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–Higher costs and lower volumes weigh on margins
BeNewz Report
KARACHI: Pakistan State Oil reported a modest increase in profit for the six months ended December 31, 2025, despite a decline in sales and mounting cost pressures, according to its latest financial statement.
Pakistan State Oil posted profit after tax of Rs12.12 billion for the half year, up about 9% from Rs11.17 billion in the same period last year. Earnings per share rose to Rs25.82 from Rs23.81, reflecting improved bottom-line performance despite a challenging operating environment.
However, the company’s topline came under pressure as net sales declined to Rs1.49 trillion from Rs1.62 trillion a year earlier, indicating weaker demand and pricing pressures in the petroleum sector. Gross sales also fell to Rs1.60 trillion compared to Rs1.74 trillion in the corresponding period.
The decline in revenue was partially offset by lower cost of products sold, which stood at Rs1.45 trillion, allowing the company to maintain a gross profit of Rs47.1 billion. This was slightly lower than Rs50.7 billion recorded last year, highlighting margin compression amid reduced volumes.
Other income contributed Rs8.63 billion, down from Rs10.32 billion, reflecting reduced non-core earnings. Analysts say lower returns on cash balances and investments may have contributed to the decline [verify].
Operating costs remained a key concern, rising to Rs16.55 billion compared to Rs15.62 billion in the same period last year. Distribution and marketing expenses increased to Rs10.73 billion, while administrative costs rose to Rs3.71 billion, indicating inflationary pressures and higher operational overheads.
Finance costs, although lower than the previous year, remained significantly high at Rs11.39 billion, underscoring continued reliance on borrowing and the impact of elevated interest rates. The company also recorded a small share of loss from associates.
Profit before taxation stood at Rs23.06 billion, up from Rs20.77 billion last year, supported by cost management and improved operational efficiency. However, taxation expenses increased to Rs10.93 billion, limiting the growth in net profit.
For the quarter ended December 31, 2025, Pakistan State Oil reported profit of Rs2.73 billion, significantly lower than Rs7.21 billion in the same quarter last year, indicating increased volatility in earnings.
On the balance sheet side, total assets stood at Rs998.8 billion, slightly lower than Rs1.02 trillion recorded earlier. Current assets declined to Rs914.7 billion, driven by lower trade receivables and cash balances. Cash and bank balances dropped sharply to Rs19.09 billion from Rs53.99 billion, pointing to liquidity pressures.
Equity increased to Rs257.1 billion, supported by retained earnings, while total liabilities declined to Rs741.7 billion. However, current liabilities remained elevated at Rs714.9 billion, reflecting high short-term borrowings and payables.
Short-term borrowings stood at Rs325.5 billion, highlighting ongoing dependence on external financing. Analysts link this to delayed recoveries from government entities and circular debt challenges in the energy sector [verify].
Market experts say the financial results reflect a mixed performance, with improved profitability but underlying weaknesses in demand, liquidity, and cost structure. The petroleum sector continues to face structural challenges, including fluctuating consumption, pricing controls, and macroeconomic pressures.
Looking ahead, analysts emphasize the need for better working capital management and cost discipline. Pakistan State Oil’s ability to sustain profitability will depend on easing financial costs, improving receivables recovery, and stabilizing fuel demand in the coming quarters.
