| PAKISTAN REFINERY LIMITED |
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| Annual
Report 1997 |
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| Contents |
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| Company
Information |
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| Notice |
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| Chairman's
Review |
|
| Directors'
Report |
|
| Ten
Years at a Glance |
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| Auditors'
Report |
|
| Balance
Sheet |
|
| Profit
and Loss Account |
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| Cash
Flow Statement |
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| Notes
to the Accounts |
|
| Pattern
of holdings of shares |
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|
|
|
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| Company
Information |
|
| Chairman |
|
| Salahuddin
Qureshi |
|
|
|
| Directors |
|
|
| M.B. Abbasi |
|
| Ardeshir
R. Cowasjee |
|
| Ahmed
Dawood |
|
| M M. Farid |
|
| T.
V. Higgins |
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| G. L. Mahan |
|
| G. A. Sabri |
|
| D.
M. Sadler |
|
| Arshad Said |
|
|
| General
Manager & |
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| Chief
Executive |
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|
| S.
Viqar Salahuddin |
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|
| Secretary |
|
|
| Mrs.
Fawzia Hafeez |
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|
| Auditors |
|
|
| A.
F. Ferguson & Co. |
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|
| Registered
Office |
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| Korangi
Creek Road, Karachi. |
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|
| Registrar
and Share Registration Office |
|
|
| Ferguson
Associates (Pvt) Ltd. |
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| P.O.
Box 4716 |
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| State
Life Building I-A |
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| Off.
I.I. Chundrigar Road |
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| Karachi
74000 |
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| Notice |
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| Notice
is hereby given that the Thirty Seventh Annual General Meeting of the Company
will be held on Friday, |
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| December
05, 1997 at 10.30 A.M. at Sheraton Hotel, Club Road, Karachi to transact the
following business: |
|
|
| ORDINARY
BUSINESS |
|
|
| 1.
To receive and consider the Balance Sheet and Profit and Loss Account
together with the Directors' Report |
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| for
the year ended June 30, 1997. |
|
|
| 2.
To declare the final dividend. |
|
|
| 3.
To appoint Auditors for the next accounting period and to fix their
remuneration. |
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| SPECIAL
BUSINESS |
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| 4.
To approve the remuneration payable to the Chief Executive of the company. |
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|
| EXPLANATORY
STATEMENT UNDER SECTION 160 (1) (B) |
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| OF
THE COMPANIES ORDINANCE, 1984. |
|
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| Approval
of the members is sought for the remuneration payable to the Chief Executive
in accordance with |
|
| terms
and conditions of his service. For this purpose it is proposed that the
following resolution be passed as |
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| an
Ordinary Resolution: |
|
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| 'RESOLVED
THAT Mr. Syed Viqar Salahuddin, the General Manager of the Company, be and is
hereby |
|
| authorised
to hold office as a full time Chief Executive of the Company under his
Contract of Service and the |
|
| Directors
of the Company be and are hereby authorised to allow him any fringe benefits
arising out of his |
|
| Contract
of Service and the applicable service rules of the Company and pay him by way
of salary a sum not |
|
| exceeding
Rs. 1,050,000 per annum gross, increased by such sums per annum as may be
applicable as per his |
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| terms
of employment as reviewed by the Directors from time to time. |
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| The
Share Transfer Books of the Company will remain closed from November 22, 1997
to December 5, 1997 (both |
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| days
inclusive) when no transfer of shares will be accepted for registration. |
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| Karachi:
September 25, 1997 |
|
|
| Notes: |
|
|
| (i)
A member entitled to be present and vote at the meeting may appoint a proxy
to attend, speak and vote instead |
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| of
him. A proxy need not also be a member of the Company. Proxies duly stamped
and signed, and the power |
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| of
attorney or other authority (if any) under which they are signed or a
notarially certified copy of that power |
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| or
authority must be deposited at the Registered Office of the Company not less
than 48 hours before the time |
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| of
the meeting. An approved form of proxy is enclosed. |
|
|
| (ii)
The minutes of the previous meeting are available at the Registered Office of
the Company. |
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|
|
| Chairman's
Review |
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| On
behalf of the Board of Directors, it gives me great pleasure in welcoming you
to the 37th Annual General |
|
| Meeting
of the Company. |
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|
| CRUDE
OIL CONTRACTS AND PRICES |
|
|
| The
Company continued to import its crude oil requirements from National Iranian
Oil Company and Abu Dhabi |
|
| National
Oil Company. The crude oil imported was shared with National Refinery Limited
