Manager Research
Oct 22 - 28, 2007

National Refinery Limited is a Pakistan-based company engaged in the manufacturing, production and sale of petroleum products. The company operates through two business segments: fuel and lube. The fuel segment supplies fuel products, which include gasoline, diesel oils, kerosene and furnace oil. The lube segment provides different types of lube base oils, asphalt, wax-free oil and other petroleum products. The premier oil refining company in the country started commenced production as a small capacity lubricant base of oils and asphalts production refinery. The Lube Oil Refinery installed in 1966, had a nameplate giving crude oil processing capacity as 600,000 metric tonnes and production of 76,000 and 100,000 million tonnes lubes and asphalt as per annum. Light Diesel Oil, (LDO) and kerosene were NRL's other products. The company being the only refining complex in the country is the sole producer of Lube Base Oil and the largest producer of Asphalt along with fuel products.

The refinery complex of the Company comprises of three refineries, consisting of two lube refineries, commissioned in 1966 and 1985, and a fuel refinery added to the complex in 1977. NRL's two Lube Refineries were installed with a time gap of nearly 19 years with each other. The starting point of first Lube Refinery is a Crude Distillation Unit and subsequent Vacuum Distillation Unit, whereas the Second Lube Refinery directly starts with a Vacuum Distillation as it takes feedstock from Fuel Refinery's Crude Distillation Unit. The Fuel Refinery's Atmospheric Crude Distillation Unit, therefore, serves the primary purpose of separating the desalted crude oils into its fuel components; Gases, LPG, Naphtha, Kerosene, High Speed Diesel and Furnace Oil for down-stream processing.


In June 2003 the Government of Pakistan decided to include NRL in its privatization program. The selling of 51% equity and transfer of management control to a strategic investor was initiated and after competitive bidding NRL was acquired by Attock Oil Group in July 2005 and the management control of NRL was taken over by Attock Oil Group in July 2005. Company after privatization is not only running very smoothly but also successfully. It earned highest ever profits in the last two years and set back to back records in its 44 years history. In the financial year 2007, company earned profit after tax of Rs.4.2bn which is 23.25 % higher than the last year profit. Major role in the improved profitability has been played by the Lube segment by earning record profit after tax of Rs.3.6bn i.e. 80.98% higher than last year. This remarkable improvement covered the weak performance of the Fuel segment. Along with that due to consistent and improved performance in the post privatization period, company's contributions to the National Exchequer are increasing at a very rapid pace. During FY07 the company contributed Rs.19.5bn in the shape of direct and in direct taxes.

NRL won the Environment Excellence Award 2007 for the fourth time consecutively in recognition to Company's efforts towards adherence to Health, Safety, Environment, and Quality Management System. As one of the major player in the Petroleum refining sector NRL has become an environmental friendly energy enterprise of the Country.


During FY07 the company participated in the privatization of Pakistan State Oil as a member of Attock Group Consortium. But unfortunately the Privatization Commission (PC) disqualified the Group. The Group had its reservation and the matter was referred to the Sindh High Court and the Group obtained an interim relief order from the Court directing the PC to allow the Group to participate in the bidding and not to take any coercive action against the Group. But unfortunately final verdict of the Court was given in favor of the PC. After that the company has filed an appeal in the Supreme Court and the case has been admitted for hearing.


The after tax profit of the company increased to Rs.4.2bn (EPS: Rs.63.07) in FY07 from Rs.3.4bn (EPS: Rs.51.17) of last year. This improved profitability has been achieved from increase in sales in monetary terms by 12.9% and Gross Refining Margin by 14%. During the year the refinery operated at a through put of 103.4% of its designed capacity. Cost during FY07 increased to Rs.85bn from Rs.76bn in FY06. Support to the bottom line also came in from the other income which although reported a decline but in numeric terms was at Rs.992m. Financial charges on the other hand remained very nominal at Rs.6.5m heading the company toward profitability. The company has humungous cash balances of Rs.11.5bn and a debt free balance sheet.


FY08 has not started on a positive note as it is masked by reduction in duties on Lube Base Oil and Asphalt, considerations for revision in pricing formula for Motor Gasoline at the ministry level coupled with asymmetrical increase in crude and product prices. Putting all those factors, the company profitability is expected to remain strong.