Corporate results: Despite weak oil prices, NRL stands strong

APL takes a hit with profit at Rs209m, down from Rs1.3b.

KARACHI: National Refinery Limited (NRL) was able to withstand the fallout of declining oil prices in fiscal year 2015’s second quarter, which ended on December 31, against market expectation of a plunge in earnings.

NRL posted a profit of Rs788 million, a significant improvement over the loss of Rs172 million it incurred in the same quarter a year ago.

“This was not expected,” said Yawaruz Zaman, VP Research of Shajar Capital. “We can’t be sure about what has happened until more details are shared by the company.”

The difference between the cost of crude oil and prices of petroleum products, also known as gross refining margin (GRM) that determines the earnings of refineries, has remained constant, he said.

“I am assuming the company was able to offset the effect of depressed oil market with its income from the lube business.”

Besides a crude oil refining distillery, NRL also operates two plants to produce lubricants, making it the only such oil refinery in the country.

But the bottom-line of the company also carried the impact of Rs234 million as reversal in the financial cost, which could be the result of exchange gains, Zaman said.

NRL share price was up 5% to Rs202.48 at the close of the stock exchange on Tuesday.

Attock Petroleum

Attock Petroleum Limited (APL), however, could not avoid the complex situation that arose after the continuous decline in oil prices depreciated the value of the stock in its tanks.

In the second quarter, APL booked a net profit of Rs209 million, significantly lower from Rs1.3 billion it earned in the same period of previous year. But this profit could easily have been a loss if not for the tax deferral of Rs160 million and other income of Rs307 million. As a matter of fact, APL posted a gross loss of Rs59 million.

“This was the result of inventory loss,” said Zaman. “We were not hoping APL would take such a big hit. This was the first petroleum marketing company to announce the results, