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PRL sees a turnaround in yearly earnings

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August 16, 2021 (MLN): Pakistan Refinery Limited (PRL) has reported a net profit of Rs937 million (EPS: Rs1.52) for the year ended on June 30th, 2021, a turnaround from the previous fiscal year when it incurred a net loss of Rs7.59 billion (LPS: Rs17.54).

During the FY21, the revenue inched up by 1.72% YoY while cost of sales plunged by 6.4% YoY. Resultantly, the company witnessed a gross profit of Rs3.24bn against the gross loss of Rs4.37bn.

According to the financial statement issued by the Company to Exchange, as at June 30, 2021, the Company's accumulated loss was Rs18.18 billion (June  30, 2020: Rs18.36 billion) and, as at that date current liabilities exceeded its current assets by Rs17.80 billion (June 30, 2020: Rs16.84 billion). The Company ended the year with negative cash and cash equivalents amounting to Rs5.46 billion (June 30, 2020: Rs3.69 billion). These conditions may cast a significant doubt on the Company's ability to continue as a going concern.

Right issue of 1 ordinary share for every 1 share held amounting to Rs3.15 billion, announced in February 2020 primarily to address negative equity and liquidity issues was completed during the year thereby increasing the share capital to Rs6.30 billion.

During the year, the Economic Coordination Committee (ECC) approved a revised pricing mechanism effective September 1, 2020 which allowed refineries to announce ex-refinery prices of regulated products on fortnightly basis as compared to previous monthly basis.

Under the revised mechanism, pricing of regulated products is based on average Freight on Board (FOB) price published by Platts for Arab Gulf Market plus PSO's actual premium, freight, incidentals (excluding ocean losses) and applicable taxes. Through the same mechanism, EURO V standard is introduced for pricing of Motor Spirit (MS) and High-Speed Diesel (HSD) instead of EURO II resulting in a price differential element for refineries not producing EURO V standard MS and HSD.

Further, by changing crude recipe and operational philosophy during the year, the Company was able to produce IMO-2020 grade Marine Residual Fuel (MRF), a premium product and EURO II compliant High-Speed Diesel for a certain year that enabled the Company to earn additional revenues. However, sustainable production of above high premium products is tied with long term crude arrangements. The Company's ability to produce Petrol (MS) 92, 95 and 97 RON resulted in saving of RON differential price adjustment on MS and also generated additional revenues to the Company during the year.

In addition, the continued availability of financing facilities demonstrates the confidence of financial institutions on the Company's business model supporting the liquidity management. All the above factors contributed positively and the Company earned profits during the period as compared to loss in the corresponding period.

Finance Act, 2021 introduced following amendments which have material impact on existing refineries

  • Reduction in rate of Minimum Tax on turnover from 0.75% to 0.5%;
  • Decrease in rate of Custom Duty on crude oil imports from 5% to 2.5%;
  • 10-year tax holiday for undertaking upgrade or expansion projects on profit earned therefrom;
  • Levy of General Sales Tax at the rate of 17% on crude oil purchases which were “zero rated” previously

These measures will have a favourable impact on the future results of the Company.

Based on the above factors and their positive effect on 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 these financial statements.

Accordingly, these financial statements have been prepared on a going concern basis and therefore, do not include any adjustments to the carrying amounts and classification of assets and liabilities that may arise if for any reason, the Company is unable to continue as a going concern, then this could have an impact on the Company's ability to realize assets at their recognized values and to extinguish liabilities in the normal course of business at the amounts stated in these financial statements.

Profit and Loss Account for the year ended June 30th, 2020 ('000 Rupees)

 

Jun-21

Jun-20

% Change

Revenue from contracts with customers

 92,084,090

 90,524,260

1.72%

Cost of sales

 (88,843,085)

 (94,892,607)

-6.38%

Gross Profit/ (loss)

 3,241,005

 (4,368,347)

Distribution cost

 (266,280)

 (206,096)

29.20%

Administrative expenses

 (478,810)

 (459,767)

4.14%

Other operating expenses

 (176,074)

 (43,038)

309.11%

Other income

 636,931

 163,901

288.61%

Operating profit/ (loss)

 2,956,772

 (4,913,347)

Finance cost

 (1,311,384)

 (1,995,012)

-34.27%

Share of income/(loss) of associated accounted for using the equity method

 (6,364)

 3,258

Profit/(Loss) before taxation

 1,639,024

 (6,905,101)

Taxation

 (701,868)

 (685,625)

2.37%

Profit/ (Loss) after taxation

 937,156

 (7,590,726)

Earnings/ (Loss) per share – basic and diluted (rupees)

 1.52

 (17.54)

 

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Posted on: 2021-08-16T17:27:00+05:00

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