National Refinery Limited (NRL) of Pakistan – Management Report

INTRODUCTION

National Refinery Limited (NRL) is the largest of three refineries Operating in Pakistan, having an installed capacity of  2.9117 million tons per year (see Appendix 1). NRL has been working since 1966. NRL’s share holders’ equity is Rs. 1,963.974 million as at December 31, 1998¹.

NRL is working in public sector and majority share is held by the Government of Pakistan (see Appendix 2 for share holders’ categories)². NRL is listed in Karachi, Lahore, and Islamabad Stock Exchanges.

 

Fuel and Lube base products are two broad categories of NRL’s product range (see Appendix 3 for product list). Fuel products are subjected to pricing  control by the Government of Pakistan, while lube base products are not³. NRL’s main profit comes from Lube business as profit margins on fuel products are tightly controlled by the Government. In last fiscal year 1997-98 the NRL registered highest ever after tax profit of Rs. 491.822 million, out of which Rs. 468.905 million came from lube business⁴.

 

NRL is currently only refinery that is producing lubes base products. Other two refineries i.e. Attock and Pakistan refineries produce only fuel products. Previously NRL was working under the administration of the Ministry of production. The government of Pakistan has decided to place NRL under the administration of the Ministry of Petroleum & Natural Resources⁵.

 

 

 

INTERNAL ANALYSIS

 

VALUE CHAIN ANALYSIS

 

(For detail organizational structure see Appendix 5)

 

PRIMARY ACTIVITIES:

 

INBOUND LOGISTICS: Around 22% crude oil is obtained through indigenous resources, while rest is imported by Saudi Aramco. Oil is unloaded at Keemari Terminal and from there it’s transported through underground pipeline to NRL. This pipeline is quite old and vulnerable to leakage.

 

To increase the storage facilities of raw material, additional tanks for storage of 45,000 tons crude oil are under construction. On completion crude oil cover for production will increase to 22 days. The project was expected to be completed by mid 1998. But it has not been completed till date.

 

OPERATIONS: NRL’s plants are quite old and not comparable at international level. These old plants and equipment cause frequent break down of production, which means production losses.

 

Last revamp was done nine years ago by NRL’s engineers to increase the design capacity of fuel refinery. After that nothing has been done to increase the design capacity of NRL, despite the fact that there is a huge gap between supply and demand. All three refineries i.e. NRL, Attock Refinery, and Pakistan Refinery collectively produce about 6 million tons per year of petroleum products against the consumption requirement of about 18 million tons per year, leaving a deficit of 12 million tons per year, which is imported⁶. NRL’s contribution to local production has remained static  at around 2.9 million tons for the last nine year and no effort has been made to increase it. Neither the management has any plan to do so in near future.

 

NRL also faces serious problem of electricity failure. To deal with this problem NRL has installed self-power generation plant of 7.5 M.W.

 

OUTBOUND LOGISTICS: Finished products are pumped to Keemari Terminal through pipelines and from there products are distributed to  Pakistan State Oil (PSO) and other firms. Products are also shipped to Pakistan Air Force and Karachi Electric Supply Corporation. Pipelines used for pumping finished products are also quite old and out of  four lines one has been permanently discarded. While the rest need excessive maintenance, which is causing increased cost to NRL. These old lines also caused theft of NRL products.

 

MARKETING & SALES: NRL is bound to sell its  fuel refinery products to PSO, at prices determined by  the Federal Government. Lube base products are sold in the open market .

 

Recently NRL has launched its own marketing firm with the name of National Oil Marketing, which is 100% owned subsidiary of NRL. But after change on ministry this company has been stopped from becoming active to help PSO.  NRL is facing tough competition from imported lube oil products that are abundantly available in the country at lower prices.  However, due to concerted efforts by NRL increased its sales of lube base oils and asphalt in the year 1997-98 as compared to last year.

 

Keeping in view the lucrativeness of lube sector, and its growing demand,  NRL needs to take desperate measures to take  advantage of this opportunity.  NRL needs to become consumer oriented and needs to find out customer needs using market research and should plan to develop new products accordingly.

 

 

SUPPORT ACTIVITIES

 

HUMAN RESOURCE MANAGEMENT: Despite NRL being a public sector organization, overall conditions are satisfactory. Most of employees are satisfied with their salary package, which is above average as compared to other public sector organizations.

 

Training is provided to all employees at the time of their induction. After that, training is provided generally at the recommendation of respective department. Training department also initiate some program itself.  There is no emphasis on improving employees’ performance after first training. Employees generally limit their participation to their assigned duties and are not encouraged to participate in improvement of organization’s performance.

 

Promotion is not directly or clearly linked to performance and usually follows traditional practices of public sector organizations. Consequently there is no motivation to participate more than what is necessary.

 

TECHNOLOGY DEVELOPMENT: NRL does not have a separate R&D department. Engineering department of Maintenance & Engineering group and Technical Services Department of Technical group play this role to some extent. Engineering department provides help in case if any process related problem arises. While in case of product related problem Technical Service Department helps. This help is limited to remove any problem, however, these R&D activities are not directed to improve process and products.

 

Technologies used in NRL are very old. Since market is regulated and there is no  competition that is why NRL has been able to survive with current technological level.

 

 

PROCUREMENT: The Government has good relations with Middle Eastern countries and it has been able to purchase crude oil for its refineries at favorable terms⁷. NRL buys its crude oil from Saudi Aramco through an annual contract. Purchase of other things e.g.  machinery, equipment, supplies, and etc. is done on the sole  criteria of low cost. NRL does not have any concept of long-term supplier relations. The bids are invited from vendors and contract is awarded to the bidder of lowest price.

 

FIRM INFRASTRUCTURE: NRL has a functional structure, comprised of departments like Technical, Maintenance & Engineering, Finance And Accounting, Commercial, Operation, Oil Movement & Utility, Personnel & Administration.

 

General management has been very weak in the area of planning. NRL does not have a mission statement. They do not have long term objectives. There is no competitive intelligence system, neither external nor internal audit is carried out to anticipate opportunities, threats, weaknesses and strengths. No strategy is devised to respond to market needs. In the last nine year nothing was done to increase the design capacity of the firm, despite the fact that the deficit of around 12 million tons of local demand is being met through import.

 

Management does not have any clear plan to replace old plants, pipelines, or to increase the installed capacity in near future. Management has not been able to recover its receivables from PSO, because of which its financial position has deteriorated.

 

 

 

 

 

 

 

 

 

 

FINANCIAL ANALYSIS

 

 

NRL has been facing the worst financial crisis for the past few years. The primary reason of this crisis is the trade debts, which (at December 31, 1998) amounted Rs. 8,548,248,000 ⁸. NRL has been facing great difficulty in receiving its receivable from PSO. Total receivable from PSO is around Rs. 10 billion (on February 17, 1999) which has affected cash flow position of NRL ⁹. Because of these unrealized trade debts NRL has been using running & short-term finance for its day to day operations. This has resulted in high financial charges, which has increased to Rs. 834 million in 1997-98 as compared to Rs. 476 million previous year ¹⁰, because of high trade debt Times Interest Earned ratio has come down as low as 2.4 (see Appendix 8 for financial data & ratios).

 

NRL inventory turnover ratio is currently (1997-98) 18.6 as compared to 12.29 in 1993, which is slightly below than industry average of 1998. Average Collection Period is 150 days up from 13.76 days in 1993, as compared to industry average i.e. 24 days. This is an alarming situation for NRL, and primary reason for deteriorated financial health of NRL.

 

Net Profit Margin is 2.37%, better than the industry average i.e. 1.18%. Return on Equity is 30.68% that is lower than the industry average of 39.4%.

