Research Analyst
Jan 19 - 25, 2009

Attock Refinery Limited (ARL) was incorporated as a Private Limited Company in November, 1978 to take over the business of the Attock Oil Company Limited (AOC) relating to refining of crude oil and supplying of refined petroleum products. It was subsequently converted into a Public Limited Company in June, 1979 and is listed on the three Stock Exchanges of the country. The Company is also registered with Central Depository Company of Pakistan Limited (CDC). Original paid-up capital of the Company was Rs 80 million which was subscribed by the holding company i.e. AOC, Government of Pakistan, investment companies and general public. The present paid-up capital of the Company is Rs 454.896 million.


The products include Liquefied Petroleum Gas (LPG), Unleaded Petroleum Solvent Grade (PMG), Naphtha, Premium Motor Gasoline, Mineral Turpentine (Mtt), Jp-1, Jp-8, Kerosene Oil, High Speed Diesel (HSD), Light Diesel Oil (LDO), Jute Batching Oil (JBO), Furnace Fuel Oil (FFO), Low Sulfur Fuel Oil (LSFO), Paving Grade Asphalts includes 1 - Grade: 80/100, 2 - Grade: 60/70, Cut Back Asphalts which includes 1 - Grade MC-70, 2 - Grade RC-70 and 3 - Grade RC-250 and Polymer Modified Bitumen.


Attock Refinery is located at Morgah, near Rawalpindi. ARL had commenced its operations with a capacity of 119ktpa. Now its capacity has reached to 1.82mtpa. The overall total capacity of the refinery sector is 12.87mtpa. ARL with a 14.14% of total refining capacity of the sector is the fourth largest refinery of Pakistan in terms of refining capacity. The company is constructing a 100,000 barrels crude oil storage tanks, costing Rs 73 million and a furnace fuel; storage tank with a capacity of 500m tons to supply fuel oil to AGL's Power Plant. The company is further constructing other products storage tanks such as 4,000m tons capacity naphtha storage and a Jute Batching Oil (JBO) of 500m tons. This will help ARL achieve more operational flexibility in the future.




Net Profit Margin -2.81% 2.14% 0.10%
Operating Margin -2.67% 3.08% 0.71%
EBITD Margin - 4.30% 3.36%
ROA (avg) -6.43% 4.66% 0.22%
ROE (avg) -22.16% 53.77% 38.24%
Employees 751 - -
Source: Attock Refinery

The crude oil prices after having touch a peak of $ 147 per barrel in the international market finally started declining from September 2008 and the products prices also decline correspondingly. The changes made by the government in the refineries pricing formula where by deem duty on jet fuel was totally withdrawn and was cut from 10 percent to 7.5 % on HSD and with the irrational change in the pricing formula from PMG, the gross refiners margin was severely curative this reduction was further compounded by the rising rupee dollar exchange parity rate that resulted in exchange loss of rupees 1.240 million on foreign currency transaction relating to crude oil with the result the company suffered a loss of Rs 870.180 million from refinery operation during the first quarter ended on Sep 30 2008 as against the profit of Rs 1,241.571 million in corresponding period last year. The refinery throughput during the quarter was 3,287,604 barrels. Due to economic and market conditions the refinery throughput had to be curtailed by 292% of its capacity. Overall sale volume in the quarter was 3,145,331 barrels as compare to 3,605,873 barrels in the corresponding quarter last year. Meanwhile all the processing unit of the refinery operated smoothly during the period.


PRL 20
NRL 19
ARL 16
Various source

The refineries are not expected to maintain the growth in the same growth in sales that they experienced in FY08 because the international oil prices have fallen from the high levels they reached earlier this year. The oil prices, which crossed $100 per barrel, have recently dropped to less than $50 per barrel and this would have a negative impact on the earnings of refineries including ARL. This could actually lead to similar profitability results as those registered in FY07. Also the government has revised the Refinery sector's pricing formula for diesel and motor spirit. This revision in prices is expected to impact the profitability of the sector. Further this and lower international crude oil prices will impact the sales value of the company in the coming fiscal year but what may make matters much worse is the continuous depreciation of the Pak Rupee against US dollar and this will raise the exchange differential i.e. the company will have to pay higher payments in Pak rupee for crude oil procurement. This view is further augmented by the recent industry sales figure by Oil Companies Advisory Committee Pakistan (OCAC) for the period Jul-Sept 2008. This shows that the volume of sales has also decreased.


The Oil Market Companies (OMCs) will experience a decline in their margins. According to the ministry of Petroleum the Sales volume of oil refineries will remain low in the next two months which will create a gap of supply and demand as well as in the profitability of the companies. These companies already face a severe competition. In future, two factors will determine the profitability of the OMCs. These are volume being handled and inventory management system. However, the reduction in POL prices will have a positive impact on the economy in general and fertilizer and cement sector in particular. Most of the domestic industries will experience a relatively more favorable cost base. This along with expectations of improving economic growth may improve the overall corporate earnings.