| Attock Refinery Limited |
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| Annual
Report 1998 |
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| CONTENTS |
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| Company
Information |
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| Notice
of the Meeting |
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| Chairman's
Review |
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| Financial
Highlights |
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| Report
of the Directors |
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| Pattern
of Shareholding |
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| Auditors'
Report to the Members |
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| Balance
Sheet |
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| Profit
and Loss Account |
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| Cash
Flow Statement |
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| Notes
to the Accounts |
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| COMPANY
INFORMATION |
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Board of Directors |
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| Chairman |
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Ch. Nisar All Khan |
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| Directors |
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Dr. Ghaith R. Pharaoh |
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Abdus Sattar |
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G. A. Sabri |
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Iftikhar Alam |
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Shuaib Anwer Malik |
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Laith Ghaith Pharaon |
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Khalid Atiq Ghazi |
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Mofarreh Said AI Ghamdi |
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(Alternate Director Babar
Bashir Nawaz) |
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Arif Kemal |
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Mohammad Raziuddin |
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Chief Executive Officer |
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| Company
Secretary |
S. Ahmed Abid |
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F.C.A. |
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| Legal
Advisors |
Zafar Law Associates |
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Advocates &
Solicitors |
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| Registered
Office |
The Refinery, |
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Morgah Rawalpindi. |
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Telephones: (051) 487041
-5 |
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Fax: (051)487254 |
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E-mail:
arl@isb.comsats,net.pk |
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| BOARD
OF DIRECTORS |
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| Ch.
Nisar Ali Khan |
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| Chairman |
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| Dr.
Ghaith R. Pharaon |
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| Abdus
Sattar |
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| G.A. Sabri |
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| Iftikhar
Alam |
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| Shuaib
Anwer Malik |
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| Laith
Ghaith Pharaon |
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| Khalid
Atiq Ghazi |
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| Mofarreh
Said Al Ghamdi |
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| Arif Kemal |
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| Mohammad
Raziuddin |
Chief Executive Officer |
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| NOTICE
OF ANNUAL GENERAL MEETING |
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| Notice
is hereby given that the 20th Annual General Meeting of the Company will be |
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| held
at the Registered Office of the Company at Morgah, Rawalpindi on Wednesday, |
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| 30th
December, 1998 at 4.00 p.m. to transact the following business: |
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| ORDINARY
BUSINESS |
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| 1.
To confirm the minutes of 19th Annual General Meeting of the Company held on |
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| December
29, 1997. |
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| 2.
To receive, consider and approve the Audited Accounts of the Company together |
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| with
the Directors' and Auditors' Reports for the year ended 30 June, 1998. |
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| 3.
To consider and, if thought fit, declare a final cash dividend as recommended
by |
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| the
Board of Directors for the year ended 30 June, 1998. |
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| 4.
To appoint Auditors for the next year and fix their remuneration. |
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| 5.
To transact such other business as may be placed before the meeting with the |
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| permission
of the Chairman. |
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| SPECIAL
BUSINESS |
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| 6.
To consider and, if thought fit, to pass the following Resolution as an
ordinary |
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| resolution: |
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| "Resolved: |
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| a.
that a sum of Rs 45,000,000 out of the profit of the Company for the year |
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| ended
30 June, 1998 be capitalised and applied for issue of 4,500,000 ordinary |
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| shares
of Rs 10 each allotted as fully paid Bonus Shares to the members of the |
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| Company
whose names appear on the register of members as at close of |
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| business
on 20 December, 1998, in the proportion of one new share for every |
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| five
shares held. |
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| b.
that the Bonus Shares so allotted shall rank pari passu in all respects with
the |
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| existing
shares except that they shall not qualify for the dividend declared for |
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| the
year ended 30 June, 1998. |
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|
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| c.
that the members entitled to fractions of a share shall be given sale
proceeds |
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| of
their fractional entitlement for which purpose the fractions shall be |
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| consolidated
into whole shares and sold in the stock market. |
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| d.
that the Secretary of the Company be authorised and empowered to give |
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| effect
to this resolution and to do or cause to do all acts, deeds and things |
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| that
may be necessary or required for issue, allotment and distribution of |
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| Bonus
Shares. In the case of non-resident shareholders the Secretary is further |
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| authorised
to issue/export the Bonus Shares after fulfilling the statutory |
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| requirements". |
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| 7.