 

Overall NRL’s financial position is very weak.

 

EXTERNAL ANALYSIS

 

Pakistan’s annual current refining capacity is about 6 million tons. Whereas annual the consumption requirements are 18 million tons. At present three refineries are working in Pakistan including National Refinery Limited, Attock Refinery Limited and Pakistan Refinery Limited.  Pak-Arab Refinery (PARCO) will start its production by year 2000. PARCO has installed capacity of 4.5 million tons per year¹¹.

 

Petroleum products are currently meeting about 43% of the country commercial demand. This share is expected to continue growing due to constraint in supply of alternative sources of energy and  a high growth rate in various consuming sectors. The oil consumption has increased form 3.6 million tons in 1976-77 to around 18 million tons in 1997-98 ¹².

 

The consumption of different petroleum products during the last two decades has undergone structural changes. For instance, furnace oil consumption increased from .96 million tons in 1981-82 to 6.93 million tons in 1996-97. This indicates a growth of 624 percent over a period of 15 years. Until early 1980s’ Pakistan was a net exporter of furnace oil while presently it imports huge volumes. This phenomenal increase in the consumption is attributed to the expansion in the thermal power sector and shift of the industrial sector from natural gas to furnace oil. Similarly, for the same period of 15 years, consumption of High Speed Diesel (HSD) has  registered a growth of 169%. Demand for petroleum product is expected to grow at an average of about 8% annually. Correspondingly, the total requirement of petroleum products will increase to about 30 million tons in the year 2006-7 ¹³.

 

Currently all refineries are working under the Governmental control, which tightly regulates fuel products. Because of these controls profit margins are very weak in this industry. That is why not many projects are coming in this sector ¹³.

 

Pricing formula is set by Economic Committee of the Federal Cabinet of the Federal Government ¹⁴. Lube sector is working under open market environment. In this sector competition is very tough. There are as big companies as Shell, Caltex, and Mobil. Number of competitors is constantly increasing. NRL faces tough competition from imported and fake products in the market.

 

Petroleum crude oil and petroleum products constitute a major portion of Pakistan’s export (see Appendix 4,Table I). Surcharges on petroleum are one of the revenue sources of the Government valueable revenue (see Appendix 4,Table II).

 

Transport sector is the largest consumer of the oil and oil products. During 1997-98 transport sector consumed 42.34% of oil and oil products followed by power sector (37.78%), industrial sector (13.01%), household (3.17%), other Government (2.23%) and agriculture (1.47%)¹⁵.

The inter-organizational-circular-debt risen to Rs 35 billion has entrapped the PSO, WAPDA, KESC, SSGPL and SNGPL into an ugly financial mess up ¹⁶. The Economic Coordination Committee of the Cabinet has approved the Power Bonds, worth Rs 11.5 billion, to bail Karachi Electric Supply Corporation (KESC) out of acute cash flow crisis consequently leading to the worst-ever power shortage, currently being experienced by Karachiites. The entire amount, out of the Power Bonds, has to be used by the KESC for debt retirement. At present KESC owes Rs12.9 billion to its suppliers primarily Pakistan State Oil (PSO) and Sui Southern Gas Company (SSGC). It is interesting to note that PSO which also owes around Rs10.5 billion to National Refinery, is not clearing its dues and continues to get supply from NRL but has refused to meet the fuel demand of KESC ¹⁷.

 

MAJOR PROBLEM

 

LACK OF PLANNING

 

NRL’s all minor problems are emanating from one major problem i.e. planning. This major issue is present both at organizational and functional level of NRL. Because of lack of planning, NRL is facing the worst financial crisis at present, which has deteriorated the financial health of the company. NRL’s management did not anticipate the financial crisis and keep supplying to PSO until debts reached enormously high level. Still NRL’s management is unable to recover its receivables from PSO.

 

Production capacity has been stagnated at present level for the last nine years. NRL does not have any plan to increase its capacity. Complacency is the major problem of the management.

 

NRL does not have any mission, objective, and goals. NRL does not have any well defined planning process. NRL’s decision making is limited to handle what is currently going on in the market. NRL’s management does not plan for future. Managers and employees know only what they have to do and are not directly concerned how they contribute to profitability of NRL. Also that there is lack of participation from lower level of employees.

 

There is also lack of R&D in NRL, which can play an important role in this industry, especially in lube business where competition is rapidly increasing and which provides major portion of NRL’s profit.

 

MINOR PROBLEMS

 

• CASH FLOW PROBLEM: NRL has to receive about Rs. 10.5 billion from PSO, which has placed NRL in the worst financial position.
• LACK OF RELATIONSHIP WITH SUPPLIER: NRL’s basic criterion for purchases is lowest price. For this reason NRL in many cases could not buy from the suppliers that are far better in other aspects and does not have any reliable relationship with its supplier.
• STAGNATE PRODUCTION CAPACITY: NRL’s production has remained static for last many years. Expansion in production capacities required capital that NRL is already short of.
• LACK OF INNOVATION: NRL does not has any R&D department and does not has any program for process and product development.
• HIGH FINANCIAL CHARGES: Because of high trade debts, NRL has to use running finance to finance which is resulting in high financial cost.
• OBSOLETE PLANT & EQUIPMENT: Most of Plants in NRL have completed their economic life and are being operated through major maintenance efforts. But this frequently results in production break downs.
• PROBLEM WITH PIPELINES: Pipelines are used for distribution and reception of oil are old and vulnerable to leakage and because of lack of proper supervision is resulting in theft of oil.
• HIGH PRODUCTION COST: Because of high maintenance and low economies of scale, NRL’s production cost is high as compared to imported products.

 

 

STRATEGIC ALTERNATIVES

 

MARKET PENETRATION: NRL needs to increase its refining capacity & should plan to continually enhance it on priority basis. Since, market penetration  can not be done unless the firm has facilities to increase its production. NRL might seek help from the Government to provide funds necessary to increase manufacturing facilities. Especially, NRL should increase the capacity of lube refinery and should set up a hydrocracker project in order to acquire the capability to refine the finest crude oil.

 

JOINT VENTURE: Joint venture is another strategic alternative for NRL. Joint venture would be feasible for the foreign firm as well as for NRL. NRL would get the foreign capital & technology, while the foreign firm’s risk will be minimized.

 

FORWARD INTEGRATION: Gaining control over distributor could be another strategic alternative for NRL. Since NRL is bound to sell its product its fuel products to PSO, therefore, NRL will have to seek approval from the Government to implement this strategy.

 

PRODUCT DEVELOPMENT: NRL’s competitors like Shell, Caltex, and Mobil are offering better quality products at competitive prices. Therefore, NRL should produce new and better products to attract the customers. But strong R&D capabilities are required to choose this option.  This strategy is also important for NRL because it is a public sector organization and can not take radical measures without the Government consent.

 

STRATEGIC CHOICE

 

After analyzing strategic alternatives using decision making matrices like EFE, IFE, CPM, TOWS, SPACE and QSPM (see Appendix 6 for Decision Making Matrices), in which product development strategy got the highest total attractive score. Therefore, keeping in view its attractiveness, product development strategy seems the best choice.

Product development is the best choice. Especially in lube sector, where NRL is facing sever competition from imported lower price products. NRL needs to increase production capacity of lube products and produce improved/new products at competitive prices. NRL should activate R&D activities for product improvement/development. NRL might seek help of the Government to provide necessary funds for enhancement of production facilities and for product development/improvement. Alternatively, NRL can acquire required plants and equipment on lease.

