National Refinery Limited - Annual Reports

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National Refinery Limited

Annual Report 2000

CONTENTS

COMPANY INFORMATION

MANAGING DIRECTOR

M. M. Husain

COMPANY SECRETARY

Asad A. Siddiqui

AUDITORS

Ford, Rhodes, Robson, Morrow Chartered Accountants

SOLICITORS

Qamar Abbas & Co.

BANKERS

ABN - AMRO Bank

Allied Bank of Pakistan Limited

American Express Bank Limited

Bank Alfalah

Citibank N.A.

Deutsche Bank A.G.

Habib Bank Limited

Muslim Commercial Bank Limited

National Bank of Pakistan

Standard Chartered Bank

Standard Chartered Grindlays

Union Bank Ltd.

United Bank Limited

REGISTERED OFFICE

7 - B, Korangi Industrial Zone, Karachi - 74900, Pakistan

SHARES LIAISON OFFICE

1 st Floor, Karim Chambers, Merewether Road, Karachi - 75530, Pakistan

REFINERY

7 - B, Korangi Industrial Zone, Karachi - 74900, Pakistan

PHONES (PABX)

5064135- 37, 5064977- 79, 5064981-86, 5064988

FAX

92 - 21 - 5054663

TELEX

29141 - ENAR - PK

20789 - ENAR - PK

CABLE

ENARLUBE

BOARD OF DIRECTORS

Chairman

Zafar Iqbal

Chairman

Social Marketing Pakistan Limited

Istaqbal Mehdi

Chairman/Chief Executive

National Investment Trust Limited

G.A. Sabri

Director General Oil

Ministry of Petroleum & NR

Tarik Kivanc

Executive Director

Islamic Development Bank, Jeddah

Towfiq H. Chinoy

Managing Director

International Industries Ltd.

M.M. Husain

Managing Director

National Refinery Ltd.

M. Younas Khan

Chairman

Inter Asia Leasing Company

Saquib H. Shirazee

President & Chief Executive Officer

Atlas Investment Bank Ltd.

Ahmed Dawood

Chairman

Dawood Group of Industries

Aaliya K. Dossa

Section Officer Research

National Investment Trust Ltd.

NRL AT GLANCE

FIRST LUBE REFINERY

Design Capacity

539,700 Tons per year of Crude processing

Design Capacity

76,200 Tons per year of Lube Base Oils

Date Commissioned

June 1986

Project Cost

103.9 Million Rupees

FUEL REFINERY

BEFORE REVAMP

Design Capacity

1,500,800 Tons per year of Crude processing

Date Commissioned

April 1977

Project Cost

607.5 Million Rupees

AFTER REVAMP

Design Capacity

2,170,800 Tons 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 Tons per year of B.T.X.

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 2000

2,387.0 Million Rupees

FINANCIAL HIGHLIGHTS

1990-91

1991-92

1992-93

1993-94

1994-95

1995-96

1996-97

1997-98

1998-99

1999-2000

RETURN ON INVESTMENT

Rs. Per Share of Rs.10

EARNING

4.78

3.41

4.36

5.30

(3.83)

4.19

6.84

7.38

9.65

10.61

BREAK-UP VALUE

13.21

13.32

13.68

14.48

10.65

14.84

19.18

24.06

29.71

35.82

DIVIDEND

3.75

3.30

4.00

4.50

0.00

2.50

4.00

4.50

FINANCIAL GLIMSES

Rs. In 000's

ISSUED & PAID-UP CAPITAL

666,388

SHARE HOLDERS' EQUITY

880,180

887,567

911,777

964,792

709,735

988,780

1,278,009

1,603,234

1,979,987

2,386,819

CAPITAL EXPENDITURE

67,751

45,791

65,441

134,355

627,244

65,451

82,370

246,516

46,622

175,521

PROFIT BEFORE TAX

552,563

406,295

589,196

633,395

(123,285)

466,284

774,311

738,928

1,230,307

1,093,059

PROFIT AFTER TAX

318,563

227,295

290,765

352,889

(255,057)

