Ratio analysis of Pakistan state oil and SHELL Pakistan

Short term salvage ratios:

1- Current ratio = current assets / current liabilities

Year 2010 2011 2012
PSO 1.14 1.6 1.5
Shell Pakistan 0.84 0.90 0.88

If we compare PSO and Shell Pakistan it is clear that PSO is in better position to
pay its liabilities because PSO has 1.4 rupees on average to pay its 1 rupee liability.

2- Quick ratio = current assets- inventories / liabilities
Year 2010 2011 2012
PSO 0.8 .73 0.85
Shell Pakistan 0.43 0.46 0.43

Both companies have excess of inventory that disable them to pay 1 rupee of
liability on average PSO have 0.8 rupee to fulfil its one rupee liability and shell
have 0.45 rupee for one rupee of liability.

3- I nternal measures = current assets / average daily operation cost
Average daily operation cost= total cost deprecation interest / 365
year 2010 2011 2012
PSO 99 118 123
Shell Pakistan 50 63 58

From the upper calculated ratios it is clear that PSO has liquidity for more days as
compare to shell, for PSO 115 days liquidity is available and shell has 56 days
liquidity on average.





Long term salvage ratios:

1- Total debt ratio = total debt / total assets

Year 2010 2011 2012
PSO 6.5% 9.3% 13%
Shell Pakistan 22% 16% 27%

Shell Pakistan has average 22% debt financing and PSO has 8 % on average which
shows goodness of Pakistan state oil.

2- Debt to equity ratio = total debt / total equity
Year 2010 2011 2012
PSO 44% 60% 90%
Shell Pakistan 106% 95% 197%

Financial manager think that a good company is that in which debt to equity ratio
should be 60 % equity and 40 % debt but in upper both cases PSO has maximum
90 % debt means PSO has 1.9 rupee from debt if company has 1 rupee from
equity. But in case of Shell it is quite surprising to see shell has minimum debt to
equity ratio is 95% and maximum it has 197 % in the year 2012.

3- Equity multiplier = 1+ total debt/ total equity

Year 2010 2011 2012
PSO 1.44 1.59 1.9
Shell Pakistan 2.1 1.95 2.97

Equity multiplier of both companies is helping to understand the debt to equity
ratio.
4- Long term debt ratio:

Both concerned companies have 0 long term debt so we cannot calculate the long
term debt ratio.

5- Time interest earned ratio = EBIT/interest

Year 2010 2011 2012
PSO 2.77 2.46 2.1
Shell Pakistan 2.9 2.04 0.57

Times interest earned ratio is very important from the creditors view point. PSO
high ratio ensures a periodical interest income for lenders. Shell is with weak ratio
may have to face difficulties in raising funds for their operations.

6- Cash coverage ratio = EBIT depreciation/ interest

Year 2010 2011 2012
PSO 2.88 2.56 2.2
Shell Pakistan 2.9 2.04 0.57

The cash coverage ratio is useful for determining the amount of cash available to
pay for interest, and is expressed as a ratio of the cash available to the amount of
interest to be paid. The ratio should be substantially greater than 1:1both PSO and
Shell have good ratio except Shell in 2012 it is very low percentage.

Asset management ratio:

1- I nventory turnover = CGS/ inventory
Year 2010 2011 2012
PSO 12.17 8.243 11.18
Shell Pakistan 15.01 11.58 11.71

Days in inventory turnover = 365/ inventory turnover
Year 2010 2011 2012
PSO 29.99 44.28 32.65
Shell Pakistan 24.317 31.52 31.17

In this case Shell is doing well then PSO because inventory turnover reflects the
efficiency of firm to convert its inventory to sale, PSO has an average 10 inventory
turnovers less then shell which is 12.

2- Receivable turnover = sales/ account receivable

Year 2010 2011 2012
PSO 51.02 36.44 48.49
Shell Pakistan 23.10 16.91 22.86

PSO is good in his collection of receivable rather than shell on average
PSO collects its receivables 45 times in a year and shell is behind PSO
which collects its receivables 20 times in a year.

3- Payable turnover = CGS/ account payable
Year 2010 2011 2012
PSO 4.57 4.098 4.0122
Shell Pakistan 9.29 8.437 7.88
Days in payable turnover = 365/ payable turnover
Year 2010 2011 2012
PSO 79.86 89.07 90.97
Shell Pakistan 39.29 43.26 46.32

PSO has low inventory turnover which is favourable for organization.

4- Net working capital turnover = sales/ NWC

Year 2010 2011 2012
PSO 31.88 23.24 23.27
Shell Pakistan (43.82) (62.644) (52.93)

PSO is efficiently utilize its NWC to generate sales on other hand Shell has
negative NWC.






5- Fixed assets turnover = sales/ net fixed asset

Year 2010 2011 2012
PSO 83.69 83.23 106.36
Shell Pakistan 17.206 19.96 21.94
A financial ratio of net sales to fixed assets. The fixed-asset turnover
Ratio measures a company's ability to generate net sales from
Fixed-asset investments And PSOS utilisation is good then shell which is
Very low as compare to PSO.

