The Pakistan Credit Rating Agency Limited
Press Release


Anam Waqas Ghayour

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PACRA maintains entity ratings of Pakistan Refinery Limited.

Rating Type Entity
(09-Jun-22 )
(09-Jun-21 )
Action Maintain Maintain
Long Term A- A-
Short Term A2 A2
Outlook Stable Stable
Rating Watch Yes Yes

The association of Pakistan Refinery Limited's (PRL) with the state-owned petroleum corporation – Pakistan State Oil (PSO) has a favourable impact on its ratings. PRL possesses a notable share in meeting the economy's demand for petroleum products. Global recovery has been witnessed in the oil demand leading to higher volumetric sales coupled with higher pricing of petroleum products, leading to better GRMs and profitability margins for the local refinery sector. However, uncertainty still prevails with respect to oil supplies as a result of Russia-Ukraine conflict which could further impact the pricing dynamics. PRL's core business remains exposed to the vicissitudes in international crude and petroleum products’ (POL) prices, which in turn, steer the gross refining margins (GRMs) of the Company. During the period ended March 31, 2022, the Company’s sales have improved majorly on the back of increase in international oil prices and better volumes especially in petrol segments. PRL has managed to report the net profit of PKR 5.415mln (9MFY21: PKR 0.6215mln) on account of effective utilzation of crude mix, prudent inventory management, in addition to the better GRM industry wide, despite the upward revision in policy rate and decline in Pak Rupee against US Dollar. The working capital requirement of the Company have also increased considerably due to sharp increase in crude oil prices. PRL’s margins, specifically impacted, due to non-installation of DHDS Unit needed to produce Euro-II compliant Diesel. The local refinery sector is going through some significant challenges pertaining to up-gradation of the refining complex. The company along with other refineries has been in continuous discussion with the government to finalize a sustainable refinery policy that would address the upgradation concerns along with certain fiscal and tariff concessions to the refining sector. However, no final approval has been granted by the government which is expected to get delayed further amid current political instability in the country.
The ratings are reflective of the resilient business profile of Pakistan Refinery Limited (PRL) emanating from its sustainable operational history and its strategic importance in the domestic context. The ratings are dependent upon PRL's ability to effectively shield its business profile from external vulnerabilities. Revived performance indicators and prudent financial matrix are imperative to uphold the ratings. Further financial risk profile of the Company is expected to improve as the company is projected to recover from the losses incurred previously during the lockdown period on account of sustainability in international oil prices and available demand drivers in the market. Further, the approval of proposed Refining Policy, which will enhance Refineries’ ability to upgrade remains imperative for the ratings.

About the Entity
PRL is a public company incorporated in Pakistan in 1960. The refinery is situated at Korangi. PRL, having refinery capacity of 2.1mln tons per annum, came fully online in Oct’62. PRL, a hydro-skimming refinery, is designed to process various imported and local crude oil to meet the strategic and domestic fuel requirements of the country. The company has an eleven-member Board of Directors (including the CEO). Board comprises six non-executive, four independent and one executive board member. Mr. Zahid Mir, the Managing Director and CEO of PRL, is a petroleum engineer by profession and has a Master’s degree in Business Administration. He is supported by a team of qualified and competent individuals.

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