30965054


20939217

Graph:

Interpretations:

This ratio indicates how much profit PSO has generated with the

investments of common stockholders. The ratio for 2012 is 18% which is

almost have of 2011 that is 35% although the investment of 2011 is less

than 2012. This leads to the lack of proper asset allocation or might be

the oil prices are the cause of low outcome. Similarly 2011 has higher

value than 2010 which is 30%. 2009 was lowest with -32% value. 2008

was the highest in last 6 years which was 45%.

The general detail can be studied from graph.

0.18

0.350.3

-0.32

0.45

0.22

-0.4

-0.3

-0.2

-0.1

0

0.1

0.2

0.3

0.4

0.5

2012 2011 2010 2009 2008 2007

Return On ToTal Equity

Return On ToTal Equity

Total Assets Turnover: Sales

Total Assets

Total Assets Turnover for 2012 = 1199927907 = 3.45

347427594


262673406


202247741


153421643


127110020


74737315

Graph:

Interpretations:

The total asset turnover ratio measures the ability of a company to use its

assets to efficiently generate sales

The company total asset turnover ratio is not declining in every year which

is not satisfactory. Low asset turnover ratio suggests problems with excess

production capacity, poor inventory management, or lax collection

methods

The company should have to utilizes it all resources .and plants to increase

it sales.it should increase the sale by maximum utilization of its resources

e.g. inventory

3.453.71

4.34.6 4.58

5.5

0

1

2

3

4

5

6

2012 2011 2010 2009 2008 2007

Total Asset Turn over

Total Asset Turn over

Market Ratios

Ratios 2012 2011 2010 2009 2008 2007

Price

/Earnings

Ratio

4.46 03.07 4.93 (5.47) 5.09 14.31

Earnings

per Share

(in Rs.)

52.80 86.17 52.76 39.05 81.99 27.34

Times Interest Earned

Ratio

2.17 2.5 2.81 -0.8 16.6 7.14

Calculations and Interpretations

Price/Earnings Ratio : Market Price per share of Common Stock

Earnings per share

Price/Earning Ratio for 2012 = 235.8 = 4.46

52.80


86.17


52.76

Price/Earning Ratio for 2009 = 213.65 = (5.47)

39.05


81.94

Price/Earning ratio for 2007 = 391.5 = 14.31

27.34

Graph:

Interpretations:

Price/Earning ratio measures the amount that investors are willing to

pay for each rupee of PSO’s earnings. It also indicates the degree of

confidence that investors have in firm’s future performance. Higher

value indicates higher confidence.

If we consider the value of 2012 which is 4.46 and compare it with

that of 2011 that is 3.07 then we can say that investors has more

confidence in 2012 performance than of 2011 performance. Similar

comparison can be done for the rest of years. 2009 was worst where

the value was -5.47 indicating a very poor confidence of investors.

2008 has the highest value in 5 year analysis with 5.09 confidence

4.43.07

4.93

-5.47

5.09

14.31

-10

-5

0

5

10

15

20

2012 2011 2010 2009 2008 2007

Price Earning Ratio

Price Earning Ratio

level. The two major factors affecting this ratio are market price per

share of common stock and earnings available for common

stockholders.

Earnings per Share : Earnings available for common stockholders

Number of shares of common stock outstanding (1)

Earnings per share for 2012 = 90560550 = 52.80

1715190


1715190


1715190

Earnings per share for 2009 = 66985350 =(39.05)

1715190


1715190


1715190

Graph:

Interpretations:

This ratio indicates the amount PSO earn from each outstanding share of

common stock. Ratio for 2012 is 52.80 which means that PSO earn Rupees

: 52.80/- from each share of common stock. 2011 has the highest EPS

among the last 6 years Rupees: 86.17/- per share of common stock.

Company can improve its EPS by either decreasing the number of shares

of common stock outstanding or by increasing the earnings available for

common stock holders.

Times Interest Earned Ratio: Earnings before interest and tax

Interest

(Note: As in the balance sheet, interest has already been deducted

before taxation so we will add the value of tax as well in the below

ratios)

Times Interest Earned Ratio for 2012 = 13674417 + 11658928 = 2.17

11658928

52.8

86.17

52.76

39.05

81.94

27.34

0

10

20

30

40

50

60

70

80

90

100

2012 2011 2010 2009 2008 2007

Earning per Share

Earning per Share


11903162

Times Interest Earned Ratio for 2010 = 17963152 + 9882010 =2.81

9882010

Times Interest Earned Ratio for 2009 = (110356864)+6232056 = (0.8)

6232056


1367898


1158112

Graph:

Interpretations:

2.17 2.5 2.81

-0.8

16.6

7.14

-2

0

2

4

6

8

10

12

14

16

18

2012 2011 2010 2009 2008 2007

Time Interst Earned Ratio

Time Interst Earned Ratio

It indicates the company’s ability to meet its debt obligations or

interest obligations. Or simply we can that it indicates that for how

much times the net operating profit covers the interest payment.