279,045

455,826

491,822

643,308

706,707

TAXATION

234,000

179,000

298,431

280,506

131,772

187,239

318,485

247,106

586,999

386,352

MARKET VALUE OF SHARE

37.40

96.00

83.75

103.00

53.50

39.25

28.50

17.50

30.54

42.70

FINANCIAL RATIOS

CURRENT RATIO

1:1

1:0.98

1:0.96

1:0.95

1:1

1:1.02

1:1.06

1:1.08

LONG TERM DEBT: EQUITY

46: 54

40: 60

33: 67

34: 66

47: 53

53: 47

32: 68

18: 82

11: 89

04: 96

TOTAL DEBT: EQUITY

77:23

84:16

86:14

85:15

90:10

89:11

85:15

84:16

NOTICE OF MEETING

Notice is hereby given that the Thirty Seventh (37th) Annual General Meeting of National Refinery

Limited will be held on Tuesday, 28th November, 2000 at 10:30 a.m. at Hotel Beach Luxury, Karachi

to transact the following business:-

ORDINARY BUSINESS

1. To confirm the minutes of the Annual General Meeting held on December 22, 1999.

2. To receive and adopt the Audited Accounts of the Company for the year ended June 30, 2000

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

3. To declare a final dividend of 35% in addition to the interim dividend of 10% already paid.

4. To appoint auditors M/s. Ford, Rhodes, Robson, Morrow Chartered Accountants as auditors

for the year ended June 30, 2001 and to fix their remuneration.

5. To elect Directors of the Company representing private shareholding pursuant to the Article 7F

of the Economic Reform Order 1972 in place of those retiring namely (1) Mr. Tarik Kivanc,

representative of Islamic Development Bank and (2) Mr. Ahmed Dawood, representative of

private shareholdings.

SPECIAL BUSINESS

1. To consider investment as loan to State Petroleum Refining & Petrochemical Corporation (Pvt.)

Ltd., (PERAC) for Rs. 60.0 million under section 208 of Companies Ordinance, 1984 with

following resolution:

RESOLVED THAT

"a sum of Rs. 60.0 (Rupees sixty) million advanced as loan to State Petroleum Refining &

Petrochemical Corporation (Pvt.) Ltd., (PERAC) @ 14% for equity in Iran-Pak Refinery Ltd.,

under section 208 of Companies Ordinance, 1984, be and hereby ratified as approved by the

Board of Directors."

AND

To transact any other Business of the Company with the permission of the Chairman.

By order of the Board

ASAD A. SIDDIQUI

Karachi: October 05, 2000

Company Secretary

NOTES:

1. Share Transfer Books of the Company will remain closed from 20th November, 2000 to 29th

November, 2000 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. CDC shareholders are requested to bring their National Identity Card, Account and

Participant's ID Number, while attending the Meeting for identification.

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

6. 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 13th

November, 2000.

7. 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.

8. 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 votes 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 single candidate or divide them between more than

one of the candidate 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 the Company have pleasure in presenting Annual Report and the Audited

Financial Statements of the Company for the year ended June 30, 2000.

The profit of the company for the year ended June 30, 2000

(Rupees in '000)

after taking in to account the amount of Rs. 3,945.366

million, under import parity pricing formula and after

providing for administrative, selling and financial charges

amount to:

1,163,295

Less:

Provision for

- Workers' Profit Participation Fund

58,165

- Workers' Welfare Fund

12,071

70,236

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

1,093,059

Less: Taxation

- For the year

401,078

- Deferred Tax

(14,726)

386,352

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

Profit after taxation

706,707

Amount of un-appropriated profit brought forward from previous year

340

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

Profit available for appropriation

707,047

APPROPRIATIONS

- Interim Dividend @ 10%

66,639

- The Directors proposed that this should be

utilized in providing for final dividend at

the rate of 35% equivalent to Rs. 3.50

per share of Rs. 10 each

233,236

- Transfer to General reserve

407,000

706,875

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

Un appropriated profit carried forward to next year

172

==========

The amount receivable from the Government under the import parity pricing formula shall be

determined after the audited accounts are submitted to the Government and the approval is received

in due course of time.