from whom Arabian |
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| Light
crude was purchased in return, as has been the practice in the past. Besides
the imported crude oil, indigenous |
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| crude
and condensate were also purchased and processed. |
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| The
crude oil prices during the year under review continued its upward trend and
averaged $ 19.92 per barrel |
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| compared
to $ 16.67 per barrel in the previous year. The present level of
international crude oil prices is around |
|
| $
17.70 per barrel. |
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|
| PRODUCTION |
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| The
throughput achieved during the year was 2.321 million tons compared to 2.467'
million tons in the previous year. |
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| The
reduction in throughput was due to the planned maintenance shutdown carried
out during the first half of the |
|
| year
under review. The throughput during the year included 0.571 million tons of
indigenous crude oil and |
|
| condensate. |
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| PROFITABILITY |
|
|
|
| The
Company continued to operate under the Import Parity Formula under which the
rate of return from refining |
|
| operations
is limited between 10-40% of the paid-up capital. During the year under
review, crude oil prices increased |
|
| at
a comparatively higher rate than the increase in product prices, as entitled
under the Import Parity Pricing Formula |
|
| approved
by the Government. As a result, the company sustained a loss after tax of Rs.
174.6 million from refinery |
|
| operations.
The Government has to reimburse Rs. 204.6 million to enable the Company to
make a profit after tax of |
|
| 10%
on paid-up capital, from its refinery operations. |
|
|
| Provision
for taxation has been made on the basis of 0.5% of turnover, in accordance
with section 80D of the Income |
|
| Tax
Ordinance, 1979. The application of turnover tax has also contributed to the
increased loss after tax. |
|
|
| As
explained in the Directors Report, I and my colleagues on the Board are
concerned at the very large increase in |
|
| trade
debts of the company. The management is taking steps to recover the overdue
outstanding. |
|
|
| PERSONNEL |
|
|
| Mr.
J.J. Smith, General Manager and Chief Executive, completed his three year
contract with the company and Mr. |
|
| Syed
Viqar Salahuddin was appointed by the Board of Directors in his place. I
would like to record my personal |
|
| appreciation
and that of my colleagues on the Board of Directors, for the excellent
service rendered by Mr. J.J. Smith. |
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| I
am confident that under the able guidance of the new Chief Executive, the
company will continue to maintain its |
|
| high
standard and growth. |
|
|
| The
relations of the Management with the workers and their union remained
cordial. The two year agreement with |
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| the
employees' union expired on June 30, 1997. A fresh Charter of Demands has
been received on which bilateral |
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| negotiations
are in progress. |
|
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| During
the year, your Company continued its emphasis on high standards of safety
consciousness amongst its |
|
| employees
and all those associated with its activities. I am glad to report that
employees at all levels and contractors |
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| have
co-operated and we did not have any major injury during the year. |
|
|
| Efforts
are continued in providing training to staff and workers at all levels within
and outside the Company, |
|
| STATEMENT
OF GENERAL BUSINESS PRINCIPLES OF PRL |
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| I
am pleased to report that the Company has adopted a Statement of General
Business Principles which conform with |
|
| the
highest international standards and are in consonance with its own
objectives. The Management and employees |
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| of
the Refinery are under obligation to adhere to these principles. |
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|
| OUTLOOK |
|
|
| The
discussion with the government in respect of the 30% capacity Expansion Plan
have continued and some |
|
| progress
was made on decapping Refinery profits for this and other projects. However,
as mentioned in last year's |
|
| review,
the current economic realities of refining are that the industry cannot be
sustained and expanded without |
|
| satisfactory
growth in refining margins. Notwithstanding, the Management is making its
best efforts to evolve and |
|
| reach
agreement with the government, on a pricing structure that will ensure the
economic viability of this project |
|
| and
provide a satisfactory return to the company's shareholders. |
|
|
| The
company is actively focusing on the setting up of an import facility for
crude and white oils. Discussions with |
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| the
government are underway. Expert advice is being sought on the feasibility of
the project |
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|
| ACKNOWLEDGMENT |
|
|
| Finally,
I take this opportunity to express my thanks to all my colleagues on the
Board of Directors, for their valuable |
|
| contribution
in running the affairs of the company. |
|
|
| I
would also like to congratulate the Management and all company employees for
their dedication and hard work in |
|
| maintaining
and running the refinery efficiently during a challenging year. |
|
|
| September
25, 1997 |
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|
|
| DIRECTORS'
REPORT |
|
|
| The
Directors of your Company are pleased to present their Report together with
the Accounts and Auditor's |
|
| Report
for the year ended June 30, 1997. |
|
|
|
|
|
1997 |
1996 |
|
|
|
|
Rupees |
Rupees |
|
|
|
|
('000) |
('000) |
|
|
| 1.
FINANCIAL RESULTS |
|
| These
are summarised below: |
|
|
| Profit
after tax from refinery operations |
|
20,000 |
60,000 |
|
| Income
net of tax from non-refinery operations |
|
24,043 |
21,806 |
|
| Unappropriated
profit brought forward |
|
38 |
15,782 |
|
| Transferred
from revenue reserves |
|
-- |
12,450 |
|
|
|
|
---------- |
---------- |
|
|
|
|
44,081 |
110,038 |
|
|
|
|
========== |
========== |
|
| APPROPRIATIONS |
|
| Interim
dividend |
|
|
-- |
-- |
|
| Proposed
final dividend of 20% |
|
|
|
| (equivalent
to Rs. 2.00 per share) |
|
40,000 |
60,000 |
|
| Transfer
to reserve for issue of bonus shares |
|
-- |
50,000 |
|
| Transfer
to General Reserve |
|
4,000 |
-- |
|
|
---------- |
---------- |
|
|
|
|
44,000 |
110,000 |
|
|
========== |
========== |
|
| Leaving
for carry over to next year an |
|
81 |
38 |
|
| unappropriated
profit of |
|
|
========== |
========== |
|
|
| The
earnings per share for the year amounted to Rs 2.20 (1996: Rs 5.45) |
|
|
| The
company continues to operate under the import parity formula under which the
rate of return from refinery |
|
| operations
is limited between 10% to 40% of the paid-up capital. The year under review
saw a continual |
|
| increase
in the prices of crude oil which ranged between $17.45 to $22.79 per barrel
with an average of about |
|
| $19.92
per barrel ( 1996: average $16.67 per barrel). The prices of our finished
products based on the import |
|
| parity
formula did not rise in the same proportion during the year. Consequently the
resultant margins were |
|
| inadequate
to cover costs which were affected by the inflationary level within the
country. |
|
|
| The
application of turnover tax of 0.5% also contributed significantly to the
loss after tax from refinery |
|
| operations.
The net effect is that the government has to reimburse Rs. 204.6 million to
enable the company |
|
| to
make a 10% profit from its refinery operations. Under the circumstances, the
Directors have proposed a |
|
| final
dividend of 20% on the issued and paid-up capital of the Company. |
|
|
| 2.
TRADE DEBTS |
|
|
| Your
Directors are deeply concerned at the sharp increase in trade debts of
associated undertakings by over |
|
| Rs.
400 million during the current accounting period. The position has
deteriorated due to overdue receivables |
|
| from
associated undertakings as shown below in the analysis as at June 30, 1997. |
|
|
|
|
|
Rs./mn. |
|
|
|
|
|
As at June |
|
As at June |
|
|
30, 1997 |
|
30, 1996 |
|
|
|
Total |
Overdue |
Total |
Overdue |
|
|
| Associated
Undertakings |
|
| Invoiced
sales |
|
1704.2 |
1087.6 |
1154.4 |
651.2 |
|
| Less:
PRL payables |
|
219.6 |
|
90.4 |
|
|
|
|
--------- |
|
--------- |
|
|
|
|
1484.6 |
|
1064.0 |
|
|
| Direct
customers |
|
98.3 |
|
188.2 |
|
|
|
|
--------- |
|
--------- |
|
|
|
|
1582.9 |
|
1252.2 |
|
|
|
--------- |
|
--------- |
|
|
|
|
|
|
| The
financing cost due from associated undertakings against overdue trade debts
is Rs. 85.5 million upto June |
|
| 30,
1997. These costs are recognised on 'receipt basis' in the accounts. |
|
|
|
|
| Whilst
the company, in the larger national interest, has maintained an uninterrupted
supply of refinery |
|
| products
to its customers the level of overdues is impacting its financial position
adversely. |
|
|
|
|
| In
view of the foregoing management has been directed to ask the Government to
intervene to resolve the |
|
| problem,
as is being done in other cases in the energy sector. If left the situation
could lead to a crisis within |
|
| the
petroleum industry. At the same time management has already taken steps to
minimise the impact and |
|
| maintain
a balance between its public sector receivables and payables. |
|
|
| 3.
