PACRA Maintains Entity Ratings of National Refinery Limited

Lahore, December 07, 2018 (PPI-OT): The rating incorporates NRL’s association with only integrated oil group – Attock Group (AG). Key character of AG is a low leveraged capital structure with sound cash flow generation ability; ably replicated to NRL too. The company predominantly financed its upgradation projects, including desulphurization unit and ISOM, through internally generated funds; capitalized in Jun’17 and Oct’17, respectively.

This translated into accelerated growth in topline FY18. In spite oil prices have been increasing, GRMs remains in comfortable range all through FY18. Higher operation cost, including depreciation, from new units, dented the gross profit. Exchange loss amounting to ~PKR 1.7bln due to the significant devaluation of Pakistani rupee against US dollar further impacted the profitability.

Additionally, management is pushing the government for an upward revision of deemed duty (from 7.5% to 9%) to address the issue; actual outcome remains to be seen. Nevertheless, the size of the free cash flows from operations (FCFO) remains in a comfortable zone on annual basis. During FY18, healthy coverages and low leveraged capital structure improve the financial risk profile of the company.

The ratings are dependent upon the sustained market position of the company, herein continuous growth in revenue is important. Prudent management of financial matrix while keeping optimal capital structure would remain critical. A prolonged downturn in gross profit thereby translating in significantly lower cash flows would impact the ratings.

For more information, contact:
The Pakistan Credit Rating Agency Limited (PACRA)
Awami Complex, FB1, Usman Block New Garden Town,
Lahore – Pakistan
Tel: +9242 586 9504 -6
Fax: +9242 583 0425

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