To consider and, if thought fit, to pass the following resolution, pursuant
to section |
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| 208
of the Companies Ordinance, 1984 in respect of the Company's investment. |
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| "Resolved
that the Company be and is hereby authorised to invest Rs 2 million as |
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| long-term
investment in Attock Hospital (Private) Limited, incorporated with the |
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| intention
of owning it as a wholly owned subsidiary. Further, resolved that the Chief |
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| Executive
be and is hereby authorised to sign such documents and take such |
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| steps
as may be necessary in acquiring the said equity interest in "Attock
Hospital |
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| (Pvt)
Limited". |
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By Order of the Board |
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| The
Refinery |
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(S. AHMED ABID) |
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| Morgah,
Rawalpindi |
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Company Secretary |
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| December
8, 1998. |
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| Notes: |
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| i.
A member entitled to vote at this meeting may appoint another member as
his/her proxy |
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| to
attend and vote. Proxies in order to be effective must be received by the
Company |
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| 48
hours before the meeting. |
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|
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| ii.
Share Transfer Books of the Company will remain closed and no transfer of
shares will be |
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| accepted
for registration from 21 December to 30 December, 1998 (both days inclusive). |
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| Transfers
received in order at the registered office of the Company by the close of
business |
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| on
20 December, 1998 will be treated in time for the purposes of payment of the
final |
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| dividend
and eligibility of Bonus Shares, if declared. |
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| iii.
Members are requested to promptly notify the Company of any change in their
addresses. |
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| iv.
Statements of material facts under Section 160 (I) (b) of the Companies
Ordinance, 1984 |
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| justifies
capitalisation of Rs. 45,000,000 out of profit by issuing fully paid Bonus
Shares in the ratio |
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| to
this Notice of Meeting being sent to members. |
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| STATEMENT
UNDER SECTION 160 (1) (b) OF THE COMPANIES ORDINANCE, 1984 |
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| 1.
ISSUE OF BONUS SHARES |
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| The
Directors are of the view that with existing profitability, the Company's
financial position |
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| justifies
capitalisation of Rs 45,000,000 out of profit by issuing fully paid Bonus
Shares in the ratio |
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| of
1:5 i.e. one Bonus Share for every five ordinary issued shares. |
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| 2.
INVESTMENT IN ATTOCK HOSPITAL (PVT) LIMITED |
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| a.
Attock Hospital (Pvt) Limited (AHL) has been incorporated to acquire, take
over and |
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| operate
the existing hospital of the Company. |
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| b.
The Directors are of the view that the investment in AHL would help in
achieving the |
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| Company's
objectives of providing medical services to the employees of the Company |
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| and
its associated companies, expand the existing base of services to introduce
specialised |
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| treatment
and to provide community services to the residents of adjoining areas. |
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| c.
