The Pakistan Credit Rating Agency Limited
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Hashim Yazdani

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PACRA Updates Entity Ratings of Attock Refinery Limited | Outlook Stable

Rating Type Entity
(26-May-23 )
(27-May-22 )
Action Maintain Maintain
Long Term AA AA
Short Term A1+ A1+
Outlook Stable Negative
Rating Watch Yes Yes

The ratings reflect ARL's sound risk absorption capacity emanating from its sizable equity base along with expertise and proven history of operations in the energy sector. The local refinery sector took a toll owing to deteriorating economic conditions of the country. The depreciation of PKR against USD resulted in unpredictable exchange losses to the refineries. ARL's core business remains exposed to the vicissitudes in international crude oil and products prices, which in turn, steer the gross refining margins (GRMs) of the Company. Spreads between prices of petroleum products and crude oil remained healthy during the period resulting in better margins which was translated into exceptional performance. During the period ended March 2023, the company supplied 1,369 thousand Metric Tons of various petroleum products while operating at about 80% of the capacity (9MFY22: 1,348 thousand Metric Tons, 78% capacity). The Company earned profit after tax of PKR 22,686mln (9MFY22: 2,839mln) from refinery operations with addition of dividend income after tax of PKR 1,313mln (9MFY22: PKR 947mln) from associated companies, resulting in a total profit after taxation of PKR 23,998mln (9MFY22: PKR 3,787mln). The Company’s profitability was further complemented by additional income on bank deposits. With a strong cash flow position, the Company has repaid its borrowings with no reliance on debt as of March 2023. The government has approved the Pakistan Oil Refining policy for New/Greenfield refineries while negotiations on policy for Current/Brownfield refineries is ongoing. The policy remains crucial for the refineries to enhance their capacities and upgrade their plants in order to meet better product compositions and standards.
The stable outlook reflects on ARL's successful and efficient management of operations to shield its business profile from ongoing external vulnerabilities. Going forward, along with the Attock Group’s remarkable strength and business acumen, the sustenance of current performance will further compliment the ratings.

About the Entity
Attock Refinery Limited (ARL) is principally engaged in the refining of crude oil. The company primarily produces premium motor gasoline, jet fuels, kerosene, high-speed diesel, light diesel oil, furnace fuel oil, mineral turpentine oil, jute batching oil, solvent oil, LPG and various grades of bitumen. Attock Group, through Attock Oil Company (AOC) (~61.06%) and its group company Attock Petroleum Limited retains the majority stake and management control in ARL. Other major shareholders consist of a) Individuals (Local & Foreign) (~20.13%), b) Banks and other Financial Institutions (~18.81%). ARL's Board of Directors comprises of seven members including five Non-Executive members and two Independent Non-Executive directors. The Chairman of the BoD, Mr. Shuaib A. Malik, is also the CEO of Attock Oil Group. Mr. Adil Khattak, the CEO, has extensive experience in the petroleum sector and has been associated with the company for over 45 years.

The primary function of PACRA is to evaluate the capacity and willingness of an entity to honor its obligations. Our ratings reflect an independent, professional and impartial assessment of the risks associated with a particular instrument or an entity. PACRA's comprehensive offerings include instrument and entity credit ratings, insurer financial strength ratings, fund ratings, asset manager ratings and real estate gradings. PACRA opinion is not a recommendation to purchase, sell or hold a security, in as much as it does not comment on the security's market price or suitability for a particular investor.