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Financial Statement Analysis

Of
Pakistan State Oil Company Limited
&
Shell Pakistan Limited
Road Map

Introduction Aims & Objectives

Data Collection Data Processing

Data Analysis Conclusion

Recommendations
INTRODUCTION
Introduction
 The Pakistani oil marketing sector mainly consist of
three companies namely Pakistan State Oil
Company, Shell Pakistan and Caltex Pakistan.

 The giant oil marketing companies Pakistan State


Oil and Shell Pakistan, I am trying to do in this
project comparison of financial statements analysis
AIMS & OBJECTIVES
Aims and Objectives

1.Determine the significant


financial strength

• PSO
• SPL
2. Determinethe
performance

3. Financial
position
DATA COLLECTION
Data Collection

 Annual Reports of Pakistan State Oil Company Limited.


 Annual Reports of Shell Pakistan Limited.
 Article from New Papers
 Websites
DATA PROCESSING
Data Processing

 Financial statement analysis has been don for three recent


years 2008, 2007 & 2006.
 All data bring together like recommendation of instructors.
 All annual reports financial statements develop in M.S
Excel.
 All analysis has been done in M.S Excel with graphical
Charts.
 All theory work has been done in M.S Word.
DATA ANALYSIS
Data analysis

Balance Sheets
Balance Sheets PSO SPL
ASSETS 2008 2007 2006 2008 2007 2006

Rs (000) Rs (000)

Non-Current Assets 11231328 12224042 12133849 9444650 9498295 7900045

Current Assets 115878692 62513273 58034675 30220209 19713632 20392354


Total Net Assets 127110020 74737315 70168524 39664859 29211927 28292399

EQUITY AND LIABILITIES


Equity 30965054 20939217 20813059 13611638 9460771 10156746

Non-Current Liabilities 2408746 2412371 2298887 2745410 139041 157643


Current Liabilities 93736220 51385727 47056578 23307811 19612115 17978010

Total Equity and Liabilities 127110020 74737315 70168524 39664859 29211927 28292399
Data analysis

Profit & Loss Account


Profit and Loss Account PSO SPL
2008 2007 2006 2008 2007 2006

Rs (000) Rs (000)

Sales 495278533 349706326 298250039 139844689 115045434 117262519

Cost of products sold (465254907) (337446896) (281042813) (124694471) (108664932) (107301071)

Gross Profit 30023626 12259430 17207226 15150218 6380502 9961448

Operating Expenses (9283021) (6012814) (7337342) (6975312) (5461240) (5125509)

Profit after operating expenses 20740605 6246616 9869884 8174906 919262 4835939

Other Income 313860 424238 442791

Other operating income 1396527 1278932 950850 306453 215322 158681

Profit from operations 22450992 7949786 11263525 8481359 1134584 4994620

Finance costs (1367898) (1158112) (884153) (970267) (878098) (398009)

Share of profit of association net of tax 294318 330306 1038939 212248 122250 43573

profit before taxation 21377412 7121980 11418311 7723340 378736 4640184

Taxation (7323617) (2432182) (3893610) (2586246) 327923 (1493060)

Profit for the year 14053795 4689798 7524701 5137094 706659 3147124
Data analysis

Liquidity Ratio Analysis


Current Assets Ratio Acid test Ratio

1.40 1.2 1.3 1.2 1.2 0.70 0.64 0.63


1.1 0.57 0.58 0.58
1.20 1.0 0.60 0.52
1.00 0.50
0.80 0.40
0.60 0.30
0.40 0.20
0.20 0.10
0.00 0.00
2008 2007 2006 2008 2007 2006
Years Years

PSO SPL PSO SPL


Data analysis

Leverage Ratio Analysis


•Time Interest Earned
( Earning before income tax / Years 2008 2007 2006
interest exp) PSO 98.09 53.97 94.58
SPL 49.11 2.88 60.23

•Debt Ratio Years 2008 2007 2006


(Total Liabilities / Total Assets) PSO 0.76 0.72 0.70
SPL 0.66 0.68 0.64

•Debt / Equity Ratio Years 2008 2007 2006


( Debt / Total Equity) PSO 3.10 2.57 2.37
SPL 1.91 2.09 1.79
Data analysis

Profitability Ratio Analysis


•Net Profit Margin Years 2008 2007 2006
(Net Profit / Net Sales)*100
PSO 2.84% 1.34% 2.52%
SPL 3.67% 0.61% 2.68%