The Directors have no vested interest in the above investment except that the |
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| Chief
Executive is also Chief Executive and Director of AHL and two of the
Directors are |
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| common
directors. |
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| CHAIRMAN'S
REVIEW |
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| It
gives me great pleasure to welcome you all to the 20th Annual General Meeting
and to |
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| present
a review of the operations, Audited Accounts and Annual Report of the Company |
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| for
the year to 30 June, 1998. |
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| PROFITABILITY |
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| Operations
of your Company during the year remained smooth and efficient. The financial |
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| results
of the Company's operations for the year ended 30 June, 1998 are given in the |
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| annexed
Directors' Report and financial statements. As the prices of petroleum
products |
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| declined
in the international market, the refiner's margin narrowed down resulting in |
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| reduced
profitability. The Company earned a net profit of Rs 119.6 million including
prior |
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| years'
adjustment of Rs 27.8 million. The Company's profits from refinery operations
were |
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| restricted
to Rs 90 million calculated at 40% on paid-up capital of Rs 225 million as
per the |
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| approved
import parity pricing formula. |
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| FUTURE
OUTLOOK |
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| Work
on the construction and erection of two new plants namely Naphtha
Hydrotreating/ |
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| Reforming
Plant and Heavy Crude Unit under the Refinery Upgradation and Expansion Plan |
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| is
progressing satisfactorily. Most of the plant, machinery and equipment has
already |
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| arrived
at the site and the construction/erection work is in full swing. Work on
offsite facilities |
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| to
cater for operational requirements after the commissioning of the new plants
is also being ~ |
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| completed
simultaneously. |
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| The
Company's management continues to make efforts to enhance the utilisation of
the |
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| refining
capacity as the availability of crude oil is reducing from the depleting
crude oil |
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| fields
in the northern region of the country. Based on national economics, the
Government |
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| permitted
transportation of crude oil from southern oilfields for processing at your
refinery. |
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| The
crude receipts from the southern oilfields are being increased progressively
to increase |
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| refinery
capacity utilisation. |
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| To
meet its operational requirements for electricity and cooling, the Company
has also |
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| planned
to set up its own Co-Generation and Dry ice Plants. |
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| The
Company is also considering the possibility of enhancing its refining
capacity to 50,000 |
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| barrels
per day by setting up a Pre-flash unit after carrying out a detailed
technical and |
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| economic
feasibility. Your Company is also participating in various projects in
collaboration .~' |
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| with
other international agencies for the refinery optimisation, production of
environment '~" |
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| friendly
products and energy conservation. |
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| To
conserve the foreign exchange resources of the country, the Company's
management |
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| has
made conscious efforts to meet its requirements for spare parts and other
consumables |
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| through
the local manufacturing facilities which would also promote the development
of |
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| the
local industry. |
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| TRAINING
AND DEVELOPMENT |
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| The
training and development of Human Resource of the Company continued through |
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| training
programmes for the management staff and workers. In-house training courses |
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| were
also organised with special emphasis on information technology, safety,
quality and |
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| maintenance.
To meet the requirement for trained personnel after the commissioning of the |
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| new