 

 

 

TENTATIVE TABLE OF CONTENT FOR LIVE CASE

 

• Executive Summary
• Industry Profile
• NRL Profile
• Value Chain Analysis
• Management Style
• NRL’s Culture
• Planning Process
• External Analysis
• Competitor, Suppliers, New Entrants, Substitue Produts
• Legal And Governmental Issues
• Economic Scenario
• Technology
• Analysis
• Future Outlook

 

 

 

ENDNOTES

 

 

1. National Refinery Limited, Un-Audited Accounts For The Half Year Ended December 31,1998.
2. National Refinery Limited, 35^th Annual Report & Accounts June 30, 1998.
3. Bashar, Amanullah, “Refining Sector Needs Acceleration.” Pakistan & Gulf Economist, March 8-14, 1999. Pp 10-12.
4. Kazmi, Shabbir H. “Oil Refining: Dim Prospects For Capacity Expansion.” Pakistan & Gulf Economist, July 28- August 3, 1997.
5. National Refinery Limited, June 30, 1998.
6. National Refinery Limited, December 31,1998.
7. National Refinery Limited, June 30, 1998.
8. Ibid.
9. Bashar, Amanullah. “Oil: Foreign Investment In This Sector Is A Major Development.” Pakistan & Gulf Economist, July 28- August 3, 1997. Pp. 10-14.
10. Ibid
11. National Refinery Limited, June 30, 1998.
12. State Bank Of Pakistan, Economic Survey, 1997- 98. P. 111.
13. Bashar, Amanullah. “Liquidity Crunch At National Refinery.” Pakistan & Gulf Economist, January 26- February 8, 1998.
14. Bashar, Amanullah. “Restructuring The KESC.” Pakistan & Gulf Economist, February 1-7, 1999.

 

APPENDIX 1

 

DESIGN CAPACITIES

 

FIRST LUBE REFINERY

DESIGN CAPACITY	539700 TONS PER YEAR OF CRUDE PROCESSING76,200 TONS OF LUBE BASE OIL PER YEAR.
DATE COMMISSIONED	JUNE 1966
PROJECT COST	RS. 103.9 MILLION

FIRST FUEL REFINERY

BEFORE REVAMP
DESIGN CAPACITY	1,500,800 TONS PER YEAR OF CRUDE PROCESSING
DATE COMMISSIONED	APRIL, 1977
PROJECT COST	RS. 607.5 MILLION
AFTER REVAMP
DESIGN CAPACITY	2,170,800 TONS PER YEAR OF CRUDE PROCESSING
DATE COMMISSIONED	FEBRUARY, 1990
PROJECT COST	RS. 125 MILLION

 

B.T.X. UNIT

DESIGN CAPACITY	25,000 TONS PER YEAR OF B.T.X.
DATE COMMISSIONED	APRIL, 1979
PROJECT COST	RS. 66.7 MILLION

 

SECOND LUBE REFINERY

DESIGN CAPACITY	100,000 TONS PER YEAR OF LUBE BASE OILS
DATE COMMISSIONED	JANUARY, 1985
PROJECT COST	RS. 2,082.4 MILLION

 

APPENDIX 2

 

CATEGORIES OF SHARE HOLDERS

 

CATEGORIES OF SHARE HOLDERS	NUMBER	SHARES HELD	PERCENTAGE
INDIVIDUALS	4537	4,695,260	7.04
INVESTMENT COMPANIES	19	31,636,441	47.47
JOINT STOCK COMPANIES	20	283,376	.43
FINANCIAL INSTITUTION	10	14,519,787	21.79
MODARBA COMPANIES	5	158,100	.24
INSURANCE COMPANIES	12	4,171,669	6.26
OTHERS*	9	10,908,567	16.37
NON RESIDENTS	3	265,600	.4
TOTAL	4615	66,638,800	100

 

OTHERS*

CATEGORIES OF SHARE HOLDERS	NUMBER	SHARES HELD	PERCENTAGE
1. PERAC	1	10,757,382	16.14
2. ADMINISTRATOR ABANDONED PROPERTIES	1	46,630	.07
3. CHARITABLE ORGANIZATIONS	5	75,554	.11
4. CORPORATE LAW AUTHORITY	1	1	–
5. EMPLOYEES OLD AGE BENEFITS	1	29,000	.05

 

 

 

APPENDIX 3

 

NRL RANGE OF PRODUCTS

 

FUEL PRODUCTS

 

• LIQUEFIED PETROLEUM GASS
• NAPHTHA
• MOTOR GASOLINE
• HIGH OCTANE
• KEROSENE
• JET FUEL (JP-1 & JP-4)
• HIGH SPEED DIESEL OIL
• LIGHT DIESEL OIL
• FURNACE OIL

 

LUBE BASE OILS

 

• 65 N-HVI
• 100 N-HVI
• 150 N-HVI
• 400 N-HVI
• 500 N-HVI
• BS –HVI
• 100 N-MVI
• 650 N-MVI
• BS –MVI

 

ASPHALTS

 

• PAVING GRADE 80/100
• PAVING GRADE 60/70

 

 

 

 

SPECIALTY PRODUCTS

 

• JUTE BATCHING OIL
• PROCESS OIL
• BENZENE
• TOLUENE
• XYLENE
• CARBON OIL
• SLACK WAX

 

 

 

 

 

APPENDIX 4

 

TABLE-I: PAKISTAN’S TOTAL IMPORTS  & OIL IMPORTS

(Million US Dollars)

	1994-95	1995-96	1996-97	1997-98
PETROLEUM CRUDE	494.1	508.4	582.0	463.8
PETROLEUM PRODUCTS	1089.6	1492.7	1678.1	1094.1
TOTAL PETROLEUM PRODUCTS	1583.6	2001.1	2260.1	1558
TOTAL IMPORTS	10375.6	11814.8	11894.9	10070.3
TOTAL PETROLEUM IMPORTS AS % OF TOTAL IMPORTS	15.26	16.94	19.0	15.47

(Source : State Bank of Pakistan Annual Report 1997-98, page 143)

 

 

TABLE-II: GOVERNMENT REVENUES AND SURCHARGE ON PETROLEUM

(Million US Dollars)

	1994-95	1995-96	1996-97	1997-98
NET GOVT. REVENUES	223,596	249,200	252,707	330,817
SURCHARGES ON PETROLEUM	12.490	15.127	22.476	40.567
PERCENTAGE	.005	.006	.008	.012

(Source : State Bank of Pakistan Annual Report 1997-98, page 22)

 

 

 

APPENDIX 5

 

ORGANIZATIONAL STRUCTURE

 

Departments of NRL are divided into two categories i.e. Manufacturing activities departments and Support activities department. Manufacturing activities departments are headed by one General Manager (GM). Manufacturing activities departments include following group of departments;

1. Operations Group
2. Oil Movement & Utilities Group
3. Maintenance & Engineering Group
4. Technical Group

Every group is headed by one General Manager.

 

OPERATIONS GROUP: This is group responsible for the production of NRL. This group is divided into three departments. These departments are responsible for the production of Lube I Unit (LUBE-I), Lube II Unit (Lube-II) and Fuel Refinery (Fuel-R). Every department is headed by one Senior Manager. These departments produced according to the schedule provided by Technical Service department.

 

OIL MOVEMENT & UTILITIES DEPARTMENT: This group is responsible for all inbound and outbound logistics. This group also takes care of NRL’s own production requirement, including water, fuel and electricity. This group is divided into four departments. Oil Movement department looks after the matter related to movement of oil to NRL from Keemari Terminal and from NRL to Keemari Terminal, where distribution facilities are located.

 

Keemari Terminal department maintains the Keemari Terminal’s tank and storage facilities. Utility department takes care of NRL’s energy requirement for production, which include furnace oil, electricity and etc.

