August 20, 2020 (MLN): Pakistan Refinery Limited (PRL) has posted net loss of Rs 7.59 billion for the year ended on June 30th, 2020, which was 30% higher than the losses reported last year.
The loss per share of the company also increased from Rs 13.68 to Rs 17.74.
During the year, company’s revenue went down by 21.79% YoY resulted in a 37% expansion in gross losses.
According to the financial statement issued by the Company to Exchange, as at June 30, 2020, the Company has accumulated loss of Rs. 18.36 billion (2019: Rs. 10.67 billion) and the current liabilities exceed its current assets by Rs. 16.84 billion (2019: Rs. 10.89 billion). Thus, the Company ended the year with net negative cash and cash equivalents amounting to Rs. 10.19 billion (2019: Rs. 14.05 billion).
In addition to above, under the policy framework for up-gradation and expansion of refinery projects issued by the Ministry of Energy (previously Ministry of Petroleum & Natural Resources) on March 27, 2013, refineries were required to install Diesel Hydrodesulphurisation Unit (DHDS) by June 30, 2017 to produce Euro 11 compliant High Speed Diesel (HSD) and in case of non-compliance, the ex-refinery price of HSD based on Import Parity Pricing (IPP) formula would be downward adjusted / reduced due to higher Sulphur content. As at June 30, 2020 the Company did not meet the aforementioned deadline of setting up DHDS unit and hence was subjected to downward adjustments of its HSD pricing causing loss Rs. 1.03 billion (2019: Rs. 1.15 billion) which is part of aforementioned loss for the year.
The above-mentioned conditions may cast significant doubt on the Company's ability to continue as a going concern and the Company may be unable to realise its assets and discharge its liabilities in the normal course of business, revealed company’s financial statement.
To address the negative equity and liquidity issues the Board of Directors in their meeting dated February 10, 2020, decided to make a right issue of 1 ordinary share for every 1 share held amounting to Rs. 3.15 billion. The Right Issue has been fully subscribed subsequent to the year end.
In addition, as already announced in Pakistan Stock Exchange, the Company in light of new operational strategy has undertaken various non-capex options which will assist the Refinery to comply with the regulatory requirements and will also have a positive impact on the Company's profitability. These measures include:
- Sustained production of MS 92 RON and the ability to produce MS 95/97 RON has been achieved. This has already resulted in saving of RON differential price adjustment on MS, which is paid to the Government, hence generating additional revenues.
- Changes in crude recipe and operational philosophy has enabled the Refinery to produce EURO 11 compliant High-Speed Diesel (HSD). This will make the Refinery compliant with the regulatory requirements and will also save price differential which the Company is required to pay to the Government due to production of HSD with higher Sulphur contents. It is to be noted that the Company has suffered cumulative Rs. 7.18 billion on account of HSD price differential since March 2013. The Refinery produced EURO II compliant HSD subsequent to year end with the revised crude recipe and is currently exploring long term arrangements with relevant crude suppliers to continue producing EURO II compliant HSD on a sustainable basis.
- The changes in crude recipe and operational philosophy made the Company the first refinery in Pakistan to produce IMO-2020 grade Marine Residual Fuel (MRF). MRF is a premium product and will add to the margins of the Company. The Company has already started production of MRF since June 2020, however, its sustained production is also tied with long term crude arrangements as explained above.
In addition, the Economic Coordination Committee of the Government of Pakistan (ECC) has approved a revised pricing mechanism effective March 1, 2020 whereby the Company will be able to recover a certain portion of exchange loss suffered on crude oil imports through pricing of MS and HSD.
This will partly address the issue of exchange risk which the Company faces. The mechanism has been implemented from June 2020. Moreover, with the support of its parent company to uplift refined products and the availability of funded and unfunded credit facilities, the Company will be able to support its liquidity management efforts.
|
Profit and Loss Account for the Year Ended June 30,2020 (Rupees '000) |
|||
|---|---|---|---|
|
|
Jun-20 |
Jun-19 |
% Change |
|
Revenue from contracts with customers |
90,524,260 |
115,740,971 |
-21.79% |
|
Cost of sales |
(94,892,607) |
(118,915,466) |
-20.20% |
|
Gross loss |
(4,368,347) |
(3,174,495) |
37.61% |
|
Distribution cost |
(206,096) |
(250,171) |
-17.62% |
|
Administrative expenses |
(459,767) |
(485,457) |
-5.29% |
|
Loss allowance in trade receivables |
– |
(121,939) |
|
|
Other operating expenses |
(43,038) |
(23,763) |
81.11% |
|
Other income |
163,901 |
267,307 |
-38.68% |
|
Operating loss |
(4,913,347) |
(3,788,518) |
29.69% |
|
Finance cost |
(1,995,012) |
(1,442,624) |
38.29% |
|
Share of income/(loss) of associated accounted for using the equity method |
3,258 |
(13,963) |
– |
|
Loss before taxation |
(6,905,101) |
(5,245,105) |
31.65% |
|
Taxation |
(685,625) |
(576,015) |
19.03% |
|
Loss after taxation |
(7,590,726) |
(5,821,120) |
30.40% |
|
Loss per share – basic and diluted (rupees) |
(17.74) |
(13.68) |
29.68% |
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