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Attock Refinery Limited

(ANNUAL REPORT 1996)

COMPANY INFORMATION

Board of Directors

Chairman

JAVED JABBAR

Directors

DR. GHAITH R. PHARAON

ABDUS SATTAR

JAHANGIR N.W. ANSARI

RASHID FAROOQ

SHUAIB ANWER MALIK

LAITH GHAITH PHARAON

KHALID ATIQ GHAZI

TANVIR AHMAD

Chief Executive Officer

K. MUZAFFAR

Company Secretary

S. AHMED ABID

Auditors

A.F. FERGUSON & CO.

Chartered Accountants

Legal Advisors

ZAFAR LAW ASSOCIATES

Advocates & Solicitors

Registered Office

The Refinery,

Morgah, Rawalpindi.

Telephones: (051) 487041-5

Fax

: (051) 487254

Telex

: 5877 ATPOL PK

BOARD OF DIRECTORS

Javed Jabbar

Chairman

Dr. Ghaith R. Pharaon

Abdus Sattar

Jahangir N. W. Ansari

Rashid Farooq

Shuaib Anwer Malik

Laith Ghaith Pharaon

Khalid Atiq Ghazi

Tanvir Ahmad

K. Muzaffar

Chief Executive Officer

NOTICE OF ANNUAL GENERAL MEETING

Notice is hereby given that the Eighteenth Annual General Meeting of the Company will be held at the

Registered Office of the Company at Morgah, Rawalpindi on Sunday, 29 December, 1996 at 10.00 a.m. to

transact the following business:

ORDINARY BUSINESS

1. To confirm the minutes of Seventeenth Annual General Meeting of the Company held on

27 December, 1995.

2. To receive, consider and approve the Audited Accounts of the Company together with the

Directors' and Auditors' Reports for the year ended 30 June, 1996.

3. To consider and, if thought fit, declare a final cash dividend as recommended by the Board of

Directors for the year ended 30 June, 1996.

4. To appoint Auditors for the next year and fix their remuneration.

5. To transact such other business as may be placed before the meeting with the permission of

the Chairman.

SPECIAL BUSINESS

6. To consider and, if thought fit, to pass the following Resolution as an ordinary resolution:

"Resolved:

a) that a sum of Rs 37,500,000 out of the profit of the Company for the year ended

30 June, 1996 be capitalised and applied for issue of 3,750,000 ordinary shares of

Rs 10/- each allotted as fully paid Bonus Shares to the members of the Company

whose names appear on the register of members as at close of business on

21 December, 1996, in the proportion of one new share for every four shares held.

b) that the Bonus Shares so allotted shall rank pari passu in all respects with the existing

shares except that they shall not qualify for the dividend declared for the year ended

30 June, 1996.

c) that the members entitled to fractions of a share shall be given sale proceeds of their

fractional entitlement for which purpose the fractions shall be consolidated into whole

shares and sold in the stock market.

d) that the Secretary of the Company be authorised and empowered to give effect to

this resolution and to do or cause to do all acts, deeds and things that may be

necessary or required for issue, allotment and distribution of Bonus Shares. In the

case of non-resident shareholders the Secretary is further authorised to issue/export

the Bonus Shares after fulfilling the statutory requirements."

By Order of the Board

(S. AHMED ABID)

COMPANY SECRETARY

Notes:

i. A member entitled to vote at this meeting may appoint another member as his/her proxy to

attend and vote. Proxies in order to be effective must be received by the Company 48 hours

before the meeting.

ii. Share Transfer Books of the Company will remain closed and no transfer of shares will be

accepted for registration from 22 December to 29 December, 1996 (both days inclusive).

Transfers received in order at the registered office of the Company by the close of business on

21 December, 1996 will be treated in time for the purposes of payment of the final dividend

and eligibility of Bonus Shares if declared.

iii. Members are requested to promptly notify the Company of any change in their addresses.

iv. A statement of material facts under Section 160 (1) (b) of the Companies Ordinance, 1984

pertaining to the Special Business referred above under agenda item 6 is annexed to this

Notice of Meeting being sent to members.

STATEMENT UNDER SECTION 160(1) (b) OF THE COMPANIES ORDINANCE, 1984

The Directors are of the view that with improved profitability, the Company's financial position justifies

capitalisation of Rs 37,500,000 out of profit by issuing fully paid Bonus Shares in the ratio

of 1:4 i.e. one Bonus Share for every four ordinary issued shares.