 

MAINTENANCE & ENGINEERING GROUP: This group’s primary job is to provide maintenance and support services to NRL’s departments. This group is divided into five departments.  Maintenance-I department is responsible for problems that are product related (Chemical Engineering). Maintenance-II is responsible for maintenance of logistic related problems. While Maintenance-III department takes care of problems that processes related (Mechanical Engineering). Wear House department looks after storage related problems. All these department provide maintenance services when they are requested to provide help.

 

Engineering department is responsible for supporting these department and whole NRL when old methods fail to achieve result. This department provide help in process related problems. This department plays role of R&D department to some extent, which does not exist in NRL. In hours of need, Engineering department also does some of the jobs of Project department and of Technical Department.

 

TECHNICAL GROUP This group is further divided into five departments. First department is Safety, which makes sure that operations are carried out with all safety precautions. This department carries out inspection of equipment  and instruments and process and also provides for fire fighting requirements.

 

Quality Control is another department of Technical group. This makes sure of quality requirements of products. Technical Services is another and very important department. This department also fulfil nee of  R&D department to some extent.  This department is contacted for all products related al problem in NRL and it carries out studies and then provides some solution for these problems. This department also finalizes production schedule for Operation departments. This department also negotiates with the Ministry of Oil and Natural Resources for production requirements and NRL’s ability to produce it.

 

Project department is fourth department of the Technical Department. This carries out studies for new facilities development requirements, its specification, its cost and etc. and when job is assigned to some contractor this department monitors development process.

 

Technical Audit & Inspection is new inducted department of Technical Department. This department carries out in-depth technical audit of process and equipment of NRL.

 

Support activities  include following departments;

1. Commercial Group
2. Personnel & Administration Group
3. Finance & Audit Group

 

COMMERCIAL GROUP: This is divided into three departments i.e. Purchase, Supply, and Contract Cell. Supply department looks after all transaction of inbound and out bound logistics. Purchase department purchases all equipment and other requirement of NRL. Contract Cell comes in action whenever NRL wants to construct any thing with the help of outside contractor. Project department of Technical department provides Job technical specifications and cost estimates. This department negotiates with contractors.

 

PERSONNEL & ADMINISTRATION GROUP: This department is further divided into five departments. Training department provides training to newly inducted employees and also provides training or arranges it for old employees whenever need arise. Department  Personnel & Administration takes care of general personnel administration requirement. Department Industrial Relation monitors affairs like workers welfare and disciplined matters.

 

Another department is Medical department. Fifth department of P & A group is Security department, which make sure security requirement of NRL. NRL installation are vulnerable to terrorism, therefore district administration also takes measure in this regard.

 

FINANCE & ACCOUNTING GROUP: This group is divided into three departments. These include Controller, Finance, and Audit. Finance department also does planning job for NRL.

 

 

 

 

APPENDIX 6

 

DECISION MAKING MATRICES

 

THE COMPETITIVE PROFILE MATRIX

 

CRITICAL SUCCESS FACTORS	WEIGHT	NATIONALREFINERY		PAKISTAN REFINERY		ATTOCK REFINERY
		RATING	WS*	RATING	WS*	RATING	WS*
MARKET SHARE	.2	4	.8	3	.6	3	.6
FINANCIAL POSITION	.3	1	.3	1	.3	1	.3
PRODUCTION CAPABILITY	.2	4	.8	3	.6	1	.2
PRODUCT QUALITY	.1	3	.3	3	.3	3	.3
PRICE COMPETITIVENESS	.05	2	.1	2	.1	2	.1
CUSTOMER LOYALTY	.05	2	.1	2	.1	2	.1
TOTAL	1.0		2.4		2.0		1.6

*WS= WEIGHTED SCORE

 

EXTERNAL FACTOR EVALUATION

 

 

KEY EXTERNAL FACTORS	WEIGHT	RATING	WEIGHTED SCORE
A GAP OF 12 MILLION TONS BETWEEN LOCAL PRODUCTION AND LOCAL CONSUMPTION REQUIREMENT	0.20	4	0.80
DEREGULATION OF LUBE SECTOR	0.20	2	0.40
LIKELY PRIVATIZATION OF PSO	0.05	3	0.15
8% GROWTH RATE OF OIL PRODUCTS	0.10	4	0.40
LIKELY DEREGULATION OF FUEL PRODUCTS	0.05	2	0.10
AVAILABILITY OF IMPORTED LUBE PRODUCTS AT LOWER PRICES	0.15	1	0.15
NEW ENTRANT, PARCO, MOBIL, ETC.	0.10	2	0.20
INCREASED EFFORTS BY GOVERNMENT TO SWITCH OVER POWER GENERATION FROM OIL TO GAS	0.15	1	0.15
TOTAL	1.00		2.35

 

 

 

INTERNAL FACTOR EVALUATION

 

 

KEY INTERNAL FACTORS	WEIGHT	RATING	WEIGHTED SCORE
GOVERNMENT SUPPORT	0.15	3	0.75
HIGH NET PROFIT MARGIN, 3.2%	0.05	2	0.10
EXPERIENCED & SKILLED WORK FORCE	0.05	3	0.15
PLANNING PROCESS	0.15	1	0.15
UNREALIZED TRADE DEBTS	0.15	1	0.15
CONTROL OVER DISTRIBUTOR	0.10	1	0.10
LIMITED PRODUCTION CAPACITY	0.20	1	0.20
R&D	0.15	2	0.30
TOTAL	1.00		1.90

 

 

 

TOWS MATRIX

 

	STRENGTHS1.      MARKET SHARE IS 46%2.      EXPERT & SKILLED WORK FORCE 3.      PROFIT MARGIN IS GOOD, 3.2% 4.      GOVERNMENT  BACKING	WEAKNESS1.      LIMITED PRODUCTION CAPACITY2.      AVERAGE COLLECTION PERIOD IS HIGH 181 DAYS 3.      DEBT-EQUITY IS HIGH 8.59 4.      LACK OF PLANNING PROCESS 5.      NO CONTROL OF DISTRIBUTION 6.      LARGE UNREALIZED TRADE DEBTS
OPPORTUNITIES1.      LARGE LOCAL DEMAND COMPARED WITH SUPPLY2.      DEREGULATION OF LUBE PRODUCTS 3.      8% GROWTH OF OIL MARKET 4.      LIKELY PRIVATIZATION OF PSO	SO-STRATEGY	WO-STRATEGY1.      INCREASE IN PRODUCTION CAPACITY 2.      FORWARD INTEGRATION
THREATS1.      NEW ENTRANTS2.      SUBSTITUTE PRODUCTS 3.      LOW PRICES OF IMPORTED PRODUCTS	ST-STRATEGY1.      JOINT VENTURE TO MAKE USE OF NRL EXPERIENCE AND WORK FORCE SKILL WITH CAPITAL OF PARTNER	WT-STRATEGY1.      PRODUCT DEVELOPMENT

 

 

 

THE SPACE MATRIX

 

FINANCIAL STABILITY

  

IS                               GROWTH POTENTIAL     4PROFIT POTENTIAL     3   FINANCIAL STABILITY  3 TECHNOLOGY           3 CAPITAL STABILITY    5 EASE OF ENTRY        1 CAPACITY UTILIZATION 5   24/7 = 3.4     COMPETITIVE                                                          ADVANTAGE	FSDEBT ON EQUITY       2AVERAGE COLLECTION PERIOD            1 CASH FLOW            2 LEVERAGE             3 WORKING CAPITAL      2   10/5= 2         INDUSTRIAL STABILITY
CA      ·         MARKET SHARE            -2 ·         TECHNICAL KNOW HOW      -3 ·         CONTROL OVER SUPPLIER   -6 ·         PRODUCT QUALITY         -3 ·         CUSTOMER LOYALTY        -4 ·          CAPACITY UTILIZATION   -2                       -20/6 = 3.3	ES ·         TECHNICAL CHANGES    -3 ·         RATE OF INFLATION    -3 ·         DEMAND VIABILITY     -1 ·         BARRIERS TO ENTRY    -5 ·         COMPETITIVE PRESSURE -4 ·         PRICE ELASTICITY OF DEMAND              -1                  -17/6 = -2.8

