National Refinery Limited (PSX: NRL) was incorporated on August 19, 1963 as a public limited company. The government took over the management of NRL under the Economic Reforms Order, 1972 exercising control through its shareholding in State Petroleum Refining and Petrochemical Corporation (PERAC).
In June 2003 the government decided to include NRL in its privatisation programme. After competitive bidding NRL was acquired by Attock Oil Group in July 2005. The Company has been privatised and the management handed over to the new owner on July 7, 2005. NRL is engaged in the manufacturing, production and sale of a variety of petroleum products. The refinery complex of the company comprises of three refineries, consisting of two lube refineries and one fuel refinery. The first lube refinery was commissioned in 1966 with designed capacity of 539,700 tons per annum of crude processing and 76,200 tonnes per annum of lube base oils. The second lube refinery was commissioned in 1985 with designed capacity of 100,000 tons per annum of lube base oils.
The fuel refinery was commissioned in 1977 with designed capacity of 1,500,800 tonnes per annum of crude processing with subsequent revamping increasing the capacity to 2,170,800 tonnes per annum of crude processing. The BTX unit was commissioned in 1985 with design capacity of 25,000 tons per annum of BTX. NRL enjoys a competitive edge, as it is the only refinery producing LBO in Pakistan.
Historical financial and operational performance
Sales revenue increased at an impressive rate from FY10 to FY14 with an increase of almost 88 percent. Although sales revenue for FY15 registered an increase of 34 percent when compared to 2010, it fell 28 percent when compared to FY14. Sales revenue eroded due to falling prices of fuel products due to supply glut as well as geo-political situation.
PRL earned profit after tax of Rs3,709 million in FY15, an increase of over 3.5 times in year-on-year earnings. Profitability margins were highest in FY15 as compared to the previous three years with a gross profit margin of 4.61 percent and a net profit margin of 2.50 percent.
The improved performance could be attributed to improvement in margins of refined fuel products versus crude oil. During the financial year crude oil prices in the international market dropped sharply from $109 to $44, settling near $60 in the last quarter. Lower prices of crude oil enabled the company to invest unutilised funds to increase its interest income while stable exchange rates during the second half of the year also helped improve profitability.
FY14 proved challenging for the oil refining industry as a whole with volatile oil production in the Middle East and Africa due to internal conflicts. Core refining operations were negatively affected due to expensive oil. The depreciation of the PKR since July, 2013 was considerable resulting in a blow to the overall economy. Of the two segments, it is the lube segment that has proved to be more reliable in profit contribution as NRL is the only player in the lube industry of Pakistan. The fuel segment suffered losses while the lube segment reduced pressure on the bottom line to a certain extent. The lube segment's share in total profit increased from 55 percent in 1QFY13 to almost 500 percent in 1QFY14 once again reaffirming the profitability potential of the segment.