PACRA maintains Entity Ratings of Pakistan Refinery Limited.

The Ratings of Pakistan Refinery Limited (the Company) draws comfort not only from its association with the state-owned petroleum corporation, Pakistan State Oil (PSO), but also from the fact that a considerable portion of the country’s petroleum demand is met through the Company. In line with the Country’s need, the Company has announced the Refinery Expansion and Upgrade Project (REUP), which will double the refinery’s crude processing capacity from 50,000 barrels per day to 100,000 barrels per day. Work on Front-End Engineering Design (FEED) of REUP has been completed, and Company is actively pursuing engagement with EPC contractors, followed by financial close of the project. The PRL’s core operations remain inherently exposed to global petroleum price volatility, which significantly impacts its GRMs and overall profitability. During 9MFY25, GRM’s declined sharply to (0.30)$/bbl due to global crude price volatility, softening product premiums, and weak demand-supply environment. These pressures were compounded by inventory losses, higher utility tariffs, and interest rates. As a result, the PRL operated at a reduced throughput level and recorded a minimal gross profit of PKR 293mln and a net loss of PKR 4.5bln. During the period, the Board of Directors of the Company approved a loan facility of PKR 3.15 billion from PSO to finance the Front-End Engineering Design (FEED) study for the Refinery Expansion & Upgrade Project (“REUP”) reflecting the strong shareholders support. During 9MFY25, equity stood at PKR 23bln. The Company's reliance on short term financing during the period remains moderate and stood at ~64% (including FEED financing of 12bln) to manage its working capital needs. Going forward, leveraging indicators are expected to rise due to the project-related loan that the Company will undertake for its upgradation project. Cashflows remained under pressure, with interest coverage dropped to negative (1.5x), underscoring increased financial and operational risks. Nevertheless, management is actively focused on addressing these challenges through strategic measures aimed at improving the Company’s financial position.
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. Furthermore, the ratings takes comfort form the refinery policy which will provide support to the REUP and contributes towards the sustainability of operations.

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 also holds a Master’s degree in Business Administration. He is associated with PRL since 2019 and having a cumulative experience of over three decades. His strategic guidance along with support of well experienced and qualified team, bodes well with PRL's growth.