Usually a value of 2 and greater is considered to be acceptable.

So the Condition was quite acceptable for 2012, 11 and 10 with values

2.17, 2.5 and 2.81. However for 2009 the value was in negative -0.8

which was very hopeless for PSO to pay off interest. Condition was

much satisfactory for 2008 where the value was 16.6. It meant that if

the PSO earnings were shrink by 93% (16.6-1.0/16.6), it would still be

able to pay off interest payments.

Liquidity Ratios

Ratios 2012 2011 2010 2009 2008

Current

Ratio

1.14 1.16 1.13 1.06 1.23

Quick

Ratio

0.84 0.72 0.79 0.75 0.57

Working

Capital

Rs.3080228

78

Rs.353037

23

Rs.232976

92

Rs.86664

04

Rs.221424

72

A/R

Turnove

r Ratio

5.97 6.77 7.50 10.71 20.85

Avg.

Days to

collect

A/R

61.05 53.87 48.65 34.08 17.50

Inventor

y

Turnove

r Ratio

13% 12.6% 17% 13.9% 12.1%

Average

Collecti

on

52.12 45.34 41.19 28.93 14.86

Period

Current Ratio: Current Assets :

Current Liabilities

Current Ratio for 2012 = 337795984 = 1.14

29773106


217513173


170075456


130023120


93736220

Graph:

Interpretations:

The Ratio tells the ability to full fill its short term obligation

1.141.16

1.13

1.06

1.23 1.22

0.95

1

1.05

1.1

1.15

1.2

1.25

2012 2011 2010 2009 2008 2007

Current Ratio

Current Ratio

Company data shows that for every one rupees of liability there is

1.14 rupees of asset in

2012. The ratio was 1.16, 1.13, 1.06, 1.23 in the year 2011, 2010, 2009

& 2008 respectively.

Company can improve its current ratios by increasing its accounts

receivables and by decreasing the account payables.

Quick Ratio :Current Assets – Inventory

Current Liabilities

Quick Ratio for 2012 = 337795984-88523794 = 0.84

293773106

Quick Ratio for 2011 = 252814896-95378393 = 0.72 217513173 Quick Ratio for 2010 = 193373148-58598668 = 0.79 170075456 Quick Ratio for 2009 = 138689524-40698209 = 0.75 130023120 Quick Ratio for 2008 = 115878692-62360067 = 0.57 93,736,220

Graph:

Interpretations:

The Ratio tells more precisely and accurately companies the ability to

full fill its short term obligations.

This ratio is more precisely because in this ratio we subtract the

inventory; it is difficult to convert the inventory into the cash.

To pay the 1 rupee current liability there is only 0.84 rupees of assets

in 2012, while in 2011

to pay the 1 rupee liability there is only 0.72 rupees of assets, to pay

the liability of 1 rupee

in 2010 there is only 0.79 rupees of assets , while in 2009 to pay the

liability of 1 rupee there

is only assets of 0.75 rupees, in 2008 to pay the liability of one rupee

there is 0.57 rupees of asset

company can increase its quick ratio by maximum utilization of

inventory .they should fully utilizes their all assstes ,they should also

works on the average collection period time.

Working Capital =Current Assets – Current Liabilities

0.84

0.72

0.790.75

0.57

0.64

0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

0.9

2012 2011 2010 2009 2008 2007

Quick Ratio

Quick Ratio

Working Capital for 2012 = 337795984-29773106=308022878




Working Capital for 2008 =115878692-93736220=22142472

Graph

308022878

3530372323297692

866640422142472

0

50000000

100000000

150000000

200000000

250000000

300000000

350000000

2012 2011 2010 2009 2008

Working Capital

Working Capital

A/R Turnover Ratio= Net Credit Sales

Avg. A/R

A/R Turnover Ratio for 2012= 1024423605 =5.97

171372062

A/R Turnover Ratio for 2011= 820530364= 6.77

121111453


99005452


57207279


23752347

Graph

Avg. days to collect A/R= 365

A/R turnover ratio

Avg. days to collect A/R for 2012= 365 = 61.05

5.97

Avg. days to collect A/R for 2011=365 = 53.87

6.77


7.50


10.71

Avg. days to collect A/R for 2008= 365= 17.50

20.85

5.976.77

7.5

10.71

20.85

0

5

10

15

20

25

2012 2011 2010 2009 2008

A/R Turnover Ratio

A/R Turnover Ratio

Graph

Inventory Turnover Ratio: Cost of Goods Sold

Avg. Inventory

Inventory Turnover Ratio for 2012 = 1199927907 = 13%

91951093.5

Inventory Turnover Ratio for 2011 = 974917064 = 12.7%

76966530.5

Inventory Turnover Ratio for 2010 = 877173254 = 17%

49648438.5


51529138


61.05

53.87

48.65

34.08

17.5

0

10

20

30

40

50

60

70

2012 2011 2010 2009 2008

Avg. Days to Collect A/R

Avg. Days to Collect A/R

45961061

Graph:

