| Pakistan Refinery Limited |
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| Annual
Report 1999 |
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| Contents |
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| Company
Information |
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| Notice
of Meeting |
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| Chairman's
Review |
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| Directors'
Report |
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| Pattern
of holding of shares |
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| Graphs |
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| Ten
Years at a Glance |
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| Auditors' Report |
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|
| Balance Sheet |
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| Profit
and Loss Account |
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| Statement
of Changes in Equity |
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| Cash
Flow Statement |
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| Notes
to the Accounts |
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| Company
Information |
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| Board
of Directors |
|
Mr. Salahuddin Qureshi |
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Chairman |
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Mr. Iftikhar Alam |
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Mr. T. J. Coombs
(Alternate: Mr. Arshad Nasar) |
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Mr. Ardeshir Cowasjee |
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Mr. Ahmed Dawood |
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Mr. Farooq Rahmatullah |
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Mr. G.A. Sabri |
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Mr. D.M. Sadler |
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Mr. Mohammadmian Soomro |
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Mr. David Weston |
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| General
Manager & Chief Executive |
Mr. S. Viqar Salahuddin |
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| Company
Secretary |
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Mr. Feroze J. Cawasji |
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| Auditors |
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A.F. Ferguson & Co. |
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| Registered
Office |
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Korangi Creek Road,
Karachi. |
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| Registrar and |
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| Share
Registration |
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| Office |
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Ferguson Associates (Pvt)
Ltd. |
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P.O. Box 4716 |
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State Life Building I-A, |
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Off I.I. Chundrigar Road, |
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Karachi - 74000. |
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| Notice |
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| Notice
is hereby given that the Thirty Ninth Annual General Meeting of tire Company
will be held on Thursday, |
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| December
16, 1999 at 10.30 a.m. at Marriott Hotel, Abdullah Haroon Road, Karachi to
transact the following |
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| business: |
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| ORDINARY
BUSINESS |
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| 1.
To receive and consider the Balance Sheet and Profit and Loss Account
together with the Directors' |
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| Report
for the year ended June 30, 1999. |
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| 2.
To approve the final dividend. |
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| 3.
To appoint Auditors for the next accounting period and to fix their
remuneration. |
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| SPECIAL
BUSINESS |
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| 4.
To approve all increase ill the borrowing powers of the Company from Rs. 900
million to Rs. 1,300 |
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| million. |
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| A
statement under Section 160 of the Companies Ordinance 1984, is appended
hereunder. |
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| The
Share Transfer Books of the Company will remain closed from December 3, 1999
to December 16, |
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| 1999
(both days inclusive) when no transfer of Shares will be accepted for
registration. |
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By Order of the Board |
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|
FEROZE J. CAWASJI |
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| Karachi:
October I, 1999 |
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Secretary |
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| Notes : |
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| (i)
Statement under Section 160 of the Companies Ordinance 1984. |
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| ITEM 4 |
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| The
borrowing powers were increased from Rs. 300 million to Rs. 900 million in
the 30th Annual |
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| General
Meeting of the Company held on November 18, 1990. With the increase in the
exchange |
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| rate
which currently stands at around Rupees 52 per dollar and the low margins,
the Company |
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| is
unable to manage within the existing borrowing limits. An increase in
borrowing power has |
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| therefore
become necessary to enable the refinery to operate with uninterrupted
supplies of crude |
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| oil.
The Directors recommend to consider and pass the following resolution: |
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| RESOLVED
THAT |
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| Pursuant
to Article 50 of the Company's Articles of Association, the amount for the
time being |
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| remaining
.undischarged of moneys borrowed or raised by the directors for the purposes
of tile |
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| Company
(otherwise than by the issue of share capital) shall not exceed Rs. 1,300
million (Rupees |
|
| one
thousand three hundred million). |
|
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| ii)
A member entitled to be present and vote at the meeting may appoint a proxy
to attend, speak |
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| and
vote instead of him. A proxy need not also be a member of the Company.
