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Inventory Gains for Oil Marketing Companies
04-26-2010, 06:21 PM
Post: #1
Inventory Gains for Oil Marketing Companies
Hello Everyone,

I need to ask this question about inventory gains/losses for Oil Marketing Companies (OMCs), because I often hear about OMCs making profits due to inventory gains. I dont understand what this gain is about because as per IAS 2 only losses on inventory can be recognized, not profits. Below article shows what I am talking about

PSO earns highest ever core profit for 9 months
By Our Equities Correspondent
Friday, 23 Apr, 2010

KARACHI, April 22 Pakistan State Oil (PSO) posted after tax profit at Rs7.53 billion for the nine months ended March 31, translating into earning per share at Rs43.93. This compared with loss of Rs9.27 billion and loss per share of 54.04 in the corresponding three quarters of last year.

The results announced by the board on Thursday were better-than-expected by analysts, which sent the price of the company stock scurrying to Rs313.33, up by Rs6.76 over the overnight value.

Analysts commented that factors contributing to turnaround in company’s 9MFY10 results included improved volume handling, <i><b>decent inventory gains (as against inventory losses previously)</b></i>, lower operating expenses and higher other income. Core earnings—net of inventory gains stood at its highest ever level.
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