PRL incurs losses of Rs114.5mn in 1HFY22

February 07, 2022 (MLN): Pakistan Refinery Limited (PRL) unveiled its financial statement for the first half of the fiscal year ended on December 31, 2021, on Monday, as per which the company incurred a loss of Rs114.5 million (LPS: Rs 0.18), compared to the profit worth Rs85mn (EPS: Rs0.14) in 1HFY21.

The loss is mainly attributed to the exchange loss of Rs1.42bn owing to significant depletion in the value of Pak Rupee against the US dollar, as per the company statement noted.

With regards to major expense heads, the company encountered a 22.28% YoY and 21.5% YoY rise in its administrative and distribution expenses, respectively while other expenses expanded by more than twofold.

Similarly, the finance cost of the company also jumped by 23% YoY to clock in at Rs798mn in 1HFY22.

On the taxation side, the company paid Rs314.5mn during the review period, compared to Rs290mn in SPLY.

However, the company believes that the current pricing mechanism which includes the allowance to recover exchange loss will enable the company to recover a portion of cumulative exchange loss suffered during the period.

The government through Finance Act, 2021 reduced the rate of Minimum Tax on Turnover from 0.75% to 0.5% and the rate of custom duty on crude oil from 5% to 2.5%. Subsequent to the period end, the government through Finance Supplementary Act 2022, has reduced sales tax on crude oil from 17% to 0%.

During December 2021, the refinery operations were temporarily shut down for a period of 16 days owing to operational and ullage issues caused by a shortfall in demand of furnace oil by Oil Marketing Companies (OMCs).

This industry-wide issue was caused due to the lower electricity demand in winters and the supply of RLNG to power plants. Subsequent to the period end, the company resumed its operations after ensuring smooth upliftment of its products, resolving the operational and ullage constraints.

During the same month, the board made a public announcement to undertake the Refinery Expansion and Upgrade Project with the objectives of production of EURO V compliant High Speed Diesel and Petrol, expansion of crude processing capacity to 100,000 barrels per day and upgradation from hydro-skimming to deep-conversion refinery, thereby significantly reducing the production of High Sulphur Furnace Oil and improving company’s results. 

Front-End  Engineering and  Design contract and appointment of the financial advisor is expected by the end of the third quarter of the current financial year, the statement informed.

In addition, the continued availability of financing facilities demonstrates the confidence of financial institutions in the company's business model supporting liquidity management.

Based on the above factors and their positive effect on the company's projections together with the continuous availability of financing facilities, the company believes that it will meet the obligations and will continue to operate as a going concern for a period of at least 12 months from the date of approval of this condensed interim financial information, it said.

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