PakSearch.com - Pakistan's Best Business site with Annual Reports, Laws and Articles

For business information, annual reports, laws, ordinances, regulations and articles.

National Refinery Limited

Annual Report 1998

CONTENTS

COMPANY INFORMATION

Board of Directors

Chairman:

Aitzaz Shahbaz

Directors:

Ahmed Dawood

Abdus Sattar

G. A. Sabri

Hussain Ahmad Khan

J.M. Pereira

Kamal Afsar

Mohammad Abbas

Tarik Kivanc

Managing Director:

M.M. Husain

Company Secretary:

Asad A. Siddiqui

Auditors:

Ford, Rhodes, Robson, Morrow

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

Bank Alfalab

Citibank N.A.

Deutsche Bank A.G.

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-74900

Pakistan.

Shares Department:

1st Floor,

Karim Chambers

Mereweather Road,

Karachi-75530

Pakistan

Refinery:

7-B, Korangi Industrial

Zone, Karachi-74900

Pakistan

Phones (PABX) 310261-66

314160-62 5064135-37

Fax: 92-21-5054663

Telex 29141 -ENAR-PK

20769-ENAR-PK

Cable: ENARLUBE

BOARD OF DIRECTORS

Aitzaz Shahbaz

Abdus Sattar

G. A. Sabri

M.M. Husain

Mohammad Abbas

Hussain Ahmad Khan

Tarik Kivanc

Kamal Afsar

J.M. Pereira

Ahmed Dawood

NRL AT A GLANCE

FIRST LUBE REFINERY

Design Capacity

- 539, 700 Tons per year of Crude processing

- 76, 200 Tons 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 Tons per year of Crude

Date Commissioned

April 1977

Project Cost

607.5 Million Rupees

AFTER REVAMP

Design Capacity

2,170,800 Tons per year of

Date Commissioning of Revamp

February 1990

Project Cost of Revamp

125.0 Million Rupees

B.T.X. UNIT

Design Capacity

25,000 Tons per year of B

Date Commissioned

April 1979

Project Cost

66.7 Million Rupees

SECOND LUBE REFINERY

Design Capacity

100,000 Tons per year of Lube Base Oils

Date Commissioned

January 1985

Project Cost

2,082.4 Million Rupees

SHARE HOLDERS' EQUITY

June 1966

20.0 Million Rupees

June 1998

1,603.2 Million Rupees

SUMMARY OF OPERATING RESULTS

(Rupees in million)

YEAR ENDED JUNE 30

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

Sales including taxes

7193

8617

14888

14386

15095

15159

16239

18188

22400

22122

Less: Duties, taxes and

development surcharge

239

195

766

794

940

1176

1018

1449

1403

1412

-------------------------------------------------------------------------------------------------------------------

Sales after duties, etc.

6954

8422

14122

13592

14155

13983

15221

16739

20997

20710

Other income

105

-------------------------------------------------------------------------------------------------------------------

6984

8442

14136

13604

14164

14001

15236

16749

21068

20815

Deduct: Cost of sales and

other expenses

excluding depreciation

6269

7843

13354

12978

13357

13132

15082

15968

19986

19803

-------------------------------------------------------------------------------------------------------------------

715

599

782

626

807

869

154

781

1082

1012

Depreciation

219

225

229

220

218

236

277

315

308

273

-------------------------------------------------------------------------------------------------------------------

Net Profit/(loss) after

depreciation

496

374

553

406

589

633

(123)

466

774

739

Extraordinary items

Unappropriated profit/

(accumulated loss)

brought forward

(254)

Taxation

217

161

234

179

298

280

131

187

318

247

Less: Dividend and other

appropriations

200

186

250

220

267

300

167

Revenue Reserves-General

289

325

Unappropriated profit/(loss)

carried to next year

(254)

-------------------------------------------------------------------------------------------------------------------

Rate of dividend in %

37.50

NOTICE OF MEETING

Notice is hereby given that the Thirty fifth (35th) Annual General Meeting of National Refinery

Limited will be held on Thursday, 31st December 1998 at 10:30 a.m. at Hotel Metropole, Karachi to

transact the following business:-

ORDINARY BUSINESS:

1. To confirm the minutes of the Annual General Meeting held on December 29, 1997.

2. To receive and adopt the Audited Accounts of the Company for the year ended June 30, 1998

together with the Directors' Report and the Auditors' Report thereon.

3. To declare the final dividend.

4. To appoint auditors for the year 1998-99 and to fix their remuneration.

By Order of the Board

ASAD A. SIDDIQUI

Karachi: December 03, 1998

Secretary

NOTES:

1. Share Transfer Books of the Company will remain closed from 21st December, 1998 to 1st

January, 1999 both days inclusive.

