PSO Finance Presentation

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PSO Finance Presentation

  1. 1. Pakistan State Oil Shell Pakistan VS
  2. 2. Group Members: <ul><li>Ammad Uddin Siddiqui </li></ul><ul><li>Umair Shafi Choksy </li></ul>Shafiq Abdullah (Leader)
  3. 3. Introduction to the Oil & Gas Marketing Industry <ul><li>Energy from various sources is of great significance in any country and oil/gas plays a very important part therein. </li></ul><ul><li>In Pakistan oil and gas combined together provide over 80% of the country’s energy mix and therefore plays a very vital role. </li></ul>
  4. 4. Introduction to PSO <ul><li>In its present form, PSO was formed on December 30, 1976 through reorganization plan implemented by the Government of Pakistan </li></ul><ul><li>Pakistan State Oil (PSO) is the oil market leader in Pakistan having 73% share of Black Oil market and around 59% share of White Oil market </li></ul>
  5. 5. Introduction to Shell Pakistan <ul><li>The Shell brand name enjoys a 100-year history in this part of the world, dating back to 1899 </li></ul><ul><li>SPL is the second largest Oil Marketing Company in Pakistan, with a market share of 30% of white oil products . </li></ul>
  6. 6. LIQUIDITY RATIOS
  7. 7. Liquidity Ratios- Current Ratio <ul><li>PSO </li></ul><ul><li>Decrease in current ratio </li></ul><ul><li>Current liabilities increasing at a faster rate than current assets </li></ul><ul><li>SHELL </li></ul><ul><li>Increasing current ratio. </li></ul><ul><li>Current assets increasing at a faster rate than current liabilities. </li></ul>Shell has a lower but increasing liquidity
  8. 8. Liquidity Ratios- Quick Ratio <ul><li>PSO </li></ul><ul><li>Decreasing quick ratio. </li></ul><ul><li>Inventory increasing at faster rate than other current assets. </li></ul><ul><li>SHELL </li></ul><ul><li>Increasing quick ratio. </li></ul><ul><li>Stock increasing at a slower rate than other current assets </li></ul>PSO holding more stock on hand than Shell.
  9. 9. Leverage Ratios
  10. 10. Leverage Ratios- Total Debt Ratio & Debt to Equity Ratio <ul><li>PSO </li></ul><ul><li>More dependence on debts for financing of assets. </li></ul><ul><li>Shell </li></ul><ul><li>Increasing dependence on debt financing. </li></ul>Both companies have relied mainly on debt financing rather than equity financing <ul><li>PSO is more prone to financial risk </li></ul><ul><li>PSO is more riskier for creditors </li></ul>
  11. 11. Leverage Ratios- Equity Multiplier The Equity multiplier for both the companies confirms previous conclusions that both companies are relying more on debt finance to finance their assets. PSO’s equity multiplier is more than Shell’s
  12. 12. Coverage Ratio
  13. 13. Interest Coverage Ratio <ul><li>PSO </li></ul><ul><li>Decrease in coverage ratio. </li></ul><ul><li>Interest charges have increased by 96.01%. </li></ul><ul><li>SHELL </li></ul><ul><li>Drastic decrease in coverage ratio. </li></ul><ul><li>Interest charges have increased by 348.23%. </li></ul><ul><li>Decline in coverage ratio for both the firms </li></ul><ul><li>Decreasing ability of Shell to pay off its interest charges through its operating profit. </li></ul>
  14. 14. Activity Ratios
  15. 15. Activity Ratios- Receivable Turnover & Average Collection Period <ul><li>PSO </li></ul><ul><li>Increase in receivable turn over. Sales increasing at a faster rate then receivables. </li></ul><ul><li>Lesser days being taken now to convert receivables into cash </li></ul><ul><li>Shell </li></ul><ul><li>Decrease in receivable turnover. </li></ul><ul><li>Shell has a become little inefficient in collecting receivables </li></ul>Shell is still more efficient in collecting receivables
  16. 16. Activity Ratios- Inventory Turnover & Inventory Turnover in Days <ul><li>PSO </li></ul><ul><li>Decreasing inventory turnover. </li></ul><ul><li>Reason being that stock has increased by 52.86%. </li></ul><ul><li>Increasing ITO resulted in increased in increase ITO days. </li></ul><ul><li>Shell </li></ul><ul><li>Decreasing inventory turnover. </li></ul><ul><li>Company is holding more inventory in hand. </li></ul><ul><li>ITO in days has increased for Shell </li></ul>Shell has a better ITO. Shell is quickly converting its stock into sales. PSO takes 10 more days to convert Inventory into sales