Interpretations:

Inventory Turnover Ratio measures company's efficiency in turning its

inventory into sales. Its purpose is to measure the liquidity of the

inventory. The company shows the greatest efficiency in 2010 where

the company inventory turnover was 17% which SHOWS GOOD

LIQUIDITY OF INVENTRY.but later in following year it shows descending

values .IN 2011 A SLITE IMPROVEMENT IN 2012

Company can improves its inventory turnover by AVOIDING OVER

STOCKING AND steps should be taken to increases in sales to consume

more inventory.

13 12.6

17

13.9

12.1

0

2

4

6

8

10

12

14

16

18

2012 2011 2010 2009 2008 2007

Inventory Turn Over

Inventory Turn Over

Average Collection Period: Average debtors x 365

Sales

Average Collection Period for 2012 = 171372062 x 365 = 52.12

1199927907


974917064


877173254


719282176


583213959

Graph:

Interpretations:

Average collection period is the number of days that i a company to

collect its accounts receivables.

52.12 45.34 41.19 28.93 14.86

The company shows that average collection period is continuously

increasing in following years.

The company can increase it collection period by defining it polices to

its debtors so that all accounts receivable should be received in

prescribed time

Solvency Ratios

Ratios 2012 2011 2010 2009 2008 2007

Debt to Asset Ratio

0.856 1.189 1.169 1.157 1.322 1.389

Debt to 5.954 5.268 5.894 6.349 3.104 2.569

52.12

45.34

41.19

28.93

14.86

0

10

20

30

40

50

60

2012 2011 2010 2009 2008 2007

Average Collection Period

Average Collection Period

Equity Ratio

Debt Ratio: Current Liabilities + Non-current Liabilities

Total Assets

Debt Ratio for 2012 = 293773106 + 3694580 = 0.856

347427594

Debt Ratio for 2011 = 217513173 + 3257248 = 1.189

262673406

Debt Ratio for 2010 = 170075456 + 2836227 = 1.169

202247741

Debt Ratio for 2009 = 130023120 + 2527738= 1.157

153421643

Debt Ratio for 2008 = 93736220 + 2408746 = 1.322

127110020

Debt Ratio for 2007 = 51385727 + 2412371 = 1.389

74737315

Graph:

Interpretations:

Debt Ratio Measures what proportion of debts a company has as

compared to its assets. Thus it shows the measure of debt of a

company. It helps investors determine the level of risk of an

organization.

Now we consider the present scenario, in 2012 the ratio was 0.856

which indicates that assets were greater than liabilities ensuring a safe

side for investors. While in the previous years the ratio was greater

than 1 which indicates that companies loans were more than assets.

2007 was worst where ratio was at extreme for last 6 years which was

1.389, however if we consider 5 years analysis then 2008 was worst

with value 1.322. The values for 2011, 10 and 09 are 1.189, 1.169 and

1.157 respectively.

0.856

1.189 1.169 1.157

1.3221.389

0

0.2

0.4

0.6

0.8

1

1.2

1.4

1.6

2012 2011 2010 2009 2008 2007

Debt to Asset Ratio

Debt Ratio

Debt to Equity Ratio: Current Liabilities + Non-current Liabilities

Total Share Holders’ Equity

Debt to equity Ratio for 2012 = 293773106 + 3694580 = 5.954

49959908


41902985


29336058

Debt to equity Ratio for 2009 = 130023120 + 2527738= 6.349

20876785


30965054


20939217

Graph

Interpretations:

Debt to Equity Ratio Measures what proportion of debts a company

has as compared to its equity. Thus it shows the measure of debt of a

company. It helps investors determine the level of risk of an

organization.

CONLUSION

In end it is concluded that the company performance in the end of year

2012 is not good as compare with previous years because the assets

are not that much to pay the company liability.

Sales are increasing but they are on the credit basis which results in

overall decrease in income statement as cost of goods is increasing.

References:

5.95

5.26

5.896.34

3.1

2.56

0

1

2

3

4

5

6

7

2012 2011 2010 2009 2008 2007

Debt to Equity Ratio

Debt to Equity Ratio

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