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Express Tribune
17-03-2025
- Business
- Express Tribune
Top-listed firms paid Rs1.22tr in taxes in 2024
In direct tax contributions, Pakistan's top-listed companies collectively added Rs1.22 trillion in the calendar year 2024 (CY24)a 2.2% year-on-year (YoY) increaseaccounting for 23.6% of the country's total direct tax collection. Auto assemblers emerged as the frontrunners, registering a staggering 62% surge in tax contributions, followed by fertilisers (19%), investment banks (15%), commercial banks (12%), textiles (10%), and cement (9%). Amid these trends, the government revised its tax collection target for FY25 downward to Rs12.35 trillion (from Rs12.97 trillion) following International Monetary Fund (IMF) negotiations. While total tax revenues soared 27% YoY to Rs10.47 trillion in CY24, direct tax collection alone jumped 33% to Rs5.16 trillion. However, not all sectors thrived. Refineries, chemicals, Oil Marketing Companies (OMCs), and Exploration and Production (E&P) firms faced tax contribution declines, reflecting sector-specific challenges. With KSE-100 companies delivering a significant share of national revenue, Pakistan's capital market remains a vital force in the country's fiscal landscape. "The numbers are in, and the tax game is strong," wrote Arif Habib Limited (AHL) analyst Muhammad Iqbal Jawaid in a research report. The government has now recalibrated its tax collection target for FY25 to Rs12.35 trillion, down from Rs12.97 trillion, after negotiations with the IMF. Under this revised target, the direct tax collection aim for FY25 adjusts to Rs5.25 trillion, from Rs5.51 trillion. For context, fiscal year 2004's direct tax revenue stood at Rs4.53 trillion. On a calendar-year basis, total tax collection in CY24 reached Rs10.47 trillion, marking a stellar 27% YoY increase. Direct tax collection alone surged 33% YoY to Rs5.16 trillion. During the first half of fiscal year 2025 (1HFY25), direct tax collection stood at Rs2.78 trillion, reflecting a strong 29% YoY growth. KSE-100 companies played a vital role, contributing Rs687 billion in the first half of fiscal year 2025, accounting for 24.71% of total direct tax collection and growing by 10% YoY. However, not all sectors experienced growth, as some witnessed a decline in tax contributions. Refineries saw the steepest drop at 47%, followed by chemicals at 30%, OMCs at 27%, and E&P firms at 18%. Despite these downturns, KSE-100 companies continued to play a critical role in tax revenue generation, reinforcing the capital market's importance in the broader economic framework. Calendar year 2024 was a challenging year for banks, with a series of tax policy changes significantly impacting the sector. Initially, banks were required to maintain a 50% advances-to-deposits ratio (ADR) to avoid penal taxes ranging from 10% to 16% on investment income. However, a late-year policy revision increased the corporate tax rate for banks from 49% to 54%, incorporating a 10% super tax. As a result, the sector's total tax contributions grew by 12% YoY. In the E&P sector, tax contributions rose 35% YoY in 1HFY25. However, this increase was primarily due to the absence of a key tax benefitthe reversal of depletion allowance taxationwhich had been available in 1HFY24 but was not present in the latest period, amplifying the tax charge. The fertiliser sector saw a strong boost in tax contributions, growing 19% YoY in CY24, driven by a surge in profitability. Urea and DAP prices increased by 39% and 9% YoY, respectively, leading to higher pre-tax earnings and, consequently, higher tax payments. Similarly, the cement sector benefited from lower interest rates in the first half of fiscal year 2025, which allowed manufacturers to generate higher taxable income, resulting in a solid 34% YoY increase in tax charges. On the other hand, the OMC sector faced declining tax contributions, slipping by 10% in 1HFY25. This drop was primarily attributed to a decline in the retail prices of motor spirit (MS) and high-speed diesel (HSD), which squeezed revenues and, in turn, reduced tax obligations for the sector. Despite some sectoral weaknesses, the strong tax contributions from KSE-100 companies reinforce their critical role in Pakistan's tax revenue framework. With evolving government policies and macroeconomic shifts, sectoral tax contributions remain an important area to watch in the coming months.
