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NATIONAL REFINERY LIMITED
Annual Report 1997
Contents
Board of Directors
Company Information
NRL at a Glance
Summary of Operating Results
Notice of Meeting
Directors' Report
Chairman's Review
Graphic Illustrations
Pattern of Shareholdings
Auditors' Report
Balance Sheet
Profit & Loss Account
Cash Flow Statement
Notes to the Accounts
BOARD OF DIRECTORS
CHAIRMAN
S.M. Ismail
DIRECTORS
Ahmed Dawood
Dato Ahmed Hassan Bin Osman
G. A. Sabri
Istaqbal Mehdi
Kamal Afsar
Mian Mohammad Farid
Sultan Ahmad Shamsi
Zafar Mahmood
MANAGING DIRECTOR
Mahmood Ahmad
SECRETARY
Altaf Hussain
COMPANY INFORMATION
AUDITORS
TASEER HADI KHALID & CO.
SOLICITORS
QAMAR ABBAS & CO.
BANKERS
ABN-AMRO BANK
ALLIED BANK OF PAKISTAN LIMITED
AMERICAN EXPRESS BANK LIMITED
ANZ GRINDLAYS BANK PLC
BANK OF AMERICA NT & SA
CITIBANK N.A.
DEUTSCHE BANK AG.
HABIB BANK LIMITED
MUSLIM COMMERCIAL BANK LIMITED
NATIONAL BANK OF PAKISTAN
STANDARD CHARTERED BANK
UNITED BANK LIMITED
REGISTERED OFFICE
7-B, KORANGI INDUSTRIAL ZONE, KARACHI.
SHARES DEPARTMENT
3RD FLOOR, CENTRAL HOTEL BUILDING,
MEREWEATHER ROAD, KARACHI.
REFINERY
7-B, KORANGI INDUSTRIAL ZONE, KARACHI.
		NRL AT A GLANCE
FIRST LUBE REFINERY
Design Capacity		- 539,700 Tonnes per year of Crude processing
		- 76,200 Tonnes per year of Lube Base Oils
Date Commissioned		June 1966
Project Cost		103.9 Million Rupees
FUEL REFINERY
BEFORE REVAMP
Design Capacity			1,500,800 Tonnes per year of Crude processing
Date Commissioned			April 1977
Project Cost			607.5 Million Rupees
AFTER REVAMP
Design Capacity			2,170,800 Tonnes per year of Crude processing
Date Commissioning of Revamp			February 1990
Project Cost of Revamp			125.0 Million Rupees
B.T.X. UNIT
Design Capacity			25,000 Tonnes per year of B.T.X.
Date Commissioned			April 1979
Project Cost			66.7 Million Rupees
SECOND LUBE REFINERY
Design Capacity			100,000 Tonnes per year of Lube Base Oil
Date Commissioned			January 1985
Project Cost			2,082.4 Million Rupees
SHARE HOLDERS' EQUITY
June 1966			20.0 Million Rupees
June 1997			1,278.0 Million Rupees
SUMMARY OF OPERATING RESULTS
								RUPEES IN MILLION
YEAR ENDED 30TH JUNE			1988	1989	1990	1991	1992	1993	1994	1995	1996	1997
Sales including taxes			7410	7193	8617	14888	14386	15095	15159	16239	18188	22387
Less: Duties, taxes and
development surcharge			90	239	195	766	794	940	1176	1018	1449	1390
			----------	----------	----------	----------	----------	----------	----------	----------	----------	----------
Sales after duties, etc.			7320	6954	8422	14122	13592	14155	13983	15221	16739	20997
Other income			6	30	20	14	12	9	18	15	10	52
			----------	----------	----------	----------	----------	----------	----------	----------	----------	----------
			7326	6984	8442	14136	13604	14164	14001	15236	16749	21049
Deduct: Cost of sales and
other expenses
excluding depreciation			6998	6269	7843	13354	12978	13357	13132	15082	15968	19967
			----------	----------	----------	----------	----------	----------	----------	----------	----------	----------
			328	715	599	782	626	807	869	154	781	1082
Depreciation			208	219	225	229	220	218	236	277	315	308
			----------	----------	----------	----------	----------	----------	----------	----------	----------	----------
Net Profit/(loss) after
depreciation			120	496	374	553	406	589	633	(123)	466	774
Extraordinary items			-	-	-	-	-	-	-	-	-	-
Unappropriated profit/
(accumulated loss)
brought forward			1	1	-	-	-	-	-	-	(254)	-
Provision for current
taxation			-	217	161	234	179	298	280	132	187	318
Less: Dividend and other
appropriations			120	200	186	250	220	267	300	-	-	167
Revenue Reserves - General			-	80	26	69	7	24	53	-	25	289
Unappropriated profit/(Ioss)
carried to next year			1	-	1	-	-	-	-	(255)	-	-
			---------	---------	---------	---------	---------	---------	---------	---------	---------	---------