BOARD OF DIRECTORS

In pursuance of letter No.4(5)/92-OiI.Vol. II dated February 16, 2000 of Ministry of Petroleum &

Natural Resources, the Board of Directors was reconstituted on February 16, 2000, accordingly

Mr. Aitzaz Shahbaz relinquished his charge as Chairman and Mr. Zafar Iqbal has been appointed as

a new Chairman.

Messrs Towfiq H. Chinoy, MD International Industries Ltd., Saquib H. Shirazi, Chief Executive, Atlas

Investment Bank Ltd., Istaqbal Mehdi, Chief Executive, National Investment Trust Ltd., Aaliya K.

Dossa, Section Officer Research, National Investment Trust Ltd., and Mr. M. Younas Khan,

Chairman Inter Asia Leasing Company were appointed. Messrs Mohammad Abbas, Joint Secretary,

Ministry of Petroleum & NR, Brigadier Abu Rashid, MD K.E.S.C., Hussain Ahmed Khan , Joint

Secretary (Ops.), Ministry of Industries & Production and Mr. Abdus Sattar, Financial Advisor,

Ministry of Petroleum & NR were retired during this period.

PATTERN OF SHAREHOLDING

Pattern of shareholding

AUDITORS

M/s Ford, Rhodes, Robson, Morrow Chartered Accountants, retire and being eligible, offer

themselves for reappointment,

CHAIRMAN'S REVIEW

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

On behalf of the Board

ZAFAR IQBAL

Chairman

CHAIRMAN'S REVIEW

Dear Shareholders

On behalf of the Board of Directors and myself I welcome you to the 37th Annual General

Meeting of the Company. I take the opportunity to present a review of Company's Financial

Result for the year ended June 30, 2000.

The year under report witnessed shrinkage in margins of fuel products. Fuel Refinery's

profitability remained under stress of increase in crude oil prices by 90.7% against increase of

84.2% in CIF prices of products, restricting its profit after tax at a minimum of 10% as

admissible under the pricing formula.

The average price of petroleum products in the international market has been increased

substantially during the year whereas the ex-refinery prices have not been increased in that

ratio by the Government as a result a deficit of Rs. 3.945 billion in the sale revenue was

required to make up the minimum profit of 10% of the Fuel Refinery.

The Lube Refinery is not subjected to pricing control by the Government and it operates in an

open market environment. The price of the feedstock of Lube Refinery increased manifold

whereas the lube base oil could not be sold at a higher price since it was facing severe

competition from 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. As a result the sale of LBOs declined to

152,916 tons compared to 176,172 tons last year.

PROFITABILITY:

Despite severe competition and low margin on sale of products the company registered

highest ever, after tax, profit of Rs.706.707 million which gives a return of 106.1% on paid-

up capital. This is mainly on account of substantial saving in expenses specially under

the head of financial charges.

CRUDE OIL:

The supplies of Arabian Light and Arabian Extra Light were arranged by the Government from

Saudi Aramco and shared with Pakistan Refinery Ltd. The crude oil throughput for the

year was 2.856 million tons including 0.303 million tons received from indigenous sources

as against 2.893 million tons (including 0.367 million tons received from indigenous sources)

of the previous year.

PRODUCTION:

The aggregate production of finished products was 2.719 million tons. The product mix was

maintained according to the market demand maximizing production of deficit items as

required by the Government. The production of Lube Base Oils was kept lower at 176,596 tons

compared to 177,751 tons last year, as imported and sub-standard reclaimed lubricants

were available in the market at lower prices.

SALES:

Sales for the year were 2.689 million tons generating a revenue of Rs. 25.683 billion

including Lube Base Oil sales of Rs.3.416 billion compared to 2.795 million tons and Rs. 18.037

billion respectively for the year 1998-99. The exports of Naphtha for the year were 126,485

tons amounting to Rs. 1.428 billion compared to last year's figure of 83,985 tons of Naphtha &

Asphalt amounting to Rs. 0.531 billion.

MANUFACTURING, SELLING, ADMIN. & FINANCIAL EXPENSES

The total manufacturing expenses for the year were Rs. 1,703 million compared to Rs.2,034

million last year. This decrease of Rs. 331 million was mainly due to substantial saving in

the use of chemicals and energy.

