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GROUP MEMBERS:
SABEEN JAVAID
SABA MANZOOR
SHEHZADI NAZ
AKBAR ALI
JAHANZEB MAQBOOL
TABLE OF CONTENTS
INTRODUCTION OF PSO
o HISTORY OF PSO
o PRINCIPLE DIVISIONS
o PRINCIPLE COMPETITORS
o PSO
CURRENT RATIO
QUICK RATIO
DEBT RATIO
GROSS PROFIT MARGIN
NET PROFIT MARGIN
EARNING PER SHARE (EPS)
RETURN ON EQUITY
WORKING CAPITAL
RECEIVABLE TURNOVER RATE
INVENTORY TURNOVER RATE
o SHELL
CURRENT RATIO
QUICK RATIO
DEBT RATIO
GROSS PROFIT MARGIN
NET PROFIT MARGIN
EARNING PER SHARE (EPS)
RETURN ON EQUITY
WORKING CAPITAL
RECEIVABLE TURNOVER RATE
INVENTORY TURNOVER RATE
o RATIO TABLE
o GRAPHS COMPARING ABOVE RATIOS OF SHELL & PSO
Introduction of PSO
PSO is a public company with 1,940 employees. It is the leading oil company of
Pakistan. The Pakistani government's move toward a nationalized oil sector
began in 1974, with the passage of Petroleum Products (Federal Control) Act.
Under the new legislation, the government took control of the two Pakistani
oil companies, Pakistan National and Dawood Petroleum. Following the
takeover, Dawood was renamed Premier Oil Company. Also in 1974, the
government founded a new agency, the Petroleum Storage Development
Corporation (PSDC). That entity was subsequently renamed Pakistan State Oil
(PSO) in 1976.
Following the adoption of the new name, PSO then took over both Pakistan
National and Premier, in what was then the largest ever merger to take place
in Pakistan. One month later, the government also took over the operations
of Esso in Pakistan, which were placed under PSO. As such, PSO became
the undisputed leader in the Pakistani market.
Pakistan State Oil Company Limited is that country's leading oil marketing
and distribution company. Formerly a state-run agency, PSO controls
approximately 70 percent of Pakistan's total finished fuel products market,
and as much as 80 percent of the total furnace oil market, the main fuel oil
market in the country. PSO also controls 60 percent of the country's diesel fuel
market. Despite a nationally operating network of more than 3,750 PSO-
branded filling stations, many of which include convenience stores, PSO's
share of the consumer gasoline and lubricants markets has dropped to just 40
percent, in large part due to Shell Pakistan's aggressive expansion of its own
retail network. Other major competitors include Total and refinery operators
Attock and Caltex. PSO itself has engaged in a strategy of developing vertically
integrated operations, including backing the construction of a new refinery.
The company also produces and markets a variety of products under its own
brand, including motor oils and lubricants. PSO's sales extend to jet fuels and
marine fuels, LPG, CNG, kerosene, and other petrochemicals. The company is
also the leading supplier to Pakistan's utility and industrial sectors.
Nonetheless, retail sales remain the company's largest revenue-generator,
representing some 90 percent of the group's sales. These topped PKR
254 billion ($4.27 billion) in 2005, making PSO Pakistan's largest company
and the flagship of the Pakistani government's privatization effort in the early
2000s. The Pakistani government continues to hold more than 25.5 percent of
PSO's shares, while a group of institutional investors, primarily banks, control
more than 37.5 percent of group stock. PSO has been hailed for its
dramatic turnaround, from inefficient government-run organization to
a streamlined, modern corporation, a transformation largely credited to the
leadership of Managing Director Tariq Kirmani. PSO is listed on the Karachi
Stock Exchange.
Principal Divisions:
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.
Introduction of Shell Pakistan
The Shell brand name enjoys a 100-year history in this part of the world,
dating back to 1899 when Asiatic Petroleum, the far eastern marketing arm of
two companies: Shell Transport Company and Royal Dutch Petroleum
Company, began importing kerosene oil from Azerbaijan into the
subcontinent. Even today, the legacy of the past is visible in a storage tank
carrying the date - 1898.
Balance Sheet:
Income Statement:
Expenses 15007.3
Expenses 6628.0
%age 41.62%
%age 156.77%
%age 37.78%
%age 199.67%
%age 126.42%
%age 98.29%
%age 68.83%
Total Current Assets in 2007 62513.3
%age 85.37%
%age -8.12%
%age 70.075%
%age 82.416%
%age -0.15%
%age 78.72%
%age 47.88%
FINANCIAL COMPARISON OF PSO WITH SHELL
PAKISTAN FOR THE YEARS 2007 & 2008
PSO:
Current Ratio:
Current Ratio = Current Assets / Current Liabilities
= 178,392 / 145,122 =1.2292
This result shows that current assets of PSO are slightly greater than its
current liabilities.
Quick Ratio:
Quick Ratio
= (Current Assets Inventory Prepaid Expenses) / Current liabilities
= (178,392 92,165.8 279) / 145,122
=0.5922
Measure of liquidity is not satisfactory in this case. Because Quick Ratio
< 1.
Debt Ratio:
Debt Ratio = (Total Liabilities / Total Assets) * 100
= (149,943.2 / 201,847.3) * 100
= 74.28 %
This shows that 74.28% of assets are financed by the creditors. It
indicates the relative size the equity position.