2. A member entitled to attend and vote at the meeting is entitled to appoint another member as

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 are requested to promptly notify the Company of any change in their address.

DIRECTORS' REPORT

The Directors have pleasure in presenting their report and the Audited Accounts for the year ended

30-Jun-98

The profit of the company for the year ended June 30, 1998, taking

(Rs. in '000)

into account the amount of Rs. 631.830 million taken to current income

(Note. 23) and amount of Rs. 2,564.389 million receivable from the

Government as at June 30, 1998 (Note.21.2) and after providing for

administrative, selling, financial and other charges amounts to:-

794,432

Less: Provision for:

-Workers Profit Participation Fund

39,722

- Workers Welfare Fund

15,782

55,504

----------

738,928

Less :Taxation

- For the year

254,258

- For prior years

(62,607)

- Deferred Tax

55,455

247,106

----------

Profit after taxation

491,822

Amount of unappropriated profit brought forward from

previous year

362

----------

Profit available for appropriation

492,184

APPROPRIATIONS:

- The Directors proposed that this should be utilized

in providing for final divided at the rate of 25%

equivalent to Rs. 2.50 per share of Rs. 10 each

166,597

- Transfer to General Reserves

325,000

----------

- Unappropriated profit carried forward to next year.

587

==========

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. Mr. Firozuddin Ahmed held

the charge of Chairman from 2nd June 1997 to 18th September 1997.

Mr. Mahmood Ahmed took over as Managing Director NRL with effect from 12th November 1997 to

2nd February, 1998. Messrs Zahiruddin and S.M. Ismail were Managing Director of NRL w.e.f. 2nd

February 1998 to 16th April 1998 and 16th April 1998 to 10th November 1998 respectively.

The Government of Pakistan has decided to place National Refinery Limited under the administra-

tive control of the Ministry of Petroleum & Natural Resources consequently the Board have been

reconstituted w.e.f. 10th November 1998.

Mr. Aitzaz Shahbaz has been appointed as a new Chairman whereas Mr. Qazi Wajeehuddin took

over the charge as Managing Director, National Refinery Limited w.e.f. 10th November 1998 to 17th

November 1998. Mr. M. M. Husain has been appointed as Managing Director National Refinery Lim-

ited vice Mr. Qazi Wajeehuddin w.e.f. 17th November 1998.

Messrs Mohammad Abbas, Joint Secretary, Ministry of Petroleum & N/R. G.A. Sabri, Director Gen-

eral (Oil), Ministry of Petroleum & N/R. Abdus Sattar, Financial Advisor, Ministry of Petroleum & N/R.

Tarik Kivanc, Representative of IDB, Ahmed Dawood, Represents Private Sector Shareholding, J.M.

Pereira, Executive Director, State Life Insurance Corporation, Kamal Afsar, Managing Director, KESC

and Hussain Ahmed Khan, Joint Secretary (Ops), Ministry of Industries & Production are presently

on the NRL Board.

COMPLIANCE WITH YEAR 2000:

We are in continuous contact with our supplier to make our computer systems year 2000 compliant.

PATTERN OF SHAREHOLDINGS:

Pattern of shareholding is shown on page 46.

AUDITORS:

The Auditors M/s. Ford, Rhodes, Robson, Morrow, Chartered Accountants, retire and being eligible,

offer themselves for reappointment.

CHAIRMAN'S REVIEW:

Chairman's Review is endorsed by the Directors of the Company.

On behalf of the Board

AITZAZ SHAHBAZ

Chairman

CHAIRMAN'S REVIEW

It gives me great pleasure to welcome you to the

35th Annual General Meeting of the Company

and to present the Audited Accounts and the

Audit Report of the Company for the year ended

June 30 1998.

Financial results of the Fuel Refinery, for the

year were adversely affected due to low level of

margin on fuel products, and high financial

charges due to large unrealised trade debts.

Management being conscious of the inflationary

pressures have exercised cost controls within

certain limits.

The Lube Refinery is not subjected to pricing

control by the Government and it operated in an

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, substandard reclaimed lubricants from

mushroom unregistered producers also flooded

the market. However due to concerted efforts of

the management it was possible to increase the

sales volume of LBOs and Asphalt in the year

1997-98 as compared to last year.

PROFITABILITY:

The company registered highest ever, after tax

profit of Rs. 491.822 million which gives a return

of 73.8% on paid-up capital. Refinery wise

profits are as under:-

Rs. In Million

Fuel Refinery

22,917

Lube Refinery

468,905

Total

491,822

The Fuel Refinery's profitability remained under

stress restricting its profit after tax to Rs. 22.917

million for the current year and same for the last

year at a minimum of 10% as admissible under

the pricing formula.

The Lube Refinery's after tax profit at

Rs. 468.905 million increased as compared to

last year's profit of Rs. 432.909 million showing

an increase of 8.31%.