 

 

ENVIRONMENTAL STABILITY

 

 

FINANCIAL STABILITY

COMPETITIVE                                                         ADVANTAGE	INDUSTRIAL STABILITY
-.1-.2-.3 -.4	.1  .2  .3

 

ENVIRONMENTAL STABILITY

 

 

QSPM MATRIX

 

CRITICAL SUCCESS FACTORS		WEIGHT	MARKET PENETRATION		JOINT VENTURE		FORWARD INTEGRATION		PRODUCT DEVELOPMENT
			AS	TAS	AS	TAS	AS	TAS	AS	TAS
OPPORTUNITIES
A GAP OF 12 MILLION TONS BETWEEN LOCAL PRODUCTION AND LOCAL CONSUMPTION	.2		4	0.8	3	0.6	2	0.6	4		0.80
DEREGULATION OF LUBE SECTOR	.2		2	0.4	2	0.4	1	0.2	4		0.8
LIKELY PRIVATIZATION OF PSO	.05		3	0.15	2	0.10	4	0.20	3		0.15
8% GROWTH RATE OF OIL PRODUCTS	.10		4	0.40	3	0.3	1	0.1	2		0.2
LIKELY DEREGULATION OF FUEL PRODUCTS	.05		2	0.10	2	0.10	1	0.05	4		0.2
THREATS
AVAILABILITY OF IMPORTED LUBE PRODUCTS AT LOWER PRICES	.15		1	.15	3	0.45	–	–	4		0.60
NEW ENTRANT, PARCO, MOBIL, ETC.	.10		2	.20	3	0.3	1	0.10	3		0.30
INCREASED EFFORTS BY GOVERNMENT TO SWITCH TO OVER POWER GENERATION FROM OIL TO GAS	.15		1	.15	1	0.15	–	–	3		0.45
STRENGTHS
GOVERNMENT SUPPORT	.15		2	0.30	4	06.0	1	0.15	1		0.15
HIGH PROFIT MARGIN, 3.2%	.05		1	0.05	3	0.15	1	0.05	3		0.15
EXPERIENCED & SKILLED WORK FORCE	.05		1	0.05	3	0.15	1	0.05	3		0.15
WEAKNESS
PLANNING PROCESS	.15		1	0.15	3	0.45	2	0.3	4		0.6
UNREALIZED TRADE DEBTS	.15		1	0.15	3	0.45	3	0.45	3		0.45
CONTROL OVER DISTRIBUTOR	.10		–	9	–	–	4	0.4	–		–
LIMITED PRODUCTION CAPACITY	.20		2	0.4	1	0.2	3	0.6	4		0.8
R&D	.15		1	0.15	2	0.3	1	0.15	1		0.15
TOTAL				3.65		4.70		3.20			5.95

 

APPENDIX  7

 

INTERVIEWS

 

NAME OF PERSON………: MR. NISAR HUSSAIN VAKIL

DESIGNATION…………………..: MANAGER FINANCE

PHONE NUMBER ……………..: 5064135-37, EXT. 2242

DATE OF MEETING………..: 25-2-99

TIME OF MEETING…….. : 10.00 A.M.

DURATION OF MEETING…: 30 MINUTES

PLACE OF MEETING…………: NATIONAL REFINERY LIMITED

ADDRESS …………………………..: 7-B KORANGI INDUSTRIAL AREA, KARACHI

 

We discussed financial position of NRL. He told us that about Rs. 10 billion are to be collected  from PSO, and that they are pruning this matter. He told us that they are receiving check form PSO of small amounts against receivables. He mentioned that around Rs. 7.5 billion is the principal amount and about Rs. 2.5 billion is interest.

 

He told us that NRL stopped supplying furnace oil to KESC in recent past for not having been paid their receivable, which caused loadshading in the city. He told us that now they are dealing with PSO on cash basis which has only prevented the situtation to get further deteriorated. He also mentioned that NRL is using running finance to meet it cash requirements.

 

 

NAME OF PERSON………: MR. ZAHOOR ABBAS

DESIGNATION…………………..: ASSISTANT MANAGER FINANCE

PHONE NUMBER ……………..: 5060884, EXT. 2233

DATE OF MEETING………..: 25-2-99

TIME OF MEETING…….. : 10.45 A.M.

DURATION OF MEETING…: 25 MINUTES

PLACE OF MEETING…………: NATIONAL REFINERY LIMITED

ADDRESS …………………………..: 7-B KORANGI INDUSTRIAL AREA, KARACHI

 

 

He told that he is mainly involved in preparing budget of the company. He said that the sends printed forms to all the department in which last year’s figure are already given & concerned people are asked to give their demands for the next year. He told us that NRL mainly uses incremental budgeting techniques does not other techniques like zero based budgeting.

 

NAME OF PERSON………: MR. KHWAJA AJMAL WAHEED

DESIGNATION…………………..: SENIOR MANAGER TRAINING

PHONE NUMBER ……………..: 5062718, 310261-65

DATE OF MEETING………..: 25-2-99

TIME OF MEETING…….. : 12.00 P.M.

DURATION OF MEETING…: 40 MINUTES

PLACE OF MEETING…………: NATIONAL REFINERY LIMITED

ADDRESS …………………………..: 7-B KORANGI INDUSTRIAL AREA, KARACHI

 

 

We met MR. K. Ajmal. He told us that there is a ban on hiring and they hire employees on dialy wages as per requirements. He told us that training period of newly inducted engineers is 2 years. He told us that employees are satisfied with their salaries and employees’ moral is good. Employees turnover rate is low but engineers have the tendency to leave whenever they get a chance to go abroad especially to Middle East at higher salaries. He  also mentioned that they provide appropriate training to diploma holders of Associates Engineering.

 

 

NAME OF PERSON………: MR. MANSOOR ALI KHAN

DESIGNATION…………………..: SENIOR MANAGER TECHNICAL

PHONE NUMBER ……………..: 310261

DATE OF MEETING………..: 25-2-99

TIME OF MEETING…….. : 9.00 A.M.

DURATION OF MEETING…: 35 MINUTES

PLACE OF MEETING…………: NATIONAL REFINERY LIMITED

ADDRESS …………………………..: 7-B KORANGI INDUSTRIAL AREA, KARACHI

 

He told us about the functions of his department and its role in NRL. He said that Technical Service department of his  group is one of the most important department of NRL. He said that this department makes schedule for NRL’s production and evaluate plants condition for producing required volumes. He also mentioned that recently we have launched a new department of Technical Audit & Inspection, with the objective to monitor cost, quality, and technical specification and need of purchases of NRL’s equipment & plants. He also told us about the role of other department that he supervises.

 

 

NAME OF PERSON………: MR. M. AAMIR

DESIGNATION…………………..: CONTROL ROOM FORMEN

PHONE NUMBER ……………..: 310261

DATE OF MEETING………..: 26-2-99

TIME OF MEETING…….. : 9.00 A.M.

DURATION OF MEETING…: 35 MINUTES

PLACE OF MEETING…………: NATIONAL REFINERY LIMITED

ADDRESS …………………………..: 7-B KORANGI INDUSTRIAL AREA, KARACHI

 

We met Mr. M. Aamir who told us that all four units of NRL have separate control rooms. Since all the plants operate continuously, therefore, control room staff performs its duty round the clock. Anything abnormal in the plant is timely detected in the control room and they told the needful to get the problem fixed. He told us that they have loud speaker & telephone system for communication.