Rate of dividend in %			18	30	28	37.5	33	40	45	-	-	25
NOTICE OF MEETING
Notice is hereby given that the Thirty fourth (34) Annual General Meeting of National Refinery Limited
will be held on Monday, 29th December, 1997 at 10:30 a.m. at Hotel Metropole Karachi to
transact the following business:-
ORDINARY BUSINESS:
1. To confirm the minutes of the last Annual General Meeting held on December 28, 1996.
2. To receive and adopt the Audited Accounts of the Company for the year ended June 30,
1997 together with the Director's Report thereon.
3. To declare the final dividend.
4. To appoint auditors for the year 1997-98 and fix their remuneration.
5. To elect three (3) Directors of the Company representing private shareholding pursuant to
the Article 7F of the Economic Order 1972 in place of those retiring namely (1) Mr. Ahmed
Dawood (2) Mr. Sultan Ahmed Shamsi (3) Mr. Dato Ahmed Hassan Bin Osman.
NOTES:
1. Share Transfer Books of the Company will remain closed from 22nd December 1997 to 31st
December 1997 both days inclusive.
2. A member entitled to attend and votes at the meeting is entitled to appoint another member
as a proxy.
3. Proxies in order to be effective must be received at the Registered Office of the Company
not less than 48 hours before the meeting and must be duly stamped, signed and witnessed.
4. Shareholders desirous of proposing any person for election as director are requested to fill
in the attached nomination form and send it duly completed in all respects to the Secretary
of the Company at 7B Korangi Industrial Zone, Karachi so as to reach him not later than
December 15, 1997.
5. Federal Government of Pakistan and other corporations or institutions being shareholders of
the Company, owned or controlled by the Federal Government shall not participate in the
election.
6. Election shall take place under provisions of Section 178(5) of the Companies Ordinance 1984,
in the following manner:-
a) A member shall have such number of vote as is equal to the product of the number of
voting shares held by him and the number of directors to be elected.
b) A member may give all his votes to a single candidate or divide them between more
than one of the candidates in such manner as he may choose; and
c) The candidate who gets the highest number of votes shall be declared elected as Director
and then the candidate who gets the next highest number of votes shall be so declared
and so on until the total number of directors to be elected has been so elected.
DIRECTORS' REPORT
The Directors of your Company are pleased in presenting the Annual Report together with Accounts
& Auditors Report thereon for the year ended June 30, 1997.
PROFIT & APPROPRIATION
The Directors recommend the appropriation of the Profit together with un-appropriated profit brought
forward from previous year as under:
							(Rs. in million)
Net profit after taxation for the year taking into account the
amount of Rs. 1,812.591 million taken to income currently (Note
26) and amount of Rs. 3,054.679 million receivable from the
Government as at June 30, 1997 shown in .(Note No. 24)
and after providing for workers' Profit Participation Funds amounts
to
						455.826
Un-appropriated profit being brought forward						0.13
						---------
Profit available for appropriation							455.96
Appropriations:
- Interim dividend @15%						99.958
-Proposed final dividend @10%						66.639
-Transfer to General Reserve						289.000	455.597
						---------	---------
Un-appropriated profit being carried forward							0.362
The amount taken to income currently and receivable/payable to the Government under the formula
is determined after the audited accounts are submitted to the Government and the approval is received
in due course of time.