Express Tribune
13-03-2025
- Business
- Express Tribune
OMCs see 39% YoY profit surge
Listen to article Pakistan's Oil Marketing Companies (OMC) sector recorded a 39% year-on-year (YoY) increase in earnings, reaching Rs18.2 billion in the first half of fiscal year 2025 (1HFY25), compared to Rs13.2 billion in the same period last year. This growth was driven by a reduction in finance costs and lower effective taxation. However, sector sales declined by 11% YoY to Rs2.1 trillion, largely due to a drop in motor spirit (MS), commonly known as petrol, and high-speed diesel (HSD), also known as diesel, retail prices by 10% and 9% YoY, respectively. Despite the revenue dip, OMC sales volumes grew by 4% YoY, with notable increases in MS (+5%) and HSD (+10%) dispatches. In terms of individual company performance, Pakistan State Oil (PSO)'s earnings tripled YoY, while Attock Petroleum Limited (APL) and WAFI (formerly Shell Pakistan Limited) saw a decline in profitability. Hi-Tech Lubricants Limited (HTL) reduced its losses significantly, supported by strong lubricant and petroleum sales growth. Looking ahead, the government is expected to revise OMC margins, potentially boosting sector earnings. Additionally, falling international petroleum prices and improving macroeconomic conditions are likely to sustain demand in the coming months. "The OMC sector recorded a 39% YoY surge in earnings during 1HFY25, reaching Rs18.2 billion compared to Rs13.2 billion in SPLY," reported Muhammad Iqbal Jawaid and Menka Kirpalani of AHL in a research report. The OMC sector recorded a 39% YoY increase in earnings during 1HFY25, reaching Rs18.2 billion compared to Rs13.2 billion in the same period last year. However, sector sales declined by 11% YoY to Rs2.1 trillion due to a reduction in fuel prices, but OMC sales volumes increased, said the report. HTL's lubricant segment exhibited strong growth, increasing by 41% YoY in 1HFY25. Meanwhile, PSO's re-gasified liquefied natural gas (RLNG) revenue grew 5% YoY, supported by an 11% YoY rise in cargo handling (55 cargoes versus 49 in the same period last year). The sector's gross margins declined slightly to 3.4% in 1HFY25 from 3.5% in SPLY, mainly due to inventory losses resulting from lower ex-refinery prices. However, the finance cost of the sector dropped by 22% YoY, driven by lower interest rates and a reduction in short-term borrowings by PSO and HTL. The sector also benefited from a lower effective tax rate of 53% in 1HFY25 compared to 67% in 1HFY24. In terms of market share, PSO's share in petroleum sales shrank to 41% in February 2025 (from 51% in February 2024), while its 8MFY25 market share stood at 45%. Meanwhile, Gas and Oil Pakistan Limited's share increased to 13% in February 2025, up from 3% in February 2024, reflecting an expanding footprint in the sector. Among individual company performances, PSO's earnings tripled YoY, settling at Rs23.81 per share in 1HFY25, mainly due to lower finance costs and reduced short-term borrowings. However, its total petroleum sales declined by 4% YoY, with MS, HSD, and furnace oil (FO) sales falling by 5%, 5%, and 29% YoY, respectively. APL's profitability dropped by 34% YoY, with its earnings reaching Rs41.18 per share, as its petroleum sales declined by 15% YoY due to a 2% and 60% YoY reduction in MS and FO dispatches, respectively. Additionally, APL's finance costs increased by 29% YoY due to higher unwinding of lease liabilities. WAFI reported profitability of Rs9.25 per share in 1HFY25, a 51% YoY decline, despite a 4% and 2% YoY increase in MS and HSD dispatches, respectively. The company's other income grew by 35% YoY, supported by higher cash balances, but a taxation charge of Rs1.7 billion (compared to a tax reversal of Rs1.1 billion in SPLY) impacted its bottom line. Meanwhile, HTL reduced its losses, reporting a loss of Rs0.3 per share in 1HFY25, compared to a loss of Rs2.5 per share in SPLY. The company's revenues surged by 74% YoY, driven by growth in its lubricant and petroleum product portfolio, while localised blending of raw materials improved its operating profits. Looking ahead, international petroleum prices are expected to decline further, which could lead to lower domestic fuel prices in the coming quarters. Additionally, PSO's trade debt from Sui Northern Gas Pipelines Limited (SNGPL) stood at Rs262 billion in December 2024, down from Rs275 billion in September 2024, as the government explores measures to resolve the circular debt issue. The government is also expected to revise OMC margins, which could boost sector earnings. Moreover, improving macroeconomic conditions and rising consumer car financing are likely to drive higher demand for petroleum products, while further declines in MS and HSD prices could sustain market momentum in the near future.