The selling and administrative expenses were Rs. 232 million this year against Rs. 230 million

last year. As stated earlier, management exercised cost / expense control measures

which were offset by significant inflation and devaluation of Pak Rupee. However, the

increase is insignificant.

The position of the company's fund flow has significantly improved during the year

1999-2000 and consequently the financial expenses have been reduced by Rs. 619 million

to Rs. 114 million as compared to previous year's figure of Rs. 733 million.

PROJECT:

M/s Siemens commenced work on the 7.5 MW steam turbo generator and it would be in

operation soon.

Installation of additional tanks for storage of 45,000 tons crude oil have been completed.

FUTURE OUT LOOK:

The production of Lube Base Oils is value added and highly profitable. The Company is

therefore actively engaged in revamping its Lube Refineries to increase its production by

about 20%.

STAFF:

On the job training to technicians and engineers to meet the Shortage of trained

personnel continued during the year.

I wish to share with you my deep appreciation for the untiring efforts and dedication of all the

executives, staff and workers during the year in keeping the Refinery operating which has

enabled the company to achieve a record profit. I acknowledge their contribution and assure

them of your full support.

I would also like to pay tribute to the Managing Director and the members of the Board for their

keen participation and guidance in the affairs of the company. I am also thankful to all financial

institutions, bankers, leasing companies, World Bank and other suppliers who extended their

support and co-operation to the management in carrying out the operation of the company.

I conclude with a word about you, our esteemed shareholders. It is heartening to know that we

continue to receive your support and confidence and trust that this will continue in the future as

well.

ZAFAR IQBAL

Chairman

AUDITORS' REPORT TO THE MEMBERS

We have audited the annexed balance sheet of NATIONAL REFINERY LIMITED as at

June 30. 2000 and the related profit and loss account, cash flow statement and statement of changes

in equity together with the notes forming part thereof for the year then ended and we state that we

have obtained all the information and explanations which, to the best of our knowledge and belief,

were necessary for the purposes of our audit.

It is the responsibility of the company's management to establish and maintain a system of internal

control, and prepare and present the above said statements in conformity with the approved

accounting standards and the requirements of the Companies Ordinance, 1984. Our responsibility is

to express an opinion on these statements based on our audit.

We conducted our audit in accordance with the auditing standards as applicable in Pakistan These

standards require that we plat, and perform the audit to obtain reasonable assurance about whether

the above said statements are free of any material misstatement An audit includes examining, on a

test basis, evidence supporting the amounts and disclosures in the above said statements An audit

also includes assessing the accounting policies and significant estimates made by management, as

well as. 9valuating the overall presentation of the above said statements We believe that our audit

provides a reasonable basis for our opinion and, after due verification, we report that:

in our opinion, proper books of accounts have been kept by the company as required by the

Companies Ordinance, 1984:

(b) in our opinion:

(i) the balance sheet and profit and loss account together with the notes thereon have

been drawn up in conformity with the Companies Ordinance, 1984 and are in

agreement with the books of account and are further in accordance with accounting

policies consistently applied;

(ii) the expenditure incurred during the year was for the purpose of the company's

business and

(iii) the business conducted, investments made and the expenditure incurred during the

year were in accordance with the objects of the company;

us, the balance sheet, profit and loss account, cash flow statement and statement of

changes in equity together with the notes forming part thereof conform with approved

accounting standards as applicable in Pakistan, and give the information required by the

Companies Ordinance, 1984, in the manner so required and respectively give a true and fair

view of the state of the company's affairs as at June 30, 2000 and of the profit, its cash flows

and changes in equity for the year then ended;

(d) in our opinion, Zakat deductible at source under the Zakat and Ushr Ordinance, 1980 (XVIII

of 1980), was deducted by the company and deposited in the Central Zakat Fund established

under Section 7 of that Ordinance; and

(e) without qualifying our opinion, we draw attention to the matter discussed in note 12.1 to the

accounts pertaining to the recovery of amount due from the Government, which is dependent

upon its review and approval.

Karachi -

Chartered Accountants.

October 09, 2000

BALANCE SHEET AS AT JUNE 30, 2000

Note

2000

1999