BOARD OF DIRECTORS:
Mr. S. M. Ismail assumed charge as Chairman on 19th September 1997. Messrs Syed Shahid Husain
and Firozuddin Ahmed held the charge of Chairman from 4th February 1997 to 1st June 1997 and
from 2nd June 1997 to 18th September 1997 respectively.
Mr. Mahmood Ahmed took over as Managing Director NRL with effect from 7th November 1997.
Mr. M. Yousuf Beg held the charge of MD, NRL from 26th May 1997 to 16th October 1997.
The Board wishes to place on record its deep shock and grief on the sad demise of Mr. Malik Shahid
Hamid, a Director on NRL Board.
PATTERN OF SHAREHOLDINGS:-
Pattern of shareholding is shown on page 12.
AUDITORS:
The Auditors M/s. Taseer Hadi Khalid & Company Chartered Accountants, retire and being eligible,
offer themselves for reappointment.
MISCELLANEOUS:
Chairman's Review is endorsed by the Directors of the Company.
CHAIRMAN'S REVIEW
It gives me great pleasure to welcome you to
the 34th Annual General Meeting of the Com-
pany and to present the Audited Accounts and
the Audit Report of the Company for the year
ended 30th June, 1997.
The year under report witnessed squeeze in
margins of fuel products due to increase in the
prices of crude oil and comparatively lesser
increase in CIF prices of fuel products. As a
result, profitability of Fuel Refinery deteriorated
and it was pegged to 10% of the paid-up capital
as admissable under the Import Parity Formula
which allows profit capping within the range of
10% to 40%.
The Lube Refinery is not subjected to pricing
control by the Government and it operates in
open market environment. Its main product
namely Lube Base Oils faced severe competition
especially from the imported Lube Base Oils
which were abundantly available in the country
at comparatively lower prices. Besides, sub-
standard reclaimed lubricants from mushroom
unregistered producers also flooded the market.
Under these circumstances the sale of LBOs
declined to 165,701 tons compared to 182,297
tons last year.
The Pricing Formula approved by ECC in 1993
stipulates that identifiable Government charges
and duties as applicable on import of Furnace
Oil would be levied on FO used as feedstock
in Lube Refinery. Since development surcharge
is not a duty levied at import stage, the man-
agement consider the same is not applicable to
FO used as feedstock in Lube Refinery. Accord-
ingly the accounts for the year 1995-96 were
finalised without charging development surcharge
on feedstock of Lube Refinery.
During the year 1996-97 the Ministry of Petro-
leum & Natural Resources devised a formula for
computation of development surcharge for 1995-
96 and 1996-97. According to the said formula
the incidence of development surcharge has
reduced. However, NRL's management still holds
its position that development surcharge on feed-
stock of Lube Refinery is not payable. Accord-
ingly the Accounts for the year 1996-97 have
been finalised without charging development
surcharge on feedstock of Lube Refinery.
PROFITABILITY:
The company registered highest ever, after tax,
profit of Rs. 455.826 million which gives a return
of 68.4% on paid-up capital.
As stated above the Fuel Refinery's profitability
remained under stress of increase in crude oil
prices by 40% against increase of 29% in CIF
prices of products, restricting its profit after tax
at a minimum of 10% as admissable under the
pricing formula.
The Lube Refinery's after tax profit at Rs. 432.909
million increased substantially compared to last
year's profit of Rs. 187.377 million. The increase
in profit is attributed to better prices of Lube Base
Oils.
CRUDE OIL:
The supplies of Arabian Light crude oil were
received from Saudi Aramco under the annual
contract. The crude oil was shared and exchanged
with Pakistan Refinery Ltd. for Iranian Light and
Upper Zakkum to give a blend mutually advan-
tageous for both the refineries as well as for the
country. The crude oil throughput for the year
CHAIRMAN'S REVIEW
The aggregate production of finished products
was 2.634 million tons. The product mix was
maintained according to the market demand
maximizing production of deficit items as re-
quired by the Government. The production of
Lube Base Oils was kept lower at 179,730 tons
compared to 189,042 tons last year, as imported
LBOs were available in the market at lower
prices.