Management being conscious of the increasing

costs due to inflationary conditions and

devaluation of the Pak Rupees exercised all

possible cost control measures within its

powers. Consequently, the manufacturing cost

and overheads were reduced to Rs. 771.2

million from Rs. 867.5 million of last year in the

Fuel Refinery while the throughput was

increased from 2.76 million tons of crude oil of

last year to 2.9 million tons in the current year

under report.

The pricing formula approved by Economic

Co-ordination Committee (ECC) of the Federal

Cabinet of the Government of Pakistan,

stipulates that "identifiable Government charges

and duties as applicable on import of furnace oil

to be used as feed stock in the lube refinery". In

this respect, the company has taken a view that

Development Surcharge, included in the above

referred charges and duties, is not a duty

payable at the import stage, hence, the same is

not a part of the import duty structure as is

apparent from the customs tariff. The company

further believes that Development Surcharge is

a part of the pricing mechanism of the Ministry of

Petroleum and Natural Resources, levied by

them to regulate the prices of petroleum

products in the country. In this regard, the

Central Board of Revenue in their letter dated

October 06,1996 clarified that the Development

Surcharge is fixed by the Ministry of Petroleum

and Natural Resources. Therefore, the company

is of the view that Development Surcharge is not

a part of the custom tariff and, hence, not an

import incidental and the same is not applicable

on the cost of feed stock of the lube refineries.

During the year, an agreement for a loan

amounting to US$ 30 million was entered into by

the company with ANZ Grindlays Bank, Bahrain

Branch. The company has not recorded the

above loan in its books of account as the same

was not received by the company and its

proceeds were credited to the account of the

Government of Pakistan. The company would in

any case show the loan and interest thereon as

recoverable from the Government of Pakistan,

hence, this transaction would have no effect on

the financial results of the company. The matter

is presently under discussion with the Bank and

the Government and further action in this regard

will be taken after the resolution of the same.

CRUDE OIL:

The supplies of Arabian Light crude oil were

received from Saudi Aramco under an annual

contract. The crude oil was shared and

exchanged with Pakistan Refinery Limited for

Iranian Light and Upper Zakum to give a blend

mutually advantageous for both the refineries as

well as for the country. The crude oil throughput

for the year was 2.903 million tons including

0.633 million tons from the indigenous sources

showing an increase of 5% over 2.766 million

tons of last year.

PRODUCTION:

The production of finished products was 2.783

million tons with an increase of 5.7% due to an

increase in throughput as well as saving in own

use and losses. The product mix was

maintained according to the market demand

maximizing production of deficit products as

required by the Government. The production of

Lube Base Oils was kept lower at 162,995 tons

compared to 179,730 tons of last year, as

imported LBOs were available in the market at

lower prices.

SALES:

The gross sales for the year were 2.785 million

tons generating a revenue of Rs. 22.122 billion

(including refunds from the Govt. under the

import parity formula amounting to Rs. 0.632

billion) compared to 2.614 million tons for

Rs. 22.400 billion for the year 1996-97. The

sales for the year included export of 73,094 tons

of Naphtha for Rs. 477.048 million.

NATIONAL OIL MARKETING:

NRL Board of Directors decided to establish its

own marketing company. Accordingly, in April

1998 National Oil Marketing Company (Pvt.)

Limited (NOM) a 100% owned subsidiary of NRL

was incorporated and registered under

Companies Ordinance, 1984. NOM started

functioning from June 24,1998. Since then it has

marketed non-regulated products.

MANUFACTURING, SELLING, ADMIN. &

FINANCIAL EXPENSES:

The total manufacturing expenses for the year

were Rs. 1,932 million compared to Rs. 1,984

million last year. This decrease of Rs. 52 million

was mainly due to substantial saving in the use

of chemicals.

The selling and administration expenses were

Rs. 243 million this year against Rs. 200 million

last year. As stated earlier, management

exercised cost / expense control measures

which were offset by significant inflation and

devaluation of Pak Rupee causing an increase

of Rs. 43 million.

Financial charges increased to Rs. 834 million

this year compared to Rs. 476 million last year.

The increase is attributed to heavy borrowing to

overcome liquidity crunch created due to

overdue of Rs. 8.0 billion of the products

receivable from PSO upto June 30, 1998.

PROJECTS:

The installation of the self power generation

plant of 7.5 MW electricity under the World Bank

financing arrangements has been completed

and will be commissioned shortly.

Additional tanks for storage of 45,000 tons crude

oil are under installation. On completion, crude

oil cover for production will increase to 22 days.

The project is expected to be completed by

March 1999.

STAFF:

On the job training to technicians and engineers

to meet the shortage of trained personnel

continued 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 under difficult conditions.