RAISING THE BAR Annual Report 2014 RAISING THE BAR PSO set new performance benchmarks by achieving all time high sales revenue and protability in FY 2014. Return on Sales Revenue Profit After Tax Capital Employed Rs. in billion Rs. in billion Percentage 1,410 21.8 50.7 41.2 1,295 12.6 FY13 FY14 FY13 FY14 FY13 FY14 Contribution to Market Capitalization Dividends Earning Per Share Government Exchequer Rs. in billion Rs. in million Rupees Rs. in billion 2,322 289 106 262 80.3 79 1,544 in billion Rs. 46.5 FY13 FY14 FY13 FY14 FY13 FY14 FY13 FY14 CONTENTS Foreword: Message from the Managing Director 04 Risk and Mitigation Plans 21 All Time Highs 06 Commitment to HSE 22 Our Vision 07 IT Governance 22 Our Mission 07 Corporate Social Responsibility 23 Our Values 07 CORPORATE GOVERNANCE NOTICE OF MEETING 08 Company Information 25 Proles of Board of Management 26 ORGANIZATIONAL OVERVIEW Board Committees 31 Company Prole 12 Role of Chairman and Managing Director 34 PSO Infrastructure 13 Management Committees 34 Business Lines 14 Business Continuity Plan 35 Strategic Investments 15 Commitment to Ethical Business Conduct 35 Meetings and Events 16 Report of Audit Committee 36 Award and Recognition 18 Stakeholders Relations and Procedures 37 STRATEGY AND RISKS REPORT TO SHAREHOLDERS 39 Management Objectives and Strategies 20 Global and Domestic Economic Overview 40 Critical Performance Indicators 20 Petroleum Industry Overview 41 Signicant Changes Over the Previous Year 20 PSO Business Performance 42 Relationship between Results and Objectives 20 02 FINANCIALS Financial Analysis 64 Statement of Compliance 80 Review Report 86 Auditor’s Report 88 Balance Sheet 90 Prot and Loss Account 91 Statement of Comprehensive Income 92 Statement of Changes in Equity 93 Cash Flow Statement 94 Notes to the Financial Statements 95 Attendance at BoM meetings 156 Shareholders’ Categories 159 Pattern of Shareholdings 161 APPENDIX Glossary 165 Proxy Form 167 03 electricity generation despite the circular debt issue vis-à-vis huge receivables from the power sector by eciently managing the supply chain, inventory and nances. The Company improved its rening base by increasing equity stake in Pakistan Renery Limited from 18% to 22.5% and completed the ground work for diversifying into LNG import business by developing the structure for Foreword by the LNG project in consultation with all stakeholders. Various system based controls were introduced and a Amjad Parvez Janjua number of business functions were automated during the year. SAP system was upgraded, enabling the Managing Director & CEO Company to utilize new features available in Enterprise Core Component Version 6 leading to improved ERP The Company accordingly made all time high utilization, cost eciency, reporting integration and contribution towards CSR and supported promotion initiatives during FY 2014. PSO contributed Rs 40 million information reconciliation. to the Prime Minister’s Relief Fund for the Internally Displaced Persons from North Waziristan in addition to An Online Order Management System (OOMS) was donating a portion of its employees’ salaries for this implemented, enabling PSO’s customers to login to their noble cause. PSO also extended support to fellow e-portals and place orders for products, make payments citizens aected and displaced by oods by providing and view accounts status. This system helped PSO to relief items to meet their nutritional and shelter needs reduce operational cost, enhance controls, eliminate in the month of October 2013. Besides, the Company potential irregularities due to human intervention, and extended active support and donations to a wide range improve payment collection by establishing online of more than thirty organizations engaged in connectivity with the banking network across the development and humanitarian support eorts in the country. elds of health, education and community building. During the year, the Company earned a Prot after Tax PSO closed FY2013-2014 with (PAT) of Rs 21.8 billion against 12.6 billion in the last year. During the year, a human resource development While we rejoice at success in achieving our ying colors. It was a momentous The Company crossed Rs 100 billion mark of market initiative for capacity building and leadership business goals, we realize that this should not be a capitalization to be one of the few Rs 100 billion plus development was launched by signing an MoU with cause of complacency but a source of year in PSO’s operating history ‘large cap’ companies on the Stock Exchanges of Pakistan, Suleman Dawood School of Business (SDSB) of the encouragement and motivation for PSO team to and its Outlook was upgraded by PACRA from ‘Stable’ to Lahore University of Management Sciences (LUMS). An play a more active