•Return on Assets
(Net Income / Total Assets)*100 Years 2008 2007 2006
PSO 11.06% 6.28% 10.72%
SPL 12.95% 2.42% 11.12%

•Operating Income Margin


(Operating Income / Sales)*100 Years 2008 2007 2006
PSO 4.53% 2.27% 3.78%
SPL 6.06% 0.99% 4.26%
Data analysis

Activity Ratio Analysis


•Average collection Years 2008 2007 2006
period PSO Days = 21 12 12
( 365 Days / Account Receivable
Turnover) SPL Days = 11 12 14

•Average payment Years 2008 2007 2006


period
(365 Days / Account Payable PSO Days = 64 45 48
Turnover) SPL Days = 48 40 41

•Average age of Years 2008 2007 2006


inventory PSO Days = 19 14 10
(365days / Inventory Turnover)
SPL Days = 13 16 11
Data analysis

Market Ratio Analysis


•Dividend per share Years 2008 2007 2006
PSO Rs.23.5 Rs.21 Rs.34
SPL Rs.50 Rs.16 Rs.30

•Earning per Share Years 2008 2007 2006


(Net Income /No of Shares) PSO 5.1 14.3 7
SPL 8.5 31.0 8.4

•Price/Earning Ratio Years 2008 2007 2006


(Market Price Per Share/ PSO 81.94 27.34 43.87
Earning Per Share)
SPL 93.76 12.90 57.44

•Dividend Payout Years 2008 2007 2006


•(Dividend Per Share/ PSO 28.68% 76.80% 77.50%
Earning Per Share)*100
SPL 53.33% 124.05% 52.23%
Data analysis

Cash flow Ratio Analysis


•Operating cash flow / current maturity Years 2008 2007 2006
of long term debt and current notes PSO 0.37 0.41 0.21
payables
SPL 17.50 3.36 34.24

•Operating cash flow / Total debt Years 2008 2007 2006


PSO 0.04 0.07 0.03
SPL 0.04 0.01 0.05

Years 2008 2007 2006


•Operating cash flow per share
PSO 0.24 0.22 0.10
SPL 0.02 0.00 0.02

Years 2008 2007 2006


•Operating cash flow /cash dividends
PSO 0.01 0.01 0.00
SPL 0.0003 0.0001 0.0005
Data analysis

PSO Balance Sheet Vertical Analysis


Balance Sheets PSO Vertical Analysis

ASSETS 2008 2007 2006 2008 2007 2006


Rs (000) % % %
Non-Current Assets 11231328 12224042 12133849 8.84 16.36 17.29

Current Assets 115878692 62513273 58034675 91.16 83.64 82.71

Total Net Assets 127110020 74737315 70168524 100.00 100.00 100.00

EQUITY AND LIABILITIES


Equity 30965054 20939217 20813059 24.36 28.02 29.66

Non-Current Liabilities 2408746 2412371 2298887 1.90 3.23 3.28

Current Liabilities 93736220 51385727 47056578 73.74 68.76 67.06

Total Equity and Liabilities 127110020 74737315 70168524 100.00 100.00 100.00
Data analysis

SPL Balance Sheet Vertical Analysis


Balance Sheets SPL Vertical Analysis

ASSETS 2008 2007 2006 2008 2007 2006


Rs (000) % % %

Non-Current Assets 9444650 9498295 7900045 23.81 32.52 27.92

Current Assets 30220209 19713632 20392354 76.19 67.48 72.08

Total Net Assets 39664859 29211927 28292399 100.00 100.00 100.00

EQUITY AND LIABILITIES

Equity 13611638 9460771 10156746 34.32 32.39 35.90

Non-Current Liabilities 2745410 139041 157643 6.92 0.48 0.56

Current Liabilities 23307811 19612115 17978010 58.76 67.14 63.54

Total Equity and Liabilities 39664859 29211927 28292399 100.00 100.00 100.00
Data analysis
PSO Profit & Loss Account
Vertical Analysis
Profit and Loss Account PSO Vertical Analysis