CHAIRMAN'S REVIEW

It gives me great pleasure to welcome you all to the

Eighteenth Annual General Meeting for presenting the

Audited Accounts and Annual Report of the Company

for the year to 30 June, 1996.

PRICING FORMULA

As already advised in the Interim Report of the Directors,

after a series of meetings with the Government and

review of profitability under the import parity pricing

formula, the Company accepted the Government's

proposal to continue with the existing import parity

pricing formula with some modifications allowing the

Company a profit after tax within the range of 10-40%

on paid-up capital and retain surplus profits over the

maximum limit of 40% after making adjustment of the

element of $ 4.30/M. Ton allowed in product prices. These

surplus profits are allowed to be retained for utilisation in

the development plans for Refinery Upgradation and

Expansion as approved by the Government and cannot

be distributed.

I am pleased to inform you that as a result of the

modification in the pricing formula, the Company is

entitled to retain surplus profits of Rs 122.3 million over

and above the allowable profits of Rs 60 million at 40%

on paid-up capital of Rs 150 million. This surplus profit

would be utilised in the development projects already

undertaken by the Company.

FUTURE OUTLOOK

The work on the Refinery Upgradation and Expansion

Plan is progressing satisfactorily as per schedule. The

contract for the construction of the Naphtha

Hydrotreating/Reforming Plant and Heavy Crude Unit is

expected to be awarded shortly after detailed evaluation

of the bids received from prequalified short-listed bidders.

It is expected that these plants would come into opera-

tion by early 1999. With the commissioning of the Naph-

tha Hydrotreater/Reforming Plant the Company would

be capableofupgrading10,000bpsdoflowoctanenaph-

tha into 87 Ron premium grade motor gasoline and would

also enable the Company to increase its throughput by

processing imported crudes. The Heavy Crude Unit would

replace the existing unit which is more than 55 years old.

As your Company continues to operate below capacity

due to insufficient and declining quantities of crude oil

available in the northern region of the country, a suitable

crude capable of being processed at the existing refining

units has been identified for import. Currently the price is

high due to international market conditions. However,

arrangements for receiving the crude and its upcountry

transportation have been discussed and will be finalised as

soon as the price of crude makes it viable to import it.

TRAINING AND DEVELOPMENT

The Company continues to provide training to its

management staff and workers within and outside the

country. Special emphasis has been placed on safety,

the latest technology, maintenance, quality control and

environment aspects.

STAFF

I am pleased to report that the management continued to

have cordial relations with the workers and the Collective

Bargaining Agent. The agreement which expired in June,

1995 was successfully negotiated for a further 2 years

through bilateral negotiations.

In order to recognise and reward continued long service,

the Company introduced a scheme for long service awards

for its management staff. A Long Service Award Scheme

for non-management staff is in existence since 1981

under which workers with long service are given awards

at the time of retirement.

I would also like to record my deep appreciation of the

efforts and dedication of all the executives, staff and

workers of the Company which enabled the management

to conduct the affairs of the Company efficiently and

smoothly during the year.

ACKNOWLEDGEMENT

Finally, I take this opportunity to express my sincere thanks

to all my colleagues on the Board, and the Government,

for their continuing support and cooperation and the

confidence placed in your Company by its crude oil

suppliers and customers. I sincerely hope that your

Company will continue to enjoy their full confidence and

cooperation for the development and progress to achieve

even better results in the years ahead.

I would also like to place on record my deep

appreciation of the valuable contribution made by the

outgoing Chairman, Mr. Anwar Saifullah Khan and

Director, Mr. Babar Bashir Nawaz during their tenure on

the Board.

I also express my sincere thanks for the continued interest

and support of our shareholders.

Javed Jabbar

14th November, 1996

Chairman

TEN YEARS AT A GLANCE

30 June

(Rupees in Million)

1996

1995

1994

1993

1992

1991

1990

1989

1988

1987

PROFIT AND LOSS SUMMARY

Sales (Net of Govt. Levi

5,112.50

3,834.40

4,746.20

5,165.80

5,179.90

4,750.70

3,810.20

2,884.40

2,962.60

2,389.30

Reimbursement from/(to)

Government

17.40

692.80

(69.4)

(9.5)

(22.7)

856.20

22.60

(26.9)

(139.1)

160.30

Other income

99.90

59.50

88.30

57.40

47.60

32.60

19.60

18.30

18.50

23.10

Income from non-refinery

operations after tax

1.2

2.80

3.60

3.10

3.20

5.20

2.60

Total Revenue

5,231.00

4,589.50

4,768.70

5,216.80

5,208.00

5,644.70

3,855.00

2,875.80

2,842.00

2,572.70

Cost of Sales, Administration

and Selling Expenses etc

(4,918.8)