plants, the staff members are undergoing special training programmes which
will |
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| also
continue during the current year. The staff has been encouraged to benefit
from the |
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| information
technology for which the necessary computer facilities have been provided to |
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| them. |
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| QUALITY
MANAGEMENT |
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| The
Company has focused on the development of quality management with stress on |
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| productivity
performance, efficiency improvement and rationalisation of activities with a |
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| view
to reduce wastage and application. Various initiatives have been taken in
highlighting |
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| areas
of improvement and incentives have been provided for employees commitment |
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| to
Total Quality Management. |
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| HUMAN
RESOURCE |
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| I
would like to record my appreciation of the efforts and dedication of the
Human |
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| Resource
of the Company which includes its officers, staff and workers that has
enabled the |
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| management
to run the Company smoothly and efficiently during the year. |
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| I
am pleased to report that the management continued to have cordial relations
with the |
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| workers
and the Collective Bargaining Agent (CBA). A new 2-years Labour Agreement was |
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| successfully
negotiated with the CBA which will expire on 30 June, 1999, |
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|
| ACKNOWLEDGEMENT |
|
| Finally,
I take this opportunity to express my 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 the lenders, 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 and to meet the future challenges |
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| in
the years ahead. |
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| Before
concluding, I also wish to express my thanks for the continued interest and
support of |
|
| our
shareholders. |
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|
|
|
|
Ch. Nisar Ali Khan |
|
| 27th
November, 1998 |
|
Chairman |
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|
|
| FINANCIAL
HIGHLIGHTS |
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|
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|
30 June |
|
(Rupees in Million) |
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|
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|
|
1998 |
1997 |
1996 |
1995 |
1994 |
1993 |
1992 |
1991 |
1990 |
1989 |
| PROFIT
& LOSS SUMMARY |
|
| Sales
(Net of Govt. Levies) |
6,582.6 |
6,528.6 |
5,112.5 |
3,834.4 |
4,746.2 |
5,165.8 |
5,179.9 |
4,750.7 |
3,810.2 |
2,884.4 |
| Reimbursement
from/(to) |
|
|
| Government |
(96.6) |
67.8 |
17.4 |
692.8 |
(69.4) |
(9.5) |
(22.7) |
856.2 |
22.6 |
(26.9) |
| Other
income |
|
111.2 |
98.2 |
99.9 |
59.5 |
88.3 |
57.4 |
47.6 |
32.6 |
19.6 |
18.30 |
| Income
from non-refinery |
|
|
|
| operations
after tax |
|
1.8 |
2.8 |
1.2 |
2.8 |
3.6 |
3.1 |
3.2 |
5.2 |
2.6 |
- |
|
| Total
Revenue |
|
6,599.0 |
6,697.4 |
5,231.0 |
4,589.5 |
4,768.7 |
5,216.8 |
5,208.0 |
5,644.7 |
3,855.0 |
2,875.8 |
| Cost
of Sales, Administration |
|
| and
Selling Expenses etc. |
(6,453.4) |
(6,492.8) |
(4,918.8) |
(4,486.8) |
(4,695.0) |
(5,126.5) |
(5,183.5) |
(5,603.6) |
(3,806.0) |
(2,827.5) |
| Workers'
Funds |
|
(10.0) |
(13.8) |
(21.9) |
(6.4) |
(4.8) |
(6.6) |
(1.5) |
(2.5) |
(3.6) |
(3.7) |
| Taxation |
|
(43.8) |
(61.8) |
(106.8) |
(43.5) |
(25.3) |
(48.6) |
(5.4) |
(19.0) |
(28.4) |
(30.2) |
|
| Net
Profit after Tax |
|
91.8 |
129.0 |
183.5 |
52.8 |
43.6 |
35.1 |
17.6 |
19.6 |
17.0 |
14.4 |
| Adjustment
in net profit |
|
| for
prior years |
|
27.8 |
(21.1) |
- |
- |
- |
32.9 |
- |
- |
- |
- |
| Unappropriated
profit |
|
| brought
forward |
|
6.2 |
3.3 |
9.6 |
6.8 |
3.2 |
0.9 |
0.8 |
0.4 |
0.8 |
0.8 |
| Dividend |
|
(45.0) |
(37.5) |
(30.0) |
(25.0) |
(19.0) |
(12.8) |
(17.6) |
(19.2) |
(14.4) |
(14.4) |
| Transfer
to Reserves |
|
(72.8) |
(67.5) |
(159.8) |
(25.0) |
(25.0) |
(52.9) |
- |
- |
(3.0) |
- |
| Transfer
from Reserves |
- |
- |
- |
- |
4.0 |
- |
- |
- |
- |
- |
|
| BALANCE
SHEET SUMMARY |
|
| Paid-up
Capital |
|
225.0 |
187.5 |
150.0 |
125.0 |
100.0 |
80.0 |
80.0 |
80.0 |
80.0 |
80.0 |
| Reserves |
|
272.1 |
228.8 |
198.7 |
63.9 |
63.9 |
62.9 |
10.0 |
10.0 |
10.0 |
6.5 |
| Unappropriated
Profit |
|
8.0 |
6.2 |
3.3 |
9.6 |
6.8 |
3.2 |
0.9 |
0.8 |
0.4 |
0.8 |
| Long
- Term Loans |
|
175.5 |
- |
- |
- |
- |
- |
- |
- |
- |
- |
| Fixed
Assets (Less depreciation) |
1092.6 |
352.4 |
180.3 |
146.8 |
117.6 |
109.1 |
95.9 |
90.3 |
100.9 |
104.3 |
|
| SHARES
AND EARNINGS |
|
| Earning
(Rs per share) |
4.1 |
6.88 |
12.2 |
4.2 |
4.4 |
8.5 |
2.2 |
2.4 |
2.1 |
1.8 |
| Break-
Up Value (Rs per share) |
22.1 |
22.5 |
23.5 |
15.9 |
17.1 |
18.3 |
11.4 |
11.4 |
11.3 |
10.9 |
| Dividend |
|
20% |
20% |
20% |
20% |
19% |
16% |
22% |
24% |
18% |
18% |
| Bonus
Shares Issue |
|
20% |
20% |
25% |
20% |
25% |
25% |
- |
- |
- |
- |
|
|
|
| REPORT
OF THE DIRECTORS |
|
|
| The
Directors of the Company have pleasure in presenting their Annual Report and
Audited |
|
| Financial
Statements of the Company together with Auditors' Report thereon for the year |
|
| ended
30 June, 1998. |
|
|
| 1.