 

NAME OF PERSON………: MR. AKHTAR BAHRAM

DESIGNATION…………………..: ASSISTANT MANAGER

PHONE NUMBER ……………..: 310261-66, EXT. 2503

DATE OF MEETING………..: 26-2-99

TIME OF MEETING…….. : 11.00 A.M.

DURATION OF MEETING…: 25 MINUTES

PLACE OF MEETING…………: NATIONAL REFINERY LIMITED

ADDRESS …………………………..: 7-B KORANGI INDUSTRIAL AREA, KARACHI

 

 

He is civil engineer and currently working for Engineering Department. He said that plants are quite old and to keep them operating is big problem. He said that these plant should have been replaced well before. He also that NRL has to import almost equipments because they are manufactured locally. He said that NRL itself cannot manufactured these parts and supplies because it has small requirements. But he said that there exist a substantial demand for support industry in Pakistan.

 

 

NAME OF PERSON………: MR. KAMRAN LARI

DESIGNATION…………………..: MANAGER PURCHASE

PHONE NUMBER ……………..: 310261-3

DATE OF MEETING………..: 26-2-99

TIME OF MEETING…….. : 1.30 P.M.

DURATION OF MEETING…: 45 MINUTES

PLACE OF MEETING…………: NATIONAL REFINERY LIMITED

ADDRESS …………………………..: 7-B KORANGI INDUSTRIAL AREA, KARACHI

 

He told us about the role of Commercial department. He said to make thing transparent they have to use policy of low cost supplier. He also told that contracts some times give a bid for some construction jobs less that what is feasible for themselves to remain lowest and win contract. But start of work they stop work and request for increased budgets.

 

 

NAME OF PERSON………: MR. ZIA ABBASI

DESIGNATION…………………..: ASSISTANT MANAGER

PHONE NUMBER ……………..: 310261-3, EXT. 2227

DATE OF MEETING………..: 22-2-99

TIME OF MEETING…….. : 10.00 A.M.

DURATION OF MEETING…: 120 MINUTES

PLACE OF MEETING…………: NATIONAL REFINERY LIMITED

ADDRESS …………………………..: 7-B KORANGI INDUSTRIAL AREA, KARACHI

 

He is working in Technical Audit and Inspection department. He told us that this has recently been established. Purpose of this department is to evaluate purchases. Traditionally audit was limited to cost and physical inventory. But this department also consider technical requirement and specification of purchase.

 

 

 

NAME OF PERSON………: MR. MAHMOOD KAMAL

0D0E0SIGNATION…………………..: INVESTMENT ANALYST

PHONE NUMBER ……………..: 2415213-15

DATE OF MEETING………..: 10-3-99

TIME OF MEETING…….. : 10.45 A.M.

DURATION OF MEETING…: 45 MINUTES

PLACE OF MEETING…………: ARIF HABIB SECURITIES

ADDRESS …………………………..: 60-63, KARACHI STOCK EXCHANGE.

 

We met M. M. Kamal, the Investment Analysts in Arif Habib Securities to know his views about the performance of NRL. He told us about the financial health of NRL and it performance in the stock exchange. He told us about the unsound financial health of NRL & its relationship with PSO. He told us that now NRL is dealing with PSO & KESC on cash basis only.

 

 

APPENDIX 8

 

FINANCIAL DATA

  

INCOME STATEMENTS

FOR THE YEARS ENDED AT JUNE 30, 1993, 1994, & 1995

	1993		1994		1995
(RS.IN‘000)
SALES	14,155,482		13,982,703		15,221,141
CGS	13,364,500		13,089,832		15,064,659
GROSS PROFIT	790,982		892,871		156,482
SELLING, ADMIN,
& GENERAL EXPENSE	110,807		116,660		148,938
TRADING PROFIT	680,175		776,211		7,544
OTHER INCOME	9,055		17,720		9,252
NON-REFINING NCOME	0		0		5,557
	689,230		793,931		22,353
FINANCIAL EXPENSES	52,193		108,611		143,905
OTHER CHARGES	47,841		51,925		1,733
	100,034		160,536		145,638
PROFIT BEFORE TAXATION	589,196		633,395		(123,285)
PROVISION FOR TAXATION	(298,431)		(280,506)		(131,772)
PROFIT AFTER TAXATION	290,765		352,889		(255,057)
UNAPPROPRIATED PROFIT BROUGHT FORWARD	691		901		916
PROFIT AVAILABLE FOR APPROPRIATION	291,456		353,790		(254,141)
APPROPRIATIONS :
DIVIDENDS :
–INTERIM	0		146,605		0
–PROPOSED	266,555		153,269		0
TRANSFER TO REVENUE RESERVE-GENERAL	24,000		53,000		0
	290,555		352,874		0
UNAPPROPRIATED  PROFIT	901		916		(254,141)

 

INCOME STATEMENTS

FOR THE YEARS ENDED AT JUNE 30, 1996, 1997, & 1998

 

	1996		1997		1998
(RS.IN‘000)
SALES	16,739,198		20,997,026		20,709,865
CGS	15,768,326		19,569,398		18,930,980
GROSS PROFIT	970,872		1,427,628		1,778,885
SELLING, ADMIN,
& GENERAL EXPENSE	207,647		191,372		243,016
TRADING PROFIT	763,225		1,236,256		1,535,869
OTHER INCOME	7,967		39,538		47,756
NON-REFINING INCOME	2,431		12,476		56,904
	773,623		1,288,270		1,640,529
FINANCIAL EXPENSES	233,080		456,975		833,979
OTHER CHARGES	74,259		56,984		67,622
	307,339		513,959		901,601
PROFIT BEFORE TAXATION	466,284		774,311		738,928
PROVISION FOR TAXATION	(187,239)		(318,485)		(247,106)
PROFIT AFTER TAXATION	279,045.00		455,826.00		491,822.00
UNAPPROPRIATED PROFIT BROUGHT FORWARD	(254,141)		133		362
PROFIT AVAILABLE FOR APPROPRIATION	24,904		455,959		492,184
APPROPRIATIONS :
DIVIDENDS :
–INTERIM	0		99,958		0
–PROPOSED  FINAL	0		66,639		166,597
TRANSFER TO REVENUE RESERVE-GENERAL	24,771		289,000		325,000
	24,771		455,597		491,597
UNAPPROPRIATED PROFIT	133		362		587

 

 

BALANCE SHEETS

AS AT JUNE 30, 1993, 1994, 1995

 

 

		1993		1994		1995
SHARE CAPITAL AND RESERVE
AUTHORIZED CAPITAL 100,000,000 ORDINARY SHARES OF RS. 10 EACH	1,000,000			1,000,000		1,000,000
ISSUED, SUBSCRIBED AND PAID UP CAPITAL 66,638,800 ORDINARY SHARES OF RS. 10	666,388			666,388		666,388
CAPITAL RESERVE	14,259			14,259		14,259
REVENUE RESERVE-GENERAL	230,229			283,229		283,229
UNAPPROPRIATED PROFIT	901			916		(254,141)
	911,777			964,792		709,735
REDEEMABLE CAPITAL	25,521			18,000		9,929
LONG-TERM AND DEFERRED LIABILITIES
LOANS	448,722			497,325		632,790
STAFF RETIREMENT BENEFITS	10,240			13,094		22,629
COMPENSATED ABSENCES	10,882			11,608		12,374
DEFERRED TAXATION	120,980			96,823		144,838
DEFERRED CREDITS	0			4,048		3,336
	590,824			622,898		815,967
CURRENT LIABILITIES
SHORT-TERM LOAN AND RUNNINGFINANCES	529,962			1,345,642		1,430,542
CURRENT PORTION OF LONG-TERMRUNNING FINANCES AND LOANS	205,711			225,750		349,293
CREDITORS, ACCRUED ANDOTHER LIABILITIES	3,884,403			3,270,334		4,202,315
TAXATION	94,711			130,716		0
PROPOSED DIVIDEND	266,555			153,269		0
	4,981,342			5,125,711		5,982,150
CONTINGENCIES AND COMMITMENTS	6,509,464			6,731,401		7,517,781

