Pakistan’s Oil Marketing Companies (OMC) sector recorded a 39% year-on-year increase in earnings during the first half of the fiscal year 2025 (1HFY25), reaching Rs18.2 billion compared to Rs13.2 billion in the same period last year.
The surge in profitability was largely driven by a decline in financial costs and reduced taxation, despite an overall drop in sales revenue.
As per reports, sector-wide sales declined by 11% year-on-year, amounting to Rs2.1 trillion. The drop was primarily attributed to falling fuel prices, with petrol and high-speed diesel retail rates decreasing by 10% and 9%, respectively, compared to the previous year. Despite the revenue contraction, OMCs witnessed a 4% growth in sales volume, driven by a 5% increase in petrol dispatches and a 10% rise in diesel sales.
Among key industry players, Pakistan State Oil (PSO) recorded the most significant earnings growth, with profits tripling over the year. In contrast, Attock Petroleum Limited (APL) and WAFI (formerly Shell Pakistan Limited) experienced a decline in profitability. Hi-Tech Lubricants Limited (HTL) managed to significantly reduce its financial losses, supported by strong sales performance in lubricants and petroleum products.
The market share landscape also shifted, with PSO’s share in petroleum sales dropping to 41% in February 2025, down from 51% in the same month last year. Over the eight-month period from July 2024 to February 2025, PSO maintained a 45% market share.
In contrast, Gas and Oil Pakistan Limited expanded its footprint, increasing its market share from 3% in February 2024 to 13% a year later, reflecting its growing presence in the sector.
The OMC sector also faced challenges due to inventory losses resulting from lower refinery prices, which slightly reduced overall gross margins to 3.4% in 1HFY25 from 3.5% in the same period last year.
However, financial stability improved, as the sector’s finance costs dropped by 22% year-on-year, mainly due to lower interest rates and reduced short-term borrowings, particularly by PSO and HTL. The effective tax rate for the sector also decreased from 67% in 1HFY24 to 53% in 1HFY25, further supporting profit growth.
The government is expected to revise OMC margins, which could provide a further boost to the sector’s earnings. Additionally, declining international petroleum prices and improving macroeconomic conditions are likely to sustain demand for fuel products in the coming months.
The resolution of circular debt remains a key challenge, with PSO’s trade debt from Sui Northern Gas Pipelines Limited (SNGPL) standing at Rs262 billion as of December 2024, down from Rs275 billion in September 2024.
With consumer car financing expected to rise and further reductions in petrol and diesel prices anticipated, the sector remains poised for potential stability in the near future, provided global fuel market trends remain favorable.