(4,486.8)

(4,695.0)

(5,126.5)

(5,183.5)

(5,603.6)

(3,806.0)

(2,827.5)

(2,791.6)

-2,516.10

Workers' Funds

(21.9)

(6.4)

(4.8)

(6.6)

(1.5)

(2.5)

(3.6)

(3.7)

(3.9)

(4.4)

Taxation

(106.8)

(43.5)

(25.3)

(48.6)

(5.4)

(19.0)

(28.4)

(30.2)

(32.1)

(37.8)

Net Profit after Tax

183.50

52.80

43.60

35.10

17.60

19.60

17.00

14.40

' 14.4

Additional net profit

for prior years

32.90

Unappropriated profit

brought forward

9.6

6.80

3.20

0.90

0.80

0.40

0.80

Dividend

(30.0)

(25.0)

(19.0)

(12.8)

(17.6)

(19.2)

(14.4)

(t4.4~

(t~4)

Transfer to Reserves

159.80

(25.0)

(52.9)

(3.0)

Transfer from Reserves

BALANCE SHEET SUMMARY

Paid-up Capital

150

125.00

100.00

80.00

Reserves

198.70

63.90

62.90

10.00

6.50

Unappropriated Profit

3.30

9.60

6.80

3.20

0.90

0.80

0.40

0.80

Long-Term Loans

30.50

64.70

Fixed Assets (Less

depreciation)

180.30

146.80

117.60

109.10

95.90

90.30

100.90

104.30

130.50

159.90

SHARES AND EARNINGS

Earning (Rs per share)

12.20

4.20

4.40

8.50

2.20

2.40

2.10

1.80

Break-up Value

(Rs per share)

23.50

15.90

17.10

18.30

11.40

11.30

10.90

Dividend

20%

19%

16%

22%

24%

18%

Bonus Shares Issue

25%

20%

25%

REPORT OF THE DIRECTORS

The Directors of the Company have pleasure in

presenting their Annual Report and Audited

Accounts of the Company together with Auditors'

Report thereon for the year ended 30 June, 1996.

1996

Rupees

(000)

1. FINANCIAL RESULTS

These are summarised below:

Profit for the year after providing for all expenses including

depreciation, workers' funds under the import parity

pricing formula as modified during the year

289,113

Less: Provision for taxation

106,801

Profit after taxation from refinery operations

182,312

Income from non-refinery operations less applicable

charges, workers' funds and taxation

1,205

Net profit for the year after taxation

183,517

Unappropriated profit brought forward

9,631

Profit available for appropriation

193,148

APPROPRIATIONS

The Directors propose that this should be utilised in providing for:

-- Transfer to Reserve for expansion/modernisation being surplus

profits over 40% retained as per Government stipulation

122,312

-- Interim dividend at the rate of 10% (equivalent to

Re. 1.00 per share of Rs 10/- each) paid in May, 1996

15,000

-- Final dividend at the rate of 10% (equivalent to

Re. 1.00 per share of Rs 10/- each) now proposed

15,000

-- Transfer to Reserve for issue of bonus shares

37,500

189,812

Leaving unappropriated profit to be

-------

carried forward to next year

3,336

========

As advised in the Chairman's review the Company's

pricing formula has been modified whereby the

Company continues to operate under the import

parity pricing formula under which the Company is

entitled to a minimum of 10% and maximum of 40%

return net of tax on its paid-up capital in respect of its

refinery operations and has been further allowed to

retain surplus profits over 40%, after adjustment of

premium of $ 4.30/M. Ton allowed in the products

prices, for utilisation in the development plans for

Refinery Upgradation and Expansion. This has

resulted in total net profit of Rs 182.3 million which

represents Rs 60 million maximum allowable return

at 40% on paid-up capital, and surplus profits of

Rs 122.3 million retained for development projects

as stipulated by the Government in the modified

pricing formula.

The sales revenue recorded an increase as a result of

increased sales volume, despite reduced throughput,

and higher average ex-refinery prices allowed to the

Company. All crude oil receipts from indigenous

sources were priced on the principles of import

parity as per parameters defined by the Government.

Although the crude throughput reduced during the

year the total cost of crude oil consumed increased

on account of average prices of crude oil being higher

than last year.