Gross Profit Margin:
Gross Profit Margin = (Gross Profit / Net Sales) * 100
= (40,378.9 / 844,984.8) * 100
= 4.77%
This implies that companys sales are profitable upto 4.77%
Net Profit Margin:
Net Profit Margin = (Net Profit after tax / Net Sales) * 100
= (18,743.6 / 844,984.8) * 100
= 2.21%
Earnings Per Share (EPS):
EPS = Net Profit after tax / Outstanding
= 18,743.6 / 171.518901
= 109.2 rupee per share
Return On Equity:
Return on Equity = Net Income / Average Total Equity
= 18,743.6 / 25,952.1
= 0.722
This implies that return is earned on the equity at a rate of 0.722
Working Capital:
Working Capital = Current Assets Current Liabilities
= 178,392 141,122
= 37,270 million rupee
Receivable Turnover Rate:
Receivable Turnover Rate = Net Sales / Average Account Receivables
= 844,984.8 / 39,523.25
= 21.37 times
Average no. of Days to collect Receivables = 365/ 21.67 = 18 Days
Inventory Turnover Rate:
Inventory Turnover Rate = Cost of Goods Sold / Average Inventory
= 804,605.9 / 46,082.9
= 17.45 times
Average no. of Days to sell Inventory = 365/17.45 =21 Days
Shell:
Current Ratio:
Current Ratio = Current Assets / Current Liabilities
= 49,933.8 /42,919.9 =1.16
This result shows that current assets of SHELL are 1.16times greater
than its current liabilities.
Quick Ratio:
Quick Ratio = (Current Assets Inventory Prepaid Expenses) /
Current liabilities
= (49,933.8 26,383.2 230.9) / 42,919.9
= 0.54
Measure of liquidity is not satisfactory in this case. Because Quick Ratio
< 1.
Debt Ratio:
Debt Ratio = (Total Liabilities / Total Assets) * 100
= (45,804.4/ 68,876.8) * 100
= 66.5 %
This shows that 66.5% of assets are financed by the creditors. It
indicates the relative size the equity position.
Gross Profit Margin:
Gross Profit Margin = (Gross Profit / Net Sales) * 100
= (21,047.9/254,890.2) * 100
= 8.75 %
This implies that companys sales are profitable upto 4.77%
Net Profit Margin:
Net Profit Margin = (Net Profit after tax / Net Sales) * 100
= (5843.753 / 254,890.2) * 100
= 2.29 %
Earnings Per Share (EPS):
EPS = Net Profit after tax / Outstanding
= 5843.753 / 54.790313
= 106.65 rupee per share
Return On Equity:
Return on Equity = Net Income / Average Total Equity
= 5843.753 / 11,536.2
= 0.50%
This implies that return is earned on the equity at a rate of 0.50%
Working Capital:
Working Capital = Current Assets Current Liabilities
= 49,933.8 42,919.9
= 7,013.9 million rupee
Receivable Turnover Rate:
Receivable Turnover Rate = Net Sales / Average Account Receivables
= 254,890.2 / 10,247.7
= 24.87 times
Average no. of Days to collect receivables = 365 / 24.87=15 Days
Inventory Turnover Rate:
Inventory Turnover Rate = Cost of Goods Sold / Average Inventory
= 233,842.3 / 13,191.6
= 17.72 times
Averages no. of Days to sell Inventory = 365/17.72=21 Days
o TABLE COMPARING RATIOS OF PSO & SHELL
o GRAPHS:
CURRENT RATIO: (times)
1.23
1.22
1.21
1.2
1.19
1.18 PSO
1.17 SHELL
1.16
1.15
1.14
1.13
2008
This shows that current assets of PSO are 1.22times greater than its current
liabilities and current assets of SHELL are 1.16times greater than its current
liabilities. This means that PSO has high ability of short-term debt-paying as
compare to SHELL.
0.6
0.59
0.58
0.57
0.56
PSO
0.55
SHELL
0.54
0.53
0.52
0.51
2008
Measure of Liquidity of PSO and SHELL are almost same and are less than one
this means that they are not in a satisfactory position to pay back their current
liabilities.
DEBT RATIO: (%)
76
74
72
70
PSO
68 SHELL
66
64
62
2008
74.28% of total assets of PSO are financed by its creditors. And 66.65%of total
assets of SHELL are financed by its creditors. This means under crucial
circumstances PSO will be facing more risk.
5
PSO
4
SHELL
3
0
2008
2.3
2.28
2.26
2.24
PSO
2.22 SHELL
2.2
2.18
2.16
2008
109.5
109
108.5
108
107.5
PSO
107
SHELL
106.5
106
105.5
105
2008
ESP of PSO is higher than shell. This means PSO is better option for an
investors to invest in, because in PSO net income applicable to each share of
common stock is higher.
RETURN ON EQUITY: (%)
0.8
0.7
0.6
0.5
0.4 PSO
SHELL
0.3
0.2
0.1
0
2008
ROT of PSO is higher than SHELL. This means PSO is financially more strong
and is a better option from investors point of view because it earn high return
on equity investment.
40000
35000
30000
25000
20000 PSO
SHELL
15000
10000
5000
0
2008
PSO has a much higher ability to pay back its short-term debt.
RECIEVABLE TURNOVER RATE: (times)
26
25
24
23
PSO
22 SHELL
21
20
19
2008
17.75
17.7
17.65
17.6
17.55
PSO
17.5
SHELL
17.45
17.4
17.35
17.3
2008
Since PSO has higher ability to pay back its short-term debts, so creditor will
be more willing to give loan to PSO as compare to SHELL. This mean PSO can
expand its business more efficiently.
Since PSO has higher EPS and ROE as compare to SHELL, so investors are
more willing to invest in it. This means PSO can raise its capital more.
Also the inventory sold at SHELL is slightly higher than at PSO, this shows that
both companies have good retail sales.