Proxies duly stamped |
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| and
signed, and the Power of Attorney or other authority (if any) under which
they are signed |
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| or
a notarially certified copy of that power or authority must be deposited at
the Registered Office |
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| of
the Company not less than 48 hours before the time of the meeting. An
approved form of |
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| proxy
is enclosed. |
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| iii)
The minutes of the previous meeting are available at the Registered Office of
the Company. |
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| Chairman's
Review |
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| On
behalf of the Board of Directors, I welcome you to tile 39th, Annual General
Meeting of the Company |
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| to
present to annual accounts for the year ended June 30, 1999 along with the
Auditors report thereon. |
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| As
mentioned in my last year's review, the crude slate of the refinery has
undergone a change during the |
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| year
under review. The crude oil purchase contracts with National Iranian Oil
Company and Abu Dhabi |
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| National
Oil Company, which were assigned by the Government to your Company, were not
renewed upon |
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| their
expiry. As a result, the entire crude imports are now taking place from Saudi
Arabia from whom Arabian |
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| Light
and Arabian Extra Light crudes are being imported. This contract is managed
by National Refinery |
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| Limited
and the crude oil imported is shared with us. |
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| The
availability of local crude oil to the southern refineries has also declined,
as part of the crude oil is |
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| being
diverted to Attock Refinery Limited. The overall change in the crude blend
processed during the year |
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| has
made a marginal improvement in our production as well as refinery
economics. |
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| The
throughput achieved during the year was 2.265 million tons of crude oil
compared to 2.349 million |
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| tons
in the previous year. Tim decline is due to the reason that during the
current year, the refinery was |
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| shut
down for planned maintenance for 25 days. This maintenance shutdown took
place after 31 months |
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| of
continuous operation, the longest in the history of this refinery. The
throughput during the year included |
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| 0.394
million tons of local crude oil and condensate. |
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| Crude
oil prices remained erratic during the year, with sharp downward and them
upward movements. The |
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| prices
ranged between $ 9.83 to $ 16.11 per barrel, with an average of around $
12.52 per barrel. Compared |
|
| to
this, the average price in the previous year was $ 15.33 per barrel.
Currently the crude oil price is around |
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| $
20 per barrel following strict adherence to OPEC production cuts by the
member states. On the other |
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| hand,
product margins continue to remain weak particularly in the case of diesel.
The weak product prices |
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| have
resulted in the refinery making a loss after tax of Rs 663.5 million from its
refinery operations. As |
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| a
consequence, the Government has to reimburse Rs 695.9 million (1997-98 Rs
548.7 million) to the refinery |
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| in
terms of the import parity pricing formula to enable the company to make a
10% profit on its paid up |
|
| capital
from its refinery operations. |
|
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| The
economic scenario after last year's nuclear explosion and resultant sanctions
also contributed to the |
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| negative
impact on the company's results. Spare parts required for the maintenance of
the refinery which |
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| are
mostly imported became much more expensive. This is reflected in the
substantial increase in the repair |
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| and
maintenance cost. Apart from that management of the refinery continues its
efforts to keep costs under |
|
| control. |
|
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| Emphasis
on safety is a prerequisite in the oil industry. Your company continues to
maintain a very high |
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| standard
of safety as a result of which, over 7 million man-hours without lost time
injury has already been |
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| achieved.
This is by no means a small feat and staff at all levels need to be
congratulated on achieving |
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| this
excellent result. Relations between the Management and the workers and their
union also remained |
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| cordial.
The two year agreement with the employees union expired on June 30, 1999. A
charter of demands |
|
| has
been exchanged and formal negotiations have commenced. Training is also an
important aspect and |
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| every
effort is made to provide training to staff and workers at all levels both
within and outside the country. |
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| As
mentioned earlier, refining margins worldwide continue to remain depressed,
as demand for products |
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| is
less than production capacities. As a result a number of refineries in
Singapore and Europe have already |
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| started
operating at lower capacities. This has adversely affected the profitability
of your company as the |
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| pricing
formula applicable is linked to the Arab Gulf prices. With the coming into
production of the PARCO |
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| mid-country
refinery late next year, the situation for the two southern refineries is
further going to change, |
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| as
certain products will become surplus within the country. Discussions are
currently being held at industry |
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| level
to come up with the most viable options. Under these circumstances, it is not
prudent to work on |
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| any
revamp or expansion projects involving large sums of money. |
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| Efforts
are however being made along with the other refineries to convince the
Government to revise the |
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| existing
Import Parity Pricing Formula. The existing formula has certain anomalies,
which makes it difficult |
|
| for
simple fuel refineries to make profit. If the Government accepts these
suggestions, it would then enable |
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| the
refilling sector to come up with projects for increasing output of deficit
products and also quality improvement |
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| projects.
