KARACHI - Pakistan State Oil (PSO) is expected to post earnings of Rs24.2 per share in 1HFY10, compared to Rs58.6 per share loss in the corresponding period of last year. PSO is scheduled to announce its half year results on Feb 17 (tomorrow) Absence of inventory and exchange losses this year will be key factors behind the turnaround in the fortunes of the company. Moreover, the company is expected to post an Earnings Per Share EPS of Rs13 in 2nd Quarter Financial Year 2010, up 17pc Quarter on Quarter (QoQ). Rise in demand from the power generation sector has driven PSOs furnace oil (FO) sales up by 27pc Year on Year (YoY) in 1HFY10, pushing up total oil sales by 14.8pc. As a result, the company has improved its market share in FO sales to 88.8pc from 86.8pc earlier. Hence, revenues for the company are likely to propel to Rs351bn in 1HFY10, compared to Rs335bn in the corresponding period last year - up 5%. PSO has already posted net sales of Rs169bn in 1QFY10. PSO, which posted inventory gains of Rs950mn in 1QFY10, is expected to benefit a further Rs768mn in 2QFY10 owing to the rising trend in oil prices. On the contrary, inventory losses last year eroded earnings for the company. Therefore, it is expected a gross profit of Rs12.7bn (gross margin: 3.6%) in the 1HFY10 as against a gross loss of Rs7.7bn (gross margin: -2.3%) in 1HFY09. A lower operating cost by 29pc due to absence of exchange losses is likely to provide support to earnings hampered by high finance costs. With the persisting circular debt, PSO is likely to post finance costs of Rs3.2bn - up 9pc from last year. Other income (operating, non-operating and share of profit of associates) too is expected to post a decline of 13pc YoY. As a result, we expect earnings of Rs4.1bn (EPS of Rs24.2) as against a net loss of Rs10.05bn (loss per share of Rs58.6) in the corresponding period last year. Atif Zafar at JS Global said that with rising demand for furnace oil (up 22pc YoY in 7MFY10) from the power generation sector, PSO is expected to be the major beneficiary, given its vast handling and distribution capacity, and PSOs FO sales are expected to grow at a 4 year (FY09-13) CAGR of 9pc.