SALES:
The sales for the year were 2.614 million tons
generating revenue of Rs. 19.184 billion com-
pared to 2.883 million tons for Rs. 15.858 billion
for the year 1995-96. The sales for the year
included export of 83,920 tons Naphtha for
Rs. 655.0 million.
MANUFACTURING, SELLING, ADMIN. &
FINANCIAL EXPENSES:
The manufacturing expenses for the year were
Rs. 1992 million compared to Rs. 1801 million
last year. The increase of Rs. 191 million (10.6%)
was mainly due to Rs. 95 million increase in the
cost of Chemicals and increase of Rs. 36 million
in Gas charges.
The selling and administration expenses were
Rs. 191 million against Rs. 207 million last year.
Financial charges increased to Rs. 457 million
compared to Rs. 233 million last year. The increase
is attributed to heavy borrowing to overcome
liquidity crunch created due to overdues of
Rs. 4.6 billion receivable from PSO upto June
30, 1997.
PROJECTS:
Self Power Generation project of 7.5 MW elec-
tricity is nearing completion. On commissioning,
it will ensure stable power supply for one of NRL's
units.
Additional tanks for storage of 45,000 tons crude
oil are under installation. On completion, crude
oil inventory level will increase to 22 days. The
project is expected to be completed by end of
1998.
The Company is actively engaged in plans for
putting up an Iso-merization Unit for M.S. and
a Desulphurization Plant for HSD to produce both
the environmental friendly products.
The projects feasibilities are being examined by
the authorities to find ways and means as to their
economic and financial viability due to extra cost
of processing.
STAFF:
On the job training to technicians and engineers
to meet the shortage of trained personnel con-
tinued during the year.
I would like to record my appreciation for the
efforts and dedication of all the executives, staff
and workers during the year in keeping the
Refinery operating despite deteriorating law and
order situation in Karachi.
PATTERN OF SHAREHOLDINGS AS AT JUNE 30, 1997
NO. OF			SHAREHOLDINGS			TOTAL
SHARE HOLDERS		FROM		TO		SHARES HELD
1371		1		100		65,290
1383		101		500		438,590
736		501		1000		608,885
965		1001		5000		2,202,224
101		5001		10000		716,709
18		10001		15000		225,159
13		15001		15001                            20000		223,015
4		20001		20001                            25000		84,676
2		25001		25001                            30000		57,800
3		30001		30001                            35000		99,597
2		35001		40000		72,550
3		40001		45000		126,385
3		45001		50000		145,965
2		50001		55000		101,932
2		55001		60000		117,000
5		60001		75000		336,504
3		75001		90000		248,400
1		90001		100000		92,000
1		100001		145000		102,100
2		145001		310000		455,100
1		310001		315000		312,717
1		315001		340000		339,320
1		340001		575000		571,600
1		575001		660000		658,040
1		660001		1305000		1,300,182
1		1305001		2840000		2,838,447
1		2840001		9430000		3,030,960
1		9430001		9995000		9,430,383
1		9995001		10755000		10,000,000
1		10755001		10760000		10,757,382
1		10760001		20880000		20,879,888
--------						--------
4,631						66,638,800
========						========
CATEGORIES OF SHAREHOLDERS				NUMBER	SHARES HELD	PERCENTAGE
Individuals				4552	4,440,872	6.66
Investment Companies				19	31,679,889	47.54
Joint Stock Companies				18	132,015	0.20
Financial Institutions*				10	14,617,787	21.94
Modaraba Companies				6	145,000	0.22
Insurance Companies				12	4,284,069	6.43
				--------	--------	--------
Others				9	10,927,068	16.39
				--------	--------	--------
1. PERAC				1	10,757,38