It is hoped that a positive response will be received from the Government. |
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| A
new Board of Directors was elected in June this year. I take this opportunity
to express my thanks to |
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| all
my colleagues on the previous Board for the valuable services they have
rendered for the company. I |
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| would
also like to welcome the new Board members who have a difficult task in front
of them due to the |
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| changing
oil scenario. |
|
|
| Finally,
on behalf of the Board I would also like to thank the Management and all the
employees of the |
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| Company
for their dedication and hard work in running and maintaining the refinery in
an efficient manner. |
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|
SALAHUDDIN QURESHI |
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| October 1, 1999 |
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|
CHAIRMAN |
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| DIRECTORS'
REPORT |
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| The
Directors of your company are pleased to present their Report with the
Accounts and Auditor's Report |
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| for
the year ended June 30, 1999. |
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|
1999 |
1998 |
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|
Rupees |
Rupees |
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|
|
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|
('000) |
('000) |
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| 1.
FINANCIAL RESULTS |
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| These
are summarised below: |
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|
|
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|
| Profit
after tax from refinery operations |
|
|
20,000 |
20,000 |
|
| Income
net of tax from non-refinery operations |
|
|
29,967 |
27,133 |
|
| Unappropriated
profit brought forward |
|
|
214 |
81 |
|
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|
------------------ |
------------------ |
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|
50,181 |
47,214 |
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|
========== |
========== |
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| APPROPRIATIONS |
|
|
|
|
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|
| Interim Dividend |
|
-- |
20,000 |
|
|
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|
| Proposed
Final Dividend of 25% |
|
|
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| (equivalent
to Rs. 2.50 Per Share) |
|
|
50,000 |
26,000 |
|
|
|
|
| Transfer
to General Reserve |
|
|
-- |
1,000 |
|
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|
------------------ |
------------------ |
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|
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|
50,000 |
47,000 |
|
|
|
|
========== |
========== |
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| Leaving
a carry over to next year |
|
|
|
| an
unappropriated profit of |
|
181 |
214 |
|
|
|
|
|
|
========== |
========== |
|
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| The
earnings per share for the year amounted to Rs. 2.50 (1998: Rs. 2.36) |
|
|
| During
the year under review, the company continued to operate under the import
parity pricing formula. |
|
| Under
this formula, the rate of return from refinery operations is restricted
between 10% to 40% of |
|
| the
paid-up capital. Oil prices continued their erratic trend with crude prices
declining to a low of |
|
| $
9.83 per barrel and then increasing to $ 16.11 per barrel. Product prices,
which are based on AG |
|
| Mean,
also remained weak and the decline was more than that of crude oil. As a
result, refining margins |
|
| continue
to remain weak because of which the refinery again suffered a loss after tax
of Rs 663.5 |
|
| million.
To offset this loss and allow the refinery to make a minimum 10% profit after
tax, the Government |
|
| has
to reimburse a sum of Rs 695.9 million. |
|
|
| 2.
OPERATING FIXED ASSETS |
|
|
| During
the year, the company successfully installed a crude desalter unit at a total
cost of Rs. 139.7 |
|
| million.
This unit is expected to improve the quality of the crude oil stream and
reduce the fowling |
|
| in
the heat exchangers. This will improve quality and reduce plant downtime and
maintenance costs. |
|
|
| 3.
TRADE DEBTS |
|
|
|
|
| Your
Directors are pleased to inform you that there are no overdue trade debts
from associated undertakings. |
|
| The
recovery position has been extremely satisfactory. The trade debts as at June
30, 1999 have all |
|
| been
subsequently realised. |
|
|
|
|
| 4.
