PACRA maintains entity ratings of PRL

June 12, 2023 (MLN): Pakistan Credit Rating Agency Limited (PACRA) has maintained entity ratings of Pakistan Refinery Limited (PSX: PRL) at "A-" for the long term and "A2" for the short term with a stable outlook forecast, latest press release issued by PACRA showed.

PRL, a hydro-skimming refinery, is designed to process various imported and local crude oil to meet the country’s strategic and domestic fuel requirements.

The ratings of PRL draw comfort not only from its association with the state-owned petroleum corporation; Pakistan State Oil (PSO) but also from the fact that a considerable portion of the country’s petroleum demand is met through the company.

The local refinery sector took a toll owing to the deteriorating economic condition of the country.

Furthermore, the depreciation of PKR against the U.S. dollar resulted in unpredictable losses to the refineries based on imported crude oil.

PRL's core business remains exposed to the vicissitudes in international crude and petroleum products (POL) prices, which steer the company’s gross refining margins (GRMs).

The throughput of fuel refinery operations declined to 57% as compared to 61% in the corresponding period.

Stability in prices of crude oil was witnessed during the latest quarter resulting in steady product margins.

Consequently, the company reported a gross profit of Rs4,464 million for the third quarter FY23 (3QFY22: Rs7,156m).

The cumulative gross profit for the nine months FY23 was reported to be Rs6,174m (9MFY22: Rs8,605m).

The net profitability of the company was impacted due to currency devaluation along with soaring interest rates.

Furthermore, the company incurred a finance cost of Rs3,177m during 9MFY23.

Therefore, during nine months period, the company reported a net profit of Rs2,531m (9MFY22: Rs5,415m).

However, no final approval has been granted by the government which is expected to get delayed further amid current political instability in the country.

The ratings are reflective of the resilient business profile of Pakistan Refinery Limited (PRL) emanating from its sustainable operational history and its strategic importance in the domestic context.

Revived performance indicators and a prudent financial matrix are imperative to uphold the ratings.

Further, the approval of the proposed refining policy, which will enhance Refineries’ ability to upgrade remains imperative for the ratings.

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