2008 2007 2006 2008 2007 2006


Rs (000) % % %
Sales 583213959 411057592 352514873 100.00 100.00 100.00
Net Sales 495278533 349706326 298250039 84.92 85.07 84.61
Cost of products sold (465254907) (337446896) (281042813) (79.77) (82.09) (79.73)
Gross Profit 30023626 12259430 17207226 5.15 2.98 4.88
Operating Expenses (9283021) (6012814) (7337342) (1.59) (1.46) (2.08)
Profit after operating expenses 20740605 6246616 9869884 3.56 1.52 2.80
Other Income 313860 424238 442791 0.05 0.10 0.13
Other operating income 1396527 1278932 950850 0.24 0.31 0.27
Profit from operations 22450992 7949786 11263525 3.85 1.93 3.20
Finance costs (1367898) (1158112) (884153) (0.23) (0.28) (0.25)
Share of profit of association net of tax 294318 330306 1038939 0.05 0.08 0.29
profit before taxation 21377412 7121980 11418311 3.67 1.73 3.24
Taxation (7323617) (2432182) (3893610) (1.26) (0.59) (1.10)
Profit for the year 14053795 4689798 7524701 2.41 1.14 2.13
Data analysis
SPL Profit & Loss Account
Vertical Analysis
Profit and Loss Account SPL Vertical Analysis

2008 2007 2006 2008 2007 2006


Rs (000) % % %
Sales 157626491 130129844 132840460 100.00 100.00 100.00
Net Sales 139844689 115045434 117262519 88.72 88.41 88.27
Cost of products sold (124694471) (108664932) (107301071) (79.11) (83.51) (80.77)
Gross Profit 15150218 6380502 9961448 9.61 4.90 7.50
Operating Expenses (6975312) (5461240) (5125509) (4.43) (4.20) (3.86)
Profit after operating expenses 8174906 919262 4835939 5.19 0.71 3.64
Other Income 0 0 0 0.00 0.00 0.00
Other operating income 306453 215322 158681 0.19 0.17 0.12
Profit from operations 8481359 1134584 4994620 5.38 0.87 3.76
Finance costs (970267) (878098) (398009) (0.62) (0.67) (0.30)
Share of profit of association net of tax 212248 122250 43573 0.13 0.09 0.03
profit before taxation 7723340 378736 4640184 4.90 0.29 3.49
Taxation (2586246) 327923 (1493060) (1.64) 0.25 (1.12)
Profit for the year 5137094 706659 3147124 3.26 0.54 2.37
Data analysis

PSO Balance sheet Horizontal Analysis


Balance Sheets PSO Horizontal Analysis Changes

ASSETS 2008 2007 2006 2008 2007 2006 2008 2007


Rs (000) % % % % %

Non-Current Assets 11231328 12224042 12133849 92.56 100.74 100 (7.44) 0.74
Current Assets 115878692 62513273 58034675 199.67 107.72 100 99.7 7.72
Total Net Assets 127110020 74737315 70168524 181.15 106.51 100 81.1 6.51

EQUITY AND LIABILITIES


Equity 30965054 20939217 20813059 148.78 100.61 100 48.8 0.61
Non-Current Liabilities 2408746 2412371 2298887 104.78 104.94 100 4.78 4.94
Current Liabilities 93736220 51385727 47056578 199.20 109.20 100 99.2 9.2
Total Equity and Liabilities 127110020 74737315 70168524 181.15 106.51 100 81.1 6.51
Data analysis

SPL Balance sheet Horizontal Analysis


Balance Sheets SPL Horizontal Analysis Changes

ASSETS 2008 2007 2006 2008 2007 2006 2008 2007

Rs (000) % % % % %

Non-Current Assets 9444650 9498295 7900045 119.55 120.23 100 19.6 20.2

Current Assets 30220209 19713632 20392354 148.19 96.67 100 48.2 (3.33)

Total Net Assets 39664859 29211927 28292399 140.20 103.25 100 40.2 3.25

EQUITY AND LIABILITIES


Equity 13611638 9460771 10156746 134.02 93.15 100 34 (6.85)

Non-Current Liabilities 2745410 139041 157643 1741.54 88.20 100 1642 (11.8)

Current Liabilities 23307811 19612115 17978010 129.65 109.09 100 29.6 9.09

Total Equity and Liabilities 39664859 29211927 28292399 140.20 103.25 100 40.2 3.25
Data analysis
PSO Profit & Loss Account
Horizontal Analysis
Profit and Loss Account PSO Horizontal Analysis Changes in %
2008 2007 2006 2008 2007 2006 2008 2007
Rs (000) % % % % %