RECEIVABLE FROM GOVERNMENT |
|
|
| The
receivable from Government at year end stood at Rs.486.7 million thus showing
a decrease of Rs.417.2 |
|
| million
compared to the previous year. The reduction is due to a recovery of Rs. 790
million from the |
|
| government
during the year. The impact of this receivable is largely offset by the
amount owed by PRL to |
|
| the
government in respect of Government share/Royalty on local crude oil
purchases. The company is making |
|
| its
best efforts to reduce government receivables and minimise its effect on the
financial position. |
|
|
| 4.
CHIEF EXECUTIVE |
|
|
| The
Chief Executive Mr. J.J. Smith completed his contract of service with the
company during the year. Mr. |
|
| Syed
Viqar Salahuddin has been appointed by the Board in his place. |
|
|
| 5.
DIRECTORS |
|
| Mr.
Aitzaz Shahbaz resigned from the Board of Directors and the vacancy arising
will be filled in due course. |
|
|
| Mr.
G.A. Sabri and Mr. MM. Farid were co-opted as directors on the Board in place
of Mr. A.R.P. Memon |
|
| and
Mr. Jahangir N.W. Ansari. |
|
|
| The
Board wishes to put on record its appreciation of the useful services
rendered by the outgoing directors. |
|
|
|
|
| 6.
ACKNOWLEDGMENT |
|
| With
profound grief, the Directors wish to record the sad demise of Mr. N.M.
Uquaili who had served as |
|
| company's
Chairman upto June 1996 and appreciated the valuable services rendered by
him. |
|
|
| 7. AUDITORS |
|
|
| The
present auditors, Messrs A. F. Ferguson & Co., retire and being eligible,
offer themselves for re- |
|
| appointment. |
|
|
| 8.
PATTERN OF SHARE-HOLDINGS |
|
| The
pattern of share-holding in the Company as at June 30, 1997 is included in
the Annual Report Booklet. |
|
|
| Karachi:
September 25, 1997 |
|
|
|
|
| Ten
years at a Glance |
|
|
|
|
|
1997 |
1996 |
1995 |
1994 |
1993 |
1992 |
1991 |
1990 |
1989 |
1988 |
| Share
capital |
Rs/mn |
200.00 |
150.00 |
150.00 |
150.00 |
150.00 |
150.00 |
120.00 |
90.00 |
60.00 |
60.00 |
| Reserves |
|
Rs/mn |
62.53 |
108.48 |
86.68 |
71.64 |
76.58 |
84.08 |
112.40 |
107.37 |
99.27 |
24.06 |
|
|
|
| Shareholders' |
|
| equity |
|
Rs/mn |
262.53 |
258.48 |
236.68 |
221.64 |
226.58 |
234.08 |
232.40 |
197.37 |
159.27 |
84.06 |
|
|
|
| Break-up |
|
|
| value |
|
Rs |
13.13 |
17.23 |
15.78 |
14.78 |
15.11 |
15.61 |
19.37 |
21.93 |
26.55 |
14.01 |
|
|
|
| Dividend
per |
|
| share |
|
Rs |
2.00 |
4.00 |
2.00 |
4.00 |
4.50 |
3.50 |
3.00 |
3.00 |
3.00 |
2.00 |
|
|
|
| Bonus
shares |
|
-- |
1:3 |
-- |
-- |
-- |
-- |
1:4 |
1:3.33 |
1:2 |
-- |
|
|
|
| Earnings
per |
|
| share |
|
Rs |
2.20 |
5.45 |
3.00 |
3.67 |
4.00 |
3.61 |
5.92 |
7.23 |
15.54 |
2.09 |
|
|
|
| Sales |
|
Rs/mn |
15,937.16 |
12,276.98 |
12,233.61 |
10,733.15 |
10,488.67 |
9,558.53 |
10,856.32 |
7,773.25 |
6,369.10 |
6,826.17 |
| Cost
of sales |
Rs/mn |
15,693.73 |
12,041.20 |
11,986.84 |