In addition the Company has also earned other

income of Rs 1.205 million (net of tax and workers'

funds) from non-refinery operations outside the

pricing formula.

2. TAXATION

The issue of taxability of amounts refunded to the

Government under the pricing formula was decided

against the Company in appeals with the Income-tax

Appellate Tribunal filed by the Tax Department in

respect of assessment years 1988-89 and 1989-90

and by the Company in respect of assessment year

1992-93. The Company has filed Reference

Applications on questions of law relating to taxability

of amounts refunded to the Government under the

pricing formula and these Reference Applications

along with Tax Department's Reference Application

on similar issue for the assessment year 1986-87 are

pending hearing by the High Court. Company's

appeals for the assessment years 1991-92 to

1994-95 against the decision of the Commissioner

of Income-tax (Appeals) on the above issue and

certain addbacks are also pending hearing with the

Income-tax Appellate Tribunal. The tax paid by the

Company in respect of prior years on refunds made

to the Government under the pricing formula has been

adjusted against the Government account as already

agreed.

3. PAID-UP CAPITAL

The Company's paid-up capital was increased from

Rs 125 million to Rs 150 million through

capitalisation of an amount of Rs 25 million, out of

the profits of the Company, by way of issue of fully

paid bonus shares to the Members of the Company in

the proportion of one new share for every five shares

held.

4. DIVIDEND

The Company has already paid an interim dividend

of 10% in May, 1996 and Directors are now

recommending final dividend at the rate of 10%

(Re. 1.00 per share of Rs 10/- each) making a total

of 20% for the year ended 30 June, 1996.

5. BONUS SHARES

The Directors are also pleased to recommend

capitalisation of an amount of Rs 37.5 million out of

the profits for the issue of fully paid bonus shares to

the Members of the Company in the proportion of

one new share for every four shares held.

6. REFINERY OPERATIONS

The Company's refining capacity continued to be

under utilised due to non-availability of indigenous

crude oil. The Refinery processed the indigenous crude

supplied from the Northern Region together with some

crude from Pakistan's southern oilfields under various

contracts approved by the Government. The total

throughput of the Refinery during the year was

7,388,157 barrels (0.958 million M. Tons) as

compared to its nameplate capacity of 10,065,000

barrels (1.330 million M. Tons) representing 73% of

capacity utilisation. A total of 7.467 million

barrels of crude oil (1995:7.735 million barrels) were

received by the Company from twenty four different

oilfields which was 3.5% lower than the receipts of

the last year. Crude receipts decreased from a number

of fields but this decrease was partly offset by increased

receipts from new fields discovered last year and crude

receipts from certain oilfields in the southern region.

The net decrease in crude receipts was 0.267 million

barrels.

The total crude receipts averaged 20,402 bpcd of

which 11,988 bpcd (59%) was received through road

transportation and the balance of 8,414 bpcd (41%)

was received through pipeline.

To meet the contractual obligations and the market

demand the Company increased its production of

asphalt to 73,000 metric tons (1995:62,000 metric

tons). The total quantity marketed was over 76,000

metric tons (1995:62,000 metric tons).

In an effort to optimise the refinery operations, the

Company successfully completed the in-house

development of producing Jute Batching Oil and has

commenced its marketing during the year.

The Company continues to maintain its plant and

machinery in a reliable operable condition. Regular

and planned maintenance of the plants and facilities

was undertaken during the year as per schedule.

The construction of a drinking water treatment plant

for supply of treated drinking water to the Refinery

and the Company's colony was completed and

commissioned during the year. Work on construction

of a new crude tank with a storage capacity of 100,000

barrels which was started last year and was expected

to be completed by June, 1996 has been delayed due

to litigation initiated by the Contractors on failure to

perform their obligations.

In order to overcome operational problem and to

enhance decanting facilities to cater for the handling

of larger quantities of crude by road tankers work has

been undertaken to relocate the crude decanting

facility with improved design and safety allowing free

movement of road tankers. As part of modernisation

and energy conservation efforts, in addition to two

new boilers completed and commissioned last year, a

contract has been awarded for the construction,

installation and commissioning of a third boiler which

is expected to be completed by June, 1997.

7. ENVIRONMENTAL PROTECTION

AND SAFETY

The Company continued to accord importance to

projects for environmental protection. The work on

the improvement of oil/water separator system of the

Refinery and to treat the effluent water for partial

reuse as well as to discharge water to the Sohan river

conforming to National Environmental Quality

Standards (NEQS) has progressed as per schedule.

Phase-I of this project which included the installation