6- Total asset turnover = sales/ total asset

Year 2010 2011 2012
PSO 3.67 3.055 2.94
Shell Pakistan 5.81 5.03 5.44

The total asset turnover ratio measures the ability of a company to use
Its assets to efficiently generate sales in this case Shell is doing
well comparatively because it has an average of 5 times.
Profitability ratio:

1- Profit margin = net income/ sales

Year 2010 2011 2012
PSO 0.012 0.018 0.009
Shell Pakistan 0.007 0.004 0.0085

PSO is generating sales greater than Shell which is showing efficiency.

2- Return on asset = net income/ total asset

Year 2010 2011 2012
PSO 0.045 0.056 0.0261
Shell Pakistan 0.042 0.018 0.0464

How much net income is generating from sales and in this case both
Companies are doing approximately equal effort to generate net
Income from sales.

3- Return on equity = net income/ total equity

Year 2010 2011 2012
PSO 0.301 0.353 0.18
Shell Pakistan 0.205 0.1097 0.34

It also reflects the generation of net income from equity and both companies are
similar here also.
4- Earnings per share = net income/ no of share outstanding

Year 2010 2011 2012
PSO 52.76 86.17 52.80
Shell Pakistan 23.59 13.23 (24.33)

Upper calculation shoes that PSO earning per share is far better than shell Pakistan.




KARACHI: Despite an energy shortfall, Pakistans oil consumption declined by
three percent in FY12 to 19.1 million tonnes as against 19.7 million tonnes recorded
in FY11, according to the data of Oil Companies Advisory Committee (OCAC).

This is the second consecutive year that oil consumption has posted a decline. The
reduction primarily came from seven percent decline in Furnace oil (FO) sales, which
account for approximately 45 percent of total oil consumption in Pakistan.

Despite electricity shortage, cash problems amid circular debt prompted power units to
consume lower furnace oil for electricity generation which declined by seven percent to
8.4 million tonnes, said Nauman Khan, an analyst at Topline Securities.

According to estimates, power sector consumed five percent lower FO as the government
increased gas supplies by four percent, which is cheaper source of generation for power
units as power sector has been given priority over other sectors in terms of gas allocation.

Moreover, liquidity constraints with oil marketing companies (OMCs) also led to
restricted FO supplies.Diesel sales declined by one percent to 6.8 million tonnes
primarily due to infiltration of smuggled diesel from Iran, whose share in local market
has increased in the past few months.

Sales of petrol depicted a robust growth of 21 percent on the back of growing auto market
and rising gas curtailment to compressed natural gas (CNG) sector prompting consumers
to switch towards gasoline. Its share of total oil consumption rose to 14 percent in FY12
as against 12 percent last year.

Amongst the individual companies, Pakistan State Oil continued to remain the major
victim of circular debt with an approximately 80 percent market share in FO segment.
The companys sales decline by three percent in FY12 to 12.4 million tonnes but was
able to maintain its market share.

Attock Petroleum Limited, on the other hand, benefited from higher petrol sales with the
companys sales increasing by 13 percent in the year. Further, company expanded its
market share by 1pps to eight percent in FY12.

A major dent came to Shells sales in FY12, down 29 percent, as the company lost its
ground in HSD sales that contribute over 55 percent to Shells volume. The companys
market share declined by 3pps to 10 percent as against 13 percent in FY12.



LONG TERM CREDIT RATING AA+

SHORT TERM CREDIT RATING A1+

RATING BY : THE PAKISTAN CREDIT RATING AGENCY LIMITED (PACRA)

RATING LAST UPDATED : MARCH 2012


Financial Year 2010 - 2011


OPERATIONAL HIGHLIGHTS

13% decline in Black Oil segment vs 2% industry decline mainly due to floods. (shut down of
KAPCO, AES LALPIR & TPS Muzaffargarh)

3% decline in White oil segment vs 1% industry decline mainly due to reduction in sales volumes of
HSD.

10% decline in HSD volumes vs 7% industry decline.

Positive volumetric growth of 27% and 2% in Mogas and JP1 (Local) respectively.

Market share declined to 65.6% from 71.1% in FY10.
FINANCIAL HIGHLIGHTS

Highest ever profit after tax of Rs. 14.78 billion vs. Rs. 9.05 billion in FY10 (EPS: Rs.86.17 , 2009-10:
Rs.52.76)

Circular debt continues to put pressure on liquidity of the Company.

Financial charges of Rs. 11.9 billion booked during the year.

GoP injected Rs. 120 billion in May2011 to reduce circular debt. PSO received Rs. 89 billion out of
which Rs. 71 billion were paid to refineries/ taxes authorities.
Received PDC on Mogas amounting to Rs. 1.8 billion in FY2011 and subsequent recovery of Rs.5
billion in Jul & Aug 2011.