10,532.51 |
10,322.87 |
9,329.96 |
10,673.7t |
7,625.46 |
6,163.86 |
6,811.92 |
| Profit
after tax |
|
| and
extraordinary |
|
| items |
|
Rs/mn |
44.04 |
81.81 |
45.03 |
55.06 |
60.00 |
54.19 |
71.02 |
65.10 |
93.21 |
12.54 |
|
|
|
| Cost
of sales |
|
| as
% of sales |
|
98.47 |
98.08 |
97.98 |
98.13 |
98.42 |
97.61 |
98.32 |
98.10 |
96.78 |
99.79 |
|
|
|
| Profit
after tax |
|
| as
% of sales |
|
0.28 |
0.67 |
0.37 |
0.51 |
0.57 |
0.57 |
0.65 |
0.84 |
1.46 |
0.18 |
|
|
|
| Profit
after tax |
|
| as
% of average |
|
| shareholders |
|
| equity |
|
|
16.91 |
33.04 |
19.65 |
24.57 |
26.05 |
23.23 |
33.05 |
36.51 |
76.61 |
14.97 |
|
|
|
|
|
|
|
|
| A.
F. FERGUSON & CO. |
|
STATE LIFE BUILDING 1-C |
Telephone |
(021) 242 6682 - 6 |
|
| CHARTERED
ACCOUNTANTS |
|
OFF I. I. CHUNDRIGAR ROAD |
|
(021) 242 6711 - 5 |
|
|
|
P.O. BOX 4716 |
|
Fax |
(021) 241 5007 Audit |
|
| OTHER
OFFICES AT: |
|
KARACHI 74000 |
|
|
(021) 242 7938 Tax |
|
| LAHORE
- RAWALPINDI - ISLAMABAD |
|
PAKISTAN |
|
Telex |
21155 AFFCO |
|
|
| AUDITORS'
REPORT TO THE MEMBERS |
|
|
| We
have audited the annexed balance sheet of Pakistan Refinery Limited as .at |
|
| June
30, 1997 and the related profit and loss~account and cash flow statement, |
|
| together
with the notes forming part thereof, for the year then ended and we |
|
| state
that we have obtained all the information and explanations which to the |
|
| best
of our knowledge and belief were necessary for the purposes of our audit |
|
| and,
after due verification thereof, we report that: |
|
|
| (a)
in our opinion, proper books of account have been kept by the Company as |
|
| required
by the Companies Ordinance, 1984; |
|
|
| (b)
in our opinion: |
|
|
| (i)
the balance sheet and profit and loss account together with the |
|
| notes
thereon have been drawn up in conformity with the |
|
| Companies
Ordinance, 1984 and are in agreement with the books of |
|
| account
and are further in accordance with accounting policies |
|
| consistently
applied; |
|
|
|
| (ii)
the expenditure incurred during the year was for the purpose of |
|
| the
Company's business; and |
|
|
| (iii)
the business conducted, investments made and the expenditure |
|
| incurred
during the year were in accordance with the objects of |
|
| the
Company; |
|
|
|
| (c)
in our opinion and to the best of our information and according to the |
|
| explanations
given to us, the balance sheet, profit and loss account and |
|
| the
cash flow statement together with the notes forming part thereof, give |
|
| the
information required by the Companies Ordinance, 1984 in the manner so |
|
| required
and respectively give a true and fair view of the state of the |
|
| Company's
affairs as at June 30, 1997 and of the profit and cash flows |
|
| for
the year then ended; and |
|
|
| (d)
in our opinion Zakat deductible at source under the Zakat and Ushr |