RECEIVABLE FROM GOVERNMENT |
|
|
| The
receivable from the Government at year end stood at Rs. 604.8 million. This
is significantly higher |
|
| than
the amount receivable in the previous year. The increase is mainly due to
lower ex-refinery prices, |
|
| which
were inadequate to cover costs and the minimum guaranteed return of 10%. This
is also reflected |
|
| in
the significantly lower sales value (note 19). |
|
|
| Although
every effort is being made to recover this huge receivable, the impact of
this on the com- |
|
| pany's
cash-flow has been reduced by offsetting the amount payable in respect of the
government |
|
| share
and royalty on local crude oil received by the company. The company continues
to emphasize |
|
| on
the Government that inadequate ex-refinery prices results in increased
borrowing with its resultant |
|
| cost
which under the present scenari6 of low margins is ultimately being borne by
the Government. |
|
|
| 5.
DISCLOSURE OF YEAR 2000 COMPLIANCE |
|
|
| Your
company has reviewed all its IT systems and devices for identifying the year
2000 problem and |
|
| has
made the necessary modifications and is satisfied that it has achieved the
necessary compliance. |
|
| Our
consultant has also extensively tested the changes made by the company and
has given their clearance. |
|
| A
contingency plan has also been drawn up in respect of the most critical
external/third party failure |
|
| to
guard against ally disruption of business ill the next millennium. |
|
|
| 6. AUDITORS |
|
|
| The
present auditors, Messrs A. F. Ferguson & Co., retire and being eligible,
offer themselves for |
|
| reappointment. |
|
|
|
| 7.
PATTERN OF SHAREHOLDINGS |
|
| The
pattern of shareholding in the company as at June 30, 1999 is shown on page 9
of the Annual |
|
| Report. |
|
|
|
|
|
By Order of the Board of Directors |
|
|
|
|
|
|
|
|
|
FAROOQ RAHMATULLAH |
|
| Karachi:
October 1, 1999 |
|
DIRECTOR |
|
|
|
| Pattern
of holding of shares held by |
|
| Shareholders
as at June 30, 1999 |
|
|
| NO. OF |
|
SHAREHOLDING |
|
|
TOTAL |
|
| SHAREHOLDERS |
|
|
|
|
|
SHARES HELD |
|
|
| 537 |
FROM |
1 |
TO |
100 |
SHARES |
19,591 |
|
| 673 |
FROM |
101 |
TO |
500 |
SHARES |
189,211 |
|
| 285 |
FROM |
501 |
TO |
1000 |
SHARES |
212,610 |
|
| 459 |
FROM |
1001 |
TO |
5000 |
SHARES |
951,684 |
|
| 40 |
FROM |
5001 |
TO |
10000 |
SHARES |
258,713 |
|
| 14 |
FROM |
10001 |
TO |
15000 |
SHARES |
167,635 |
|
| 3 |
FROM |
15001 |
TO |
20000 |
SHARES |
53,547 |
|
| 5 |
FROM |
20001 |
TO |
25000 |
SHARES |
109,993 |
|
| -- |
FROM |
25001 |
TO |
30000 |
SHARES |
-- |
|
| 1 |
FROM |
30001 |
TO |
35000 |
SHARES |
33,366 |
|
| -- |
FROM |
35001 |
TO |
40000 |
SHARES |
-- |
|
| 3 |
FROM |
40001 |
TO |
45000 |
SHARES |
124,847 |
|
| 5 |
FROM |
45001 |
TO |
50000 |
SHARES |
233,457 |
|
| 2 |
FROM |
50001 |
TO |
55000 |
SHARES |
107,414 |
|
| 1 |
FROM |
55001 |
TO |
60000 |
SHARES |