FINANCIAL RESULTS |
|
|
|
|
|
1998 |
|
|
|
|
|
Rupees |
|
|
|
|
|
(000) |
|
| These
are summarised below: |
|
|
|
|
|
|
|
|
| Profit
for the year as per the import parity pricing formula, |
|
| after
providing for all expenses including depreciation, workers' funds |
133,797 |
|
| Less:
Provision for taxation |
|
|
43,797 |
|
|
|
|
|
---------- |
|
| Profit
after taxation from refinery operations |
|
90,000 |
|
|
|
|
| Income
from non-refinery operations less |
|
|
|
| applicable
charges, workers' funds and taxation |
|
1,830 |
|
|
|
|
|
---------- |
|
| Net
profit for the year after taxation |
|
|
91,830 |
|
| Prior
year adjustment less applicable charges and taxation |
27,798 |
|
|
|
|
|
---------- |
|
|
|
|
|
119,628 |
|
| Unappropriated
profit brought forward |
|
|
6,160 |
|
|
|
|
|
---------- |
|
| Profit
available for appropriation |
|
|
125,788 |
|
|
|
|
|
|
|
|
|
|
|
| APPROPRIATIONS: |
|
|
|
| The
Directors propose that this should be utilized in providing for: |
|
| Transfer
to Reserve for expansion/modernisation being surplus |
|
| profits
over 40% retained as per Government stipulation |
|
27,798 |
|
|
|
|
|
|
| Interim
dividend at the rate of 10% (equivalent to Re 1.00 |
|
| per
share of Rs 10 each) paid in May, 1998 |
|
|
22,500 |
|
|
|
|
|
|
| Final
dividend at the rate of 10% (equivalent to Re 1.00 |
|
|
| per
share of Rs 10 each) now proposed |
|
|
22,500 |
|
|
|
|
| Transfer
to Reserve for issue of bonus shares |
|
45,000 |
|
|
|
|
|
---------- |
|
|
|
|
|
|
|
117,798 |
|
| Leaving
unappropriated profit to be |
|
|
---------- |
|
| carried
forward to next year |
|
|
7,990 |
|
|
|
========== |
|
|
|
| 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 further
allowed |
|
| to
retain surplus profits over 40% as per agreed parameters, for utilisation in
the |
|
| development
plans for Refinery Upgradation and Expansion. In the current year under |
|
| review
the Company earned a total net profit of Rs 101 million and under the pricing |
|
| formula
was entitled to retain Rs 90 million being the maximum allowable return at |
|
| 40%
on paid-up capital. In addition, prior year adjustments mainly relating to
crude oil |
|
| and
product prices have resulted in additional net profits of Rs 27.798 million
which are |
|
| transferable
to reserve for expansion/modernisation as stipulated by the Government |
|
| in
the pricing formula applicable to your Company. |
|
|
| As
compared to last year the current year's profits have declined because of a
lower |
|
| refiner's
margin, generally due to depressed international prices for petroleum |
|
| products
during the year. |
|
|
| In
addition, the Company has also earned other income of Rs 1.830 million (net
of tax |
|
| and
workers' funds) from non-refinery operations outside the pricing formula. |
|
|
| As
reported last year the Company's representation to the Ministry of Petroleum
to |
|
| treat
the net profit from sale of asphalt outside the import parity pricing formula
after |
|
| the
deregulation of asphalt prices in June, 1996 is still pending consideration
by the |
|
| Ministry
of Petroleum. |
|
|
| The
average prices of petroleum products in the international market were |
|
| substantially
lower in the current year. Consequently, the ex-refinery prices allowed to |
|
| the
Company for its petroleum products were revised downwards as a result of
which |
|
| the
sales revenue generated through ex-refinery prices was lower in comparison to
last |
|
| year.