  17. 17. Activity Ratios- Total Asset Turnover <ul><li>PSO </li></ul><ul><li>Improved Asset turnover. </li></ul><ul><li>Sales increased by 31.55% as compared to assets which increased by 22.8% . </li></ul><ul><li>Shell </li></ul><ul><li>Decreasing asset turnover </li></ul><ul><li>Assets increased by 40.33% and sales increase by only24.43%. </li></ul>Shell’s asset turnover is still better.
  18. 18. Profitability Ratios
  19. 19. Profitability Ratios- Gross Profit Margin <ul><li>PSO </li></ul><ul><li>Increase in gross profit margin </li></ul><ul><li>Gross profit increased by 59.56 % </li></ul><ul><li>Sales increased by31.55%. </li></ul><ul><li>Shell </li></ul><ul><li>Shell also registers an increase in gross profit margin </li></ul><ul><li>Gross profit increase by 42.44% </li></ul><ul><li>Sales increased by 24.43%. </li></ul>Shell is still more efficient in production and selling products above cost.
  20. 20. Profitability Ratios- Net Profit Margin Both firms have registered an increase <ul><li>PSO has a higher profitability on per Rupee Sale. </li></ul><ul><li>Shell’s Net profit margin could have been higher if interest expense had not risen. </li></ul>
  21. 21. Profitability Ratios- Return on Assets <ul><li>PSO </li></ul><ul><li>Increasing Return on ROI </li></ul><ul><li>Better utilization of assets to generate profit after taxes. </li></ul><ul><li>Shell </li></ul><ul><li>Improved ROI </li></ul>PSO lagging behind Shell in utilizing its asset.
  22. 22. Profitability Ratios- Return on Equity ROE improving for both firms but PSO has a better ROE.
  23. 23. Market Value Measures
  24. 24. Market Value Measures- Earning per Share & Price to Earning Ratio <ul><li>Earning Per Share </li></ul><ul><li>Improved EPS of both the companies </li></ul><ul><li>Higher EPS for Shell due to 62.53% increase in profitability. </li></ul><ul><li>Price to Earning </li></ul><ul><li>P/E ratio decreasing for both of the firms </li></ul><ul><li>Market Price has not increased with same proportion as EPS. </li></ul>
  25. 25. COMMON SIZE & INDEXED ANALYSIS
  26. 26. Pakistan State Oil Common Size Balance Sheet As at June 30, 2005 2004 2005 Total Shareholder’s Equity 36.43% 33.24% Total Long Term Liabilities 3.86% 3.84% Total Current Liabilities 59.72% 62.92% Total Liabilities & Equity 100% 100% 2004 2005 Total Fixed Assets 25.40% 21.78% Total Current Assets 74.60% 78.22% Total Assets 100% 100%
  27. 27. Pakistan State Oil Common Size Income Statement For the year ended June 30, 2005 2005 2004 Sales 100% 100% Cost of Products Sold 93.53% 94.31% Gross Profit 6.47% 5.69% Profit Before Taxation 4.34% 3.88% Taxation 1.66% 1.27% Net Profit After Taxation 2.68% 2.61%
  28. 28. Pakistan State Oil Indexed Balance Sheet As at June 30, 2005 2005 2004 Total Shareholder’s Equity 112.09% 100% Total Long Term Liabilities 122.16% 100% Total Current Liabilities 129.38% 100% Total Liabilities & Equity 122.80% 100% 2005 2004 Total Fixed Assets 105.27% 100% Total Current Assets 128.77% 100% Total Assets 122.80% 100%
  29. 29. Pakistan State Oil Indexed Income Statement For the year ended June 30, 2005 2005 2004 Sales 131.55% 100% Cost of Products Sold 130.46% 100% Gross Profit 149.56% 100% Profit Before Taxation 147.32% 100% Taxation 172.46% 100% Net Profit After Taxation 135.07% 100%
  30. 30. Summary
  31. 31. <ul><li>Declining quick ratio </li></ul>Summary • Relying more on debt financing • Decreasing coverage ratio • Improved efficiency in collecting receivables • Inefficiency in converting stocks into sales • Utilization of assets to generate sales • Improving gross profit • Improving net profit • Improving EPS • Rising P/E Ratio
  32. 32. Recommendations <ul><li>PSO should seriously look into the inventory management problem. </li></ul><ul><li>PSO is advised to adopt strict credit policies </li></ul><ul><li>Less inclination towards debt finance </li></ul><ul><li>Room for improvement in utilizing assets </li></ul>
  33. 33. THANK YOU Presented By: Shafiq Abdullah Ammad Uddin Siddiqui Umair Shafi Choksy

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