role in growth and development of the Company in the interest of all stakeholders. when the Company recorded all ‘Positive’ with AA+ and A1+ long-term and short-term internship program for the students of universities credit ratings. PSO is now on Forbes 2000 list of world’s across Balochistan was also launched. time high sales revenue, operating biggest publically traded companies. I take this opportunity to express gratitude for the guidance of our Board of Management, support of the As a responsible corporate citizen, PSO is committed to These all time high performance benchmarks were Government of Pakistan, dedicated hard work of our prot, after tax earnings and fulllment of its responsibility towards the society, with achieved without any increase in margins during the sta, and continued trust of our shareholders, customers market capitalization. year and despite higher nance cost borne by the a particular focus on supporting the distressed and and business partners which enabled us to successfully Company owing to higher power sector receivables deprived segments of society. achieve our business goals. Consequently, the Company made during the year. To manage this situation, the Company optimized the sales of its products to strike an eective its highest ever contribution to the balance between growth and protability while realizing substantial cost eciencies in administration, Government exchequer in the form distribution, and marketing; limiting increase in expenses in this regards to 3% as compared with 14% average Amjad Parvez Janjua of duties and taxes. increase in expenses over the last three years and against Managing Director & CEO an ination of 8.5% during FY 2014. During FY 2014, the Company successfully met the challenge of timely and continuous supply of fuel oil for 04 electricity generation despite the circular debt issue vis-à-vis huge receivables from the power sector by PSO realizes that in addition to eciently managing the supply chain, inventory and nances. being directly accountable to its The Company improved its rening base by increasing shareholders, it is responsible to equity stake in Pakistan Renery Limited from 18% to 22.5% and completed the ground work for diversifying a wide group of stakeholders for into LNG import business by developing the structure for the LNG project in consultation with all stakeholders. supporting sustainable Various system based controls were introduced and a development and expanding number of business functions were automated during the year. SAP system was upgraded, enabling the economic opportunity. Company to utilize new features available in Enterprise Core Component Version 6 leading to improved ERP The Company accordingly made all time high utilization, cost eciency, reporting integration and contribution towards CSR and supported promotion initiatives during FY 2014. PSO contributed Rs 40 million information reconciliation. to the Prime Minister’s Relief Fund for the Internally Displaced Persons from North Waziristan in addition to An Online Order Management System (OOMS) was donating a portion of its employees’ salaries for this implemented, enabling PSO’s customers to login to their noble cause. PSO also extended support to fellow e-portals and place orders for products, make payments citizens aected and displaced by oods by providing and view accounts status. This system helped PSO to relief items to meet their nutritional and shelter needs reduce operational cost, enhance controls, eliminate in the month of October 2013. Besides, the Company potential irregularities due to human intervention, and extended active support and donations to a wide range improve payment collection by establishing online of more than thirty organizations engaged in connectivity with the banking network across the development and humanitarian support eorts in the country. elds of health, education and community building. During the year, the Company earned a Prot after Tax (PAT) of Rs 21.8 billion against 12.6 billion in the last year. During the year, a human resource development While we rejoice at success in achieving our The Company crossed Rs 100 billion mark of market initiative for capacity building and leadership business goals, we realize that this should not be a capitalization to be one of the few Rs 100 billion plus development was launched by signing an MoU with cause of complacency but a source of ‘large cap’ companies on the Stock Exchanges of Pakistan, Suleman Dawood School of Business (SDSB) of the encouragement and motivation for PSO team to and its Outlook was upgraded by PACRA from ‘Stable’ to Lahore University of Management Sciences (LUMS). An play a more active role in growth and development of the Company in the interest of all stakeholders.