The products and crude oil prices continued to be priced on the principles of |
|
| import
parity as per parameters defined by the Government. Although the crude |
|
| throughput
increased during the year the total cost of crude oil consumed decreased |
|
| as
the prices of crude oil processed at the Refinery were low due to
internationally |
|
| depressed
prices of crude oil upon which is also based the determination of local |
|
| crude
oil price. |
|
|
|
|
| In
recognition of its performance and dividend payout to the shareholders, the |
|
| Company
was presented the Top 25 Companies Award by the Karachi Stock Exchange |
|
| for
the years 1995 and 1996. |
|
|
| 2.
PAID-UP CAPITAL |
|
| The
Company's paid-up capital was increased from Rs 187.50 million to Rs 225
million |
|
| through
capitalisation of an amount of Rs 37.5 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. |
|
|
| 3.
DIVIDEND |
|
|
| The
Company has already paid an interim dividend of 10% in May, 1998 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, 1998. |
|
|
| 4.
BONUS SHARES |
|
| The
Directors are also pleased to recommend capitalisation of an amount of Rs 45 |
|
| 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 five shares held. |
|
|
| 5.
REFINERY MANAGEMENT AND OPERATIONS |
|
| The
Company's refining capacity continued to be under utilised due to non- |
|
| availability
of indigenous crude oil. The entire indigenous crude production from the |
|
| Northern
Region was processed at the Refinery. However, to increase the utilisation of |
|
| the
refining capacity, the Company also received crude oil from the Southern
Region |
|
| after
obtaining Government's approval in this respect. Initially the Company
requested |
|
| a
quantity of 2,600 bpcd of Southern crude from November, 1997. Later on, based
on |
|
| successful
R & D and processing, the quantity was increased to 6,000 bpcd in |
|
| May, 1998. |
|
|
| The
total throughput of the Refinery during the year was 8,248,779 barrels (1.090
million |
|
| M.
Tons) as compared to its nameplate capacity of 10,065,000 barrels (1.330
million |
|
| M.
Tons) representing 82% of capacity utilisation. A total of 8.234 million
barrels of |
|
| crude
oil (1997:7.217 million barrels) were received by the Company from 44
different |
|
| oilfields
which was 14% higher than the receipts of last year. Crude receipts from the |
|
| Northern
Region declined but this decrease was offset by additional crude received |
|
| from
the Southern Region. The net increase in crude receipts was 1.017 million
barrels |
|
| for
the financial year. |
|
|
| The
total crude receipts averaged 22,560 bpcd of which 15,310 bpcd (68%) was |
|
| received
through road transportation and the balance of 7,250 bpcd (32%) was |
|
| received
through pipeline. |
|
|
| 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. Turnaround (Planned shutdown) time was |
|
| decreased
from 20 days to 10 days. Further, the mean time between turnaround has |
|
| been
increased by 6 months without any adverse effect on plant, equipment and |
|
| machinery. |
|
|
| Work
on construction of a new crude tank with a storage capacity of 100,000
barrels |
|
| has
been completed and the new tank has been recently commissioned for |
|
| operations.
The work on the construction, installation and commissioning of a third |
|
| boiler
was also completed and the boiler was put into operation in January, 1998. |
|
|
| The
Company is actively engaged in upgrading its offsite facilities to meet the |
|
| operational
requirements for full capacity operations after the expected |
|
| commissioning
in May, 1999 of the new Catalytic Reformer and Heavy Crude Unit |
|
| plants
under the Refinery Upgradation and Expansion Project. |
|
|
| The
Company took drastic steps to rationalise and optimise all expenditures, thus |
|
| improving
the profitability. The Company made strides in reducing foreign purchases |
|
| of
plant, equipment and machinery. |
|
|
| 6.
REFINERY UPGRADATION AND EXPANSION PLAN |
|
| The
work on the implementation of the Refinery Upgradation and Expansion Project
is |
|
| progressing
as per schedule and the Catalytic Reformer Plant and Heavy Crude Unit |
|
| are
expected to be commissioned for commercial production in May, 1999. With |
|
| the
commissioning of these plants Company's capability to upgrade low octane |
|
| naphtha
into high octane premium grade gasoline would be enhanced, operational |
|
| flexibility
achieved and 55 years old heavy crude unit replaced. The plant, machinery |
|
| and
equipment for the two units is being supplied by a consortium of two Japanese |
|
| companies
comprising of Mitsui Engineering & |