 

 

	1993		1994		1995
TANGIBLE FIXED ASSETS
OPERATING ASSETS	1,360,733		1,261,133		1,613,484
CAPITAL WORK-IN-PROGRESS	290,518		544,337		186,956
	1,651,251		1,805,470		1,800,440
LONG-TERM ASSETS
INVESTMENTS	27.00		31		25
LOANS	48,561.00		51,342		50,813
DEPOSITS	3,736.00		14,997		4,456
	52,324.00		66,370		55,294
CURRENT ASSETS
STORES AND SPARES	595,330.00		712,707		623,289
STOCK-IN-TRADE	1,151,720		1,353,134		1,215,821
TRADE DEBTS	533,544.00		1,691,854		1,596,657
LOANS AND ADVANCES	22,256.00		28,970		85,582
DEPOSITS AND SHORT TERM PREPAYMENTS	126,952.00		69,169		107,012
OTHER RECEIVABLE	37,757.00		32,565		25,823
DUE FROM GOVERNMENT	1,559,202		757,442		1,666,169
CASH AND BANK BALANCES	779,128		213,720		341,694
	4,805,889		4,859,561		5,662,047
	6,509,464		6,731,401		7,517,781

 

 

BALANCE SHEETS

AS AT JUNE 30, 1996, 1997, 1998

 

 

	1996		1997		1998
SHARE CAPITAL AND RESERVE
AUTHORIZED CAPITAL 100,000,000 ORDINARY SHARES OF RS. 10 EACH	1,000,000		1,000,000		1,000,000
ISSUED, SUBSCRIBED AND PAIDUP CAPITAL 66,638,800ORDINARY SHARES OF RS. 10	666,388		666,388		666,388
CAPITAL RESERVE	14,259		14,259		14,259
REVENUE RESERVE-GENERAL	308,000		597,000		922,000
UNAPPROPRIATED PROFIT	133		362		587
	988,780		1,278,009		1,603,234
REDEEMABLE CAPITAL	1,308		0		0
LONG-TERM AND DEFERRED LIABILITIES
LOANS	860,698		482,273		356,438
STAFF RETIREMENT BENEFITS	24,912		27,605		36,588
COMPENSATED ABSENCES	12,441		13,116		12,635
DEFERRED TAXATION	11,024		48,650		104,105
DEFERRED CREDITS	255,305		129,123		0
	1,164,380		700,767		509,766
CURRENT LIABILITIES
SHORT-TERM LOAN AND RUININGFINANCES	1,130,140		3,000,869		4,928,573
CURRENT PORTION OF LONG-TERMRUNNING FINANCES AND LOANS	290,773		1,232,840		277,919
CREDITORS, ACCRUED AND OTHERLIABILITIES	6,041,986		6,497,862		7,885,490
TAXATION	174,201		121,653		0
PROPOSED DIVIDEND	0		66,639		166,597
	7,637,100		10,919,863		13,258,579
CONTINGENCIES AND COMMITMENTS	9,791,568		12,898,639		15,371,579

 

 

	1996		1997		1998
TANGIBLE FIXED ASSETS
OPERATING ASSETS	1,399,836		1,177,445		1,152,431
CAPITAL WORK-IN-PROGRESS	596,752		689,629		534,839
	1,996,588		1,867,074		1,687,270
LONG-TERM ASSETS
INVESTMENTS	50,020		10,859		9
LOANS	68,610		140,783		89,887
DEPOSITS	5,398		3,829		55,059
	124,028		155,471		144,955
CURRENT ASSETS
STORES AND SPARES	760,163		602,917		569,248
STOCK-IN-TRADE	1,539,581		1,799,494		1,140,130
TRADE DEBTS	2,121,504		4,896,610		8,548,248
LOANS AND ADVANCES	45,610		34,586		118,730
DEPOSITS AND SHORT TERM PREPAYMENTS	151,961		62,385		57,492
OTHER RECEIVABLE	15,413		8,459		50,005
DUE FROM GOVERNMENT	2,828,793		3,054,679		2,569,230
CASH AND BANK BALANCES	207,927		416,964		486,271
	7,670,952		10,876,094		13,539,354
	9,791,568		12,898,639		15,371,579

 

 

STATEMENTS OF CHANGE IN FINACIAL POSITION

FOR THE YEARS ENDED AT JUNE 30, 1993 & 1994

 

	1993		1994
FINANCIAL RESOURCES WERE PROVIDED BY:
PROFIT AFTER TAXATION	290,765		352,889
ADD(LESS): NOT INVOLVING MOVEMENT OF FUNDS
DEPRECIATION	218,134		236,226
PROVISION FOR DIMINUTION IN VALUEOF INVESTMENT	4		(4)
STAFF RETIREMENT GRATUITIES	3,994		2,854
DEFERRED LIABILITY FOR COMPENSATEDABSENCE	10,882		726
PROFIT ON SALE OF ASSETS	(268)		(951)
DEFERRED TAXATION	7,431		(24,157)
FUNDS PROVIDED FROM OPERATION	530,938		567,587
PROCEEDINGS FROM SALE OF FIXED ASSETS	948		1,413
LONG-TERM LOANS PAYABLE	28,907		230,831
OBLIGATION UNDER FINANCE LEASES	0		4,048
LONG-TERM LOANS RECOVERABLE	236		0
	561,033		803,875
FINANCIAL RESOURCES WERE USED FOR
FIXED CAPITAL EXPENDITURE	143,330		332,414
LONG-TERM LOANS RECOVERABLE	0		2,781
LONG-TERM DEPOSITS	695		11,261
LONG-TERM RUNNING FINANCE	6,971		7,521
LONG-TERM LOANS PAYABLE	200,194		240,721
AMOUNT UTILIZED OUT OF DEFERRED CREDITS	2,677		0
DIVIDENDS	0		146,605
PROPOSED DIVIDEND	266,555		153,269
LOAN TO ASSOCIATED UNDERTAKING	20,000		0
	633,451		887,051
INCREASE (DECREASE) IN WORKING CAPITAL	(79,389)		(90,697)
	561,033		803,875

CASH FLOW STATEMENTS

FOR THE YEARS ENDED AT JUNE 30, 1995 & 1996

 

 

	1995		1996
CASH FLOW FROM OPERATING ACTIVITIES
CASH GENERATED FROM OPERATIONS	558,459		623,232
FINICAL EXPENSES PAID	(128,017)		(143,929)
TAXES PAID	(214,472)		(146,852)
NET CASH FLOW FROM OPERATING    ACTIVITIES	215,970		332,451
CASH FLOWS FROM INVESTING ACTIVITIES
FIXED CAPITAL EXPENDITURE	(269,435)		(511,341)
FIXED ASSETS DISPOSALS	1,132		1,528
LONG TERM INVESTMENTS	0		(50,000)
LONG TERM LOANS RECEIVABLE	529		(17,797)
LONG TERM DEPOSITS AND PREPAYMENTS	10,541		(942)
NET CASH FLOW FROM INVESTING   ACTIVITIES	(257,233)		(578,552)
CASH FLOW FROM FINANCING ACTIVITIES
DIVIDENDS PAID	(153,269)		0
LEASE FINANCE	(1,787)		379,235
LONG TERM LOANS	246,914		41,572
REPAYMENT OF REDEEMABLE CAPITAL	(7,521)		(8,071)
NET CASH FLOW FROM FINANCING   ACTIVITIES	84,337		412,736
INCREASE IN CASH AND CASH EQUIVALENTS	43,074		166,635
CASH AND CASH EQUIVALENTS AT BEGINNING OF THE YEAR	(1,131,922)		(1,088,848)
CASH AND CASH EQUIVALENT AT END OF YEAR	(1,088,848)		(922,213)