|
| Ordinance,
1980 was deducted by the Company and deposited in the Central |
|
| Zakat
Fund established under section 7 of that Ordinance. |
|
| October
20, 1997 |
|
|
|
| Balance
Sheet as at June 30, 1997 |
|
|
|
|
|
1997 |
1996 |
|
|
|
|
Rupees |
Rupees |
|
|
|
|
Note |
{'000} |
('00{}) |
|
| SHARE
CAPITAL AND RESERVES |
|
| Share
Capital |
|
| Authorised |
|
|
2 |
1,000,000 |
200,000 |
|
|
|
|
|
========== |
========== |
|
| Issued,
subscribed and paid-up |
|
|
2 |
200,000 |
150,000 |
|
| Reserves |
|
|
3 |
62,447 |
108,447 |
|
| Unappropriated
profit |
|
|
|
81 |
38 |
|
|
|
|
---------- |
---------- |
|
|
|
|
262,528 |
258,485 |
|
| DEFERRED
LIABILITIES |
|
|
|
| Staff
retirement benefits |
|
|
1,839 |
1,839 |
|
| CURRENT
LIABILITIES |
|
| Running
finance under mark-up arrangements |
|
4 |
551,277 |
610,752 |
|
| Creditors,
accrued and other liabilities |
|
5 |
2,600,723 |
2,246,135 |
|
| Workers'
profits participation fund |
|
6 |
6,652 |
10,091 |
|
| Workers'
welfare fund |
|
|
|
3,956 |
3,128 |
|
| Provision
for taxation |
|
|
|
6,718 |
2,574 |
|
| Proposed
dividend |
|
|
|
40,000 |
60,000 |
|
|
---------- |
---------- |
|
|
|
|
3,209,326 |
2,932,680 |
|
| COMMITMENTS |
|
|
7 |
|
|
|
|
|
---------- |
---------- |
|
|
|
3,473,693 |
3,193,004 |
|
|
|
========== |
========== |
|
| The
annexed notes form an integral part of these accounts. |
|
|
|
|
|
|
|
|
|
1997 |
1996 |
|
|
|
|
Rupees |
Rupees |
|
|
|
Note |
('000) |
('000) |
|
| FIXED
ASSETS-TANGIBLE |
|
| Operating
assets |
|
|
8 |
93,304 |
71,210 |
|
| Capital
work-in-progress - at cost |
|
9 |
14,986 |
9,423 |
|
|
|
|
|
---------- |
---------- |
|
|
|
|
|
108,290 |
80,633 |
|
| LONG-TERM
INVESTMENT - AT COST |
|
|
10 |
865 |
865 |
|
| LONG-TERM
LOANS AND ADVANCES |
|
|
11 |
3,192 |
1,790 |
|
| LONG-TERM
DEPOSITS |
|
|
|
2,304 |
1,949 |
|
| CURRENT
ASSETS |
|
|
|
|
|
| Stores,
spares and chemicals |
|
|
12 |
264,836 |
165,017 |
|
| Stock-in-trade |
|
|
13 |
817,481 |
759,175 |
|
| Trade debts |
|
|
14 |
1,582,877 |
1,252,244 |
|
| Loans
and advances |
|
|
15 |
22,630 |
12,622 |
|
| Trade
deposits and short-term prepayments |
|
16 |
14,013 |
4,676 |
|
| Other
receivables |
|
|
17 |
653,834 |
909,053 |
|
| Cash
and bank balances |
|
|
18 |
3,371 |
4,980 |
|
|
---------- |
---------- |
|
|
|
|
3,359,042 |
3,107,767 |
|
|
---------- |
---------- |
|
|
|
3,473,693 |
3,193,004 |
|
|
========== |
========== |
|
|
|
|
| Profit
and Loss Account for the year |
|
| ended
June 30, 1997 |
|
|
|
|
|
|
1997 |
1996 |
|
|
|
|
Rupees |
Rupees |
|
|
|
|
Note |
('000) |
('000) |
|
|
| Sales |
|
|
19 |
15,937,157 |
12,276,985 |
|
| Cost
of sales |
|
|
20 |
15,693,731 |
12,041,202 |
|
|
---------- |
---------- |
|
| Gross
profit |
|
|
|
|
243,426 |
235,783 |
|
| Administration
and selling expenses |
|
21 |
61,258 |
49,994 |
|
|
|
|
|
|
---------- |
---------- |