57,400 |
|
| -- |
FROM |
60001 |
TO |
80000 |
SHARES |
-- |
|
| 1 |
FROM |
80001 |
TO |
85000 |
SHARES |
84,933 |
|
| -- |
FROM |
85001 |
TO |
90000 |
SHARES |
-- |
|
| 1 |
FROM |
90001 |
TO |
95000 |
SHARES |
90,733 |
|
| -- |
FROM |
95001 |
TO |
125000 |
SHARES |
-- |
|
| 1 |
FROM |
125001 |
TO |
130000 |
SHARES |
127,400 |
|
| -- |
FROM |
130001 |
TO |
165000 |
SHARES |
-- |
|
| 1 |
FROM |
165001 |
TO |
170000 |
SHARES |
165,200 |
|
| -- |
FROM |
170001 |
TO |
195000 |
SHARES |
-- |
|
| 1 |
FROM |
195001 |
TO |
200000 |
SHARES |
200,000 |
|
| -- |
FROM |
200001 |
TO |
205000 |
SHARES |
-- |
|
| 1 |
FROM |
205001 |
TO |
210000 |
SHARES |
206,600 |
|
| -- |
FROM |
210001 |
TO |
280000 |
SHARES |
-- |
|
| 1 |
FROM |
280001 |
TO |
285000 |
SHARES |
283,501 |
|
| -- |
FROM |
285001 |
TO |
295000 |
SHARES |
-- |
|
| 2 |
FROM |
295001 |
TO |
300000 |
SHARES |
596,810 |
|
| -- |
FROM |
300001 |
TO |
1850000 |
SHARES |
-- |
|
| 1 |
FROM |
1850001 |
TO |
1855000 |
SHARES |
1,852,401 |
|
| -- |
FROM |
1855001 |
TO |
1870000 |
SHARES |
-- |
|
| 1 |
FROM |
1870001 |
TO |
1875000 |
SHARES |
1,872,954 |
|
| -- |
FROM |
1875001 |
TO |
2395000 |
SHARES |
-- |
|
| 1 |
FROM |
2395001 |
TO |
2400000 |
SHARES |
2,400,000 |
|
| -- |
FROM |
2400001 |
TO |
3595000 |
SHARES |
-- |
|
| 1 |
FROM |
3595001 |
TO |
3600000 |
SHARES |
3,600,000 |
|
| -- |
FROM |
3600001 |
TO |
5995000 |
SHARES |
-- |
|
| 1 |
FROM |
5995001 |
TO |
6000000 |
SHARES |
6,000,000 |
|
| ------------------ |
|
|
|
|
|
------------------ |
|
| 2,042 |
|
|
|
|
20,000,000 |
|
| ========== |
|
|
|
========== |
|
|
|
|
| SHAREHOLDER'S
CATEGORY |
|
NO. OF |
NO OF SHARES |
PERCENTAGE |
|
|
|
SHARE |
|
OF ISSUED |
|
|
HOLDERS |
|
CAPITAL |
|
| Investment
Companies |
|
9 |
421,798 |
2.11 |
|
| Insurance
Companies |
|
9 |
2,826,511 |
14.13 |
|
| Joint
Stock Companies - Local |
|
11 |
3,822,537 |
19.11 |
|
| Financial
Institutions |
|
8 |
1,883,348 |
9.41 |
|
| Others |
|
3 |
41,614 |
0.21 |
|
| Individuals |
|
1,998 |
2,603,166 |
13.02 |
|
| Foreign
Investors: |
|
2 |
1,026 |
0.01 |
|
| J/Stock
Companies - Foreign |
|
2 |
8,400,000 |
42.00 |
|
|
|
------------------ |
------------------ |
------------------ |
|
| Total |
|
2,042 |
20,000,000 |
100.00 |
|
|
========== |
========== |
========== |
|
|
|
| Ten
Years at a Glance |
|
|
|
|
1999 |
1998 |
1997 |
1996 |
1995 |
1994 |
1993 |
1992 |
1991 |
1990 |
|
|
|
| Share Capital |
|
Rs/mn |
200.00 |
200.00 |
200.00 |
150.00 |
150.00 |
150.00 |
150.00 |
150.00 |
120.00 |
90.00 |
| Reserves |
|
Rs/mn |
63.63 |
63.66 |
62.53 |
108.48 |
86.68 |
71.64 |
76.58 |
84.08 |
112.40 |
107.37 |
| Shareholders' |
|
|
|
| equity |
|
Rs/mn |
263.63 |
263.66 |
262.53 |
258.48 |
236.68 |
221.64 |
226.58 |
234.08 |
232.40 |
197.37 |
|
|
|
| Break up value |
|
Rs. |
13.18 |
13.18 |
13.13 |
17.23 |
15.78 |
14.78 |
15.11 |
15.61 |
19.37 |
21.93 |
|
|
|
|
| Dividend per |
|
|
|
| share |
|
Rs. |
2.50 |
2.30 |
2.00 |
4.00 |
2.00 |
4.00 |
4.50 |
3.50 |
3.00 |
3.00 |
|
|
|
| Bonus shares |
|
|
-- |
-- |
-- |
1:03 |
-- |
-- |
-- |
-- |
1:4 |
1:3.33 |
|
|
|
| Earnings per |
|
|
|
| share |
|
Rs. |
2.50 |
2.36 |
2.20 |
5.45 |
3.00 |
3.67 |
4.00 |
3.61 |
5.92 |
7.23 |
|
|
|
| Sales |
|
Rs/mn |
12,696.28 |
15,294.82 |
15,937.16 |
12,276.98 |
12,233.61 |
10,733.15 |
10,488.67 |
9,558.53 |
10,856.32 |
7,773.25 |
| Cost of Sales |
|
Rs/mn |
12,434.54 |
15,038.71 |
15,693.73 |
12,041.20 |
11,986.84 |
10,532.51 |
10,322.87 |
9,329.96 |
10,673.71 |
7,625.46 |
| Profit
after tax and |
|
|
| extraordinary |
|
|
|
| items |
|
Rs/mn |
50.18 |
47.13 |
44.04 |
81.81 |
45.03 |
55.06 |
60.00 |
54.19 |
71.02 |
65.10 |
|
|
|
| Cost
of sales as % |
|
|
| of sales |
|
|
97.94 |
98.33 |
98.47 |
98.08 |
97.98 |
98.13 |
98.42 |
97.61 |
98.32 |
98.10 |
|
|
|
| Profit after tax |
|
|
|
| as % of sales |
|
|
0.40 |
0.31 |
28 |
0.67 |
0.37 |
0.51 |
0.57 |
0.57 |
0.65 |
0.84 |
|
|
|
| Profit after tax as |
|
|
|
| % of average |
|
|
|
| shareholders |
|
|
|
| equity |
|
|
19.03 |
17.91 |
16.91 |
33.04 |
19.65 |
24.57 |
26.05 |
23.23 |
33.05 |
36.51 |
|
|
|
| A.
F. FERGUSON & CO. |
|
STATE LIFE BUILDING 1-C |
Telephones: |
(021)242 6682-6 |
|
| CHARTERED
ACCOUNTANTS |
|
OFF I. I. CHUNDRIGAR ROAD |
|
(021) 242 6711 - 5 |
|
|
|
P.O. BOX 4716 |
|
Fax: |
(021) 241 5007 Audit |
|
| OTHER
OFFICES AT |
|
KARACHI 74000 |
|
(021) 242 7938 Tax |
|
| LAHORE
- RAWALPINDI - ISLAMABAD |
PAKISTAN |
|
Telex: |
21155 AFFCO |
|
|
E-mail: |
affco-abs@cyber.net.pk |
|
|
|
affco-tax@cyber.net.pk |
|
|
| AUDITORS'
REPORT TO THE MEMBERS |
|
|
| We
have audited the annexed balance sheet of Pakistan Refinery Limited as at
June 30, 1999 |
|
| and
the related profit and loss account, statement of changes in equity and cash
flow statement, |
|
| 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 and, after due verification thereof,
we report that: |
|
|
| (a)
in our opinion, proper books of account 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 except for the change as stated in |
|
| note
1.2 with which we concur; |
|
|
|
| (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; |
|
|
| (c)
in our opinion and to the best of our information and according to the
explanations |
|
| given
to us, the balance sheet, profit and loss account, statement of changes in
equity and |
|
| the
cash flow statement together with the notes forming part thereof, 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,
1999 and |
|
| of
the profit, changes in equity and cash flows for the year then ended; and |
|
|
| (d)
in our opinion no zakat was deductible at source under the Zakat and Ushr
Ordinance, 1980. |
|
|
|
|
|
|
Chartered Accountants |
|
|
| October 18, 1999 |
|
|
|
|
|
|
ACCOUNTS |
|
|
|
for the year ended June 30, 1999 |
|
|
|
|
| Balance
Sheet as at June 30, 1999 |
|
|
|
Note |
1999 |
1998 |
|
|