 

CASH FLOW STATEMENTS

FOR THE YEARS ENDED AT JUNE 30, 1995 & 1996

 

 

		1997		1998
CASH FLOW FROM OPERATING ACTIVITIES
CASH GENERATED FROM OPERATIONS		(1,044,520)		595,051
FINICAL EXPENSES PAID		(413,304)		(743,936)
TAXES PAID		(333,407)		(339,839)
NET CASH FLOW FROM OPERATING ACTIVITIES		(1,791,231)		(488,724)
CASH FLOWS FROM INVESTING ACTIVITIES
FIXED CAPITAL EXPENDITURE		(180,114)		(101,892)
FIXED ASSETS DISPOSALS		4,913		2,514
LONG TERM INVESTMENTS		(10,850)		0
ACQUISITION OF SUBSIDIARY–NATIONAL OIL MARKETING (PVT) LTD.				(1)
LONG TERM LOANS RECEIVABLE		(22,173)		0
LONG TERM DEPOSITS AND PREPAYMENTS		1,569		(334)
NET CASH FLOW FROM INVESTING ACTIVITIES		(206,655)		(99,713)
CASH FLOW FROM FINANCING ACTIVITIES
DIVIDENDS PAID		(99,958)		(66,639)
LEASE FINANCE		(126,122)		(129,712)
LONG TERM LOANS		572,203		(1,080,167)
REPAYMENT OF REDEEMABLE CAPITAL		(9,929)		0
NET CASH FLOW FROM FINANCING ACTIVITIES		336,194		(1,276,518)
INCREASE IN CASH AND CASH EQUIVALENTS		(1,661,692)		(1,864,955)
CASH AND CASH EQUIVALENTS AT BEGINNING OF THE YEAR		(922,213)		(2,577,347)
CASH AND CASH EQUIVALENT AT END OF YEAR		(2,583,905)		(4,442,302)

 

 

 

FINANCIAL RATIOS

 

FORMULAS USED

 

LIQUIDITY
CURRENT RATIO	CURRENT ASSETS/ CURRENT LIABILITIES
QUICK RATIO	(CURRENT ASSETS-INVENTORIES)/ CURRENT LIABILITIES
ACTIVITY RATIOS
INVENTORY TURNOVER	SALES/INVENTORY
TOTAL ASSET TURNOVER	SALES / TOTAL ASSETS
FIXED ASSETS TURNOVER	SALES/ NET FIXED ASSETS
AVERAGE COLLECTION PERIOD	ACCOUNT RECEIVABLE/ SALES PER DAY
LEVERAGE RATIOS
DEBT RATIO	TOTAL LIABILITIES/ TOTAL ASSETS
DEBT ON EQUITY RATIO	TOTAL LIABILITIES / TOTAL COMMON EQUITIES
TIME INTEREST EARNED	EARNING BEFORE INTEREST AND TAXES / INTEREST EXPENSE
PROFITABILITY RATIO
PROFIT MARGIN	NET INCOME/ SALES
RETURN ON ASSETS	NET INCOME/ TOTAL ASSETS
RETURN ON EQUITY	NET INCOME/ TOTAL EQUITY
EARNING PER SHARE	NET INCOME/ TOTAL OUT STANDING SHARES

 

 

 

RATIO ANALYSIS OF NRL

 

 

		1993	1994	1995		1996			1997		1998
LIQUIDITY
CURRENT RATIO		0.96	0.95	0.95		1.00			1.00		1.02
QUICK RATIO		0.61	0.55	0.64		0.70			0.78		0.89
ACTIVITY RATIOS
INVENTORY TURNOVER	12.29		10.33	12.52		10.87				11.67		18.16
TOTAL ASSET TURNOVER	2.17		2.08	2.02		1.71				1.63		1.35
FIXED ASSETS TURNOVER	8.57		7.74	8.45		8.38				11.25		12.27
AVERAGE COLLECTION PERIOD	13.76		44.16	38.29		46.26				85.12		150.66
LEVERAGE RATIOS
DEBT RATIO		0.86	0.86		0.91		0.90		0.90		0.90
DEBT ON EQUITY RATIO	6.14		5.98		9.59			8.90		9.09		8.59
TIME INTEREST EARNED	14.13		7.15		0.11			3.02		2.70		2.40
PROFITABILITY RATIO
PROFIT MARGIN		2.05%	2.52%		-1.68%		1.67%		2.17%		2.37%
RETURN ON ASSETS		4.47%	5.24%		-3.39%		2.85%		3.53%		3.20%
RETURN ON EQUITY		31.89%	36.58%		-35.94%		28.22%		35.67%		30.68%
EARNING PER SHARE		4.36	5.3		-3.83		4.19		6.84		2.3

 

 

RATIO ANALYSIS OF ATTOCK AND PAKISTAN REFINERIES

 

	ATTOCK REFINERY			PAKISTAN REFINERY
	1997	1998		1997	1998
LIQUIDITY RATIO
CURRENT RATIO	1.05	0.78		1.05	1.06
QUICK RATIO	0.75	0.48		0.71	0.58
ACTIVITY RATIOS
INVENTORY TURNOVER	12.27	11.91		19.49	19.91
AVERAGE COLLECTION PERIOD	37.07	19.76		36.25	22.04
TOTAL ASSET TURNOVER	2.95	2.55		4.58	6.00
FIXED ASSET TURNOVER	18.72	5.94		147.17	118.32
LEVERAGE RATIO
DEBT RATIO	0.81	0.80		0.92	..896
DEBT ON EQUITY	4.30	4.12		12.23	8.65
TIMES INTERST EARNED	190.08	87.34		2.10	2.11
PROFITABILITY RATIO
PROFIT MARGIN	1.96%	1.42%		27.60%	30.80%
RETURN ON ASSETS	5.76%	3.61%		126.79%	185.00%
RETURN  ON EQUITY	30.55%	18.47%		1677.00%	1785.00%
EARNING PER SHARE	6.85	4.08		2.20	7.38

 

 

 

 

INDUSTRY AVERAGE OF RATIOS OF NATIONAL, ATTOCK AND PAKISTAN REFINERIES

 

	INDUSTRY AVERAGE
YEAR	1997	1998
LIQUIDITY RATIOS
CURRENT RATIO	1.032	0.952
QUICK RATIO	0.75	0.651
ACTIVITY RATIOS
INVENTORY TURNOVER	14.48	16.65
AVERAGE COLLECTION PERIOD	52.75	63.19
TOTAL ASSET TURNOVER	3.05	3.28
FIXED ASSET TURNOVER	58.98	49.65
LEVERAGE RATIOS
DEBT RATIO	0.878	0.865
DEBT ON EQUITY	8.54	7.12
TIMES INTEREST EARNED	64.9	30.5
PROFITABILITY RATIOS
PROFIT MARGIN	1.47%	1.366%
RETURN ON ASSETS	3.52%	2.88%
RETURN  ON EQUITY	27.6%	22.34
EARNING PER SHARE	5.29	4.58