Sales 583213959 411057592 352514873 165.44 116.607 100.00 48.84 16.61


Net Sales 495278533 349706326 298250039 166.06 117.253 100.00 48.81 17.25
Cost of products sold -465254907 -337446896 -281042813 165.55 120.070 100.00 45.48 20.07
Gross Profit 30023626 12259430 17207226 174.48 71.246 100.00 103.24 (28.75)
Operating Expenses -9283021 -6012814 -7337342 126.52 81.948 100.00 44.57 (18.05)
Profit after operating expenses 20740605 6246616 9869884 210.14 63.290 100.00 146.85 (36.71)
Other Income 313860 424238 442791 70.88 95.810 100.00 (24.93) (4.19)
Other operating income 1396527 1278932 950850 146.87 134.504 100.00 12.37 34.50
Profit from operations 22450992 7949786 11263525 199.32 70.580 100.00 128.74 (29.42)
Finance costs -1367898 -1158112 -884153 154.71 130.985 100.00 23.73 30.99
Share of profit of association net of
tax 294318 330306 1038939 28.33 31.793 100.00 (3.46) (68.21)
profit before taxation 21377412 7121980 11418311 187.22 62.373 100.00 124.85 (37.63)
Taxation -7323617 -2432182 -3893610 188.09 62.466 100.00 125.63 (37.53)
Profit for the year 14053795 4689798 7524701 186.77 62.325 100.00 124.44 (37.67)
Data analysis
SPL Profit & Loss Account
Horizontal Analysis
Profit and Loss Account SPL Horizontal Analysis Changes in %
2008 2007 2006 2008 2007 2006 2008 2007
Rs (000) % % % % %
Sales 157626491 130129844 132840460 118.66 97.96 100.00 18.66 (2.04)
Net Sales 139844689 115045434 117262519 119.26 98.11 100.00 19.26 (1.89)
(107301071
Cost of products sold (124694471) (108664932) ) 116.21 101.27 100.00 16.21 1.27
Gross Profit 15150218 6380502 9961448 152.09 64.05 100.00 52.09 (35.95)
Operating Expenses (6975312) (5461240) (5125509) 136.09 106.55 100.00 36.09 6.55
Profit after operating expenses 8174906 919262 4835939 169.04 19.01 100.00 69.04 (80.99)
Other Income 0 0 0
Other operating income 306453 215322 158681 193.13 135.69 100.00 93.13 35.69
Profit from operations 8481359 1134584 4994620 169.81 22.72 100.00 69.81 (77.28)
Finance costs (970267) (878098) (398009) 243.78 220.62 100.00 143.78 120.62
Share of profit of association net of
tax 212248 122250 43573 487.11 280.56 100.00 387.11 180.56
profit before taxation 7723340 378736 4640184 166.44 8.16 100.00 66.44 (91.84)
Taxation (2586246) 327923 (1493060) 173.22 (21.96) 100.00 73.22 (121.96)

Profit for the year 5137094 706659 3147124 163.23 22.45 100.00 63.23 (77.55)
CONCLUSIONS
Conclusions
Current Ratios

1.40
1.20
1.00
Ratio 0.80
0.60
0.40
0.20
0.00
2008 2007 2006
PSO 1.24 1.22 1.23
SPL 1.30 1.01 1.13
Years

Both companies not able to maintain the normal limit of current ratio
which means their current liabilities are more than the current assets.
Conclusions
Gross Profit Margin

10

0
2008 2007 2006
PSO 5.15 2.98 4.88
SPL 9.61 4.90 7.50
Year

Gross profit margin showing that SPL have a good and very attractive
cost of goods sold and PSO not have good gross profit margin
Conclusions
Net Profit Margin

4.00

3.50

Percentage of changes
3.00

2.50

2.00

1.50

1.00

0.50

0.00
2008 2007 2006
PSO 2.84 1.34 2.52
SPL 3.67 0.61 2.68
Years

In the Net profit margin SPL have the advantage over the PSO, because of
their all expenses are in control and budgeted and that’s why their Net profit
margin is very effective.
Conclusions
Earning Per Share

100

80

60
Rs
40

20

0
2008 2007 2006
PSO 81.94 27.34 43.87
SPL 93.76 12.90 57.44
Years

Earning per share in 2008 Shell leading with Rs.93.76 per share in year 2007
PSO leading Rs.27.34 per share and in 2006 SPL Rs.57.44 per share
profitability its means SPL profitability level is good.
RECOMMENDATIONS
Recommendations
 Both companies current ratio not showing the normal limits
their Current assets should be twice the current liabilities.

 PSO cost of production is higher than the SPL. Its means that
PSO not producing products effectively or efficiently PSO
have to reduce their Production cost.

 Both companies not able to maintain the normal limit of acid


test ratio because is less then 1 which means their current
liabilities are more than the current assets. Current assets
should be equal to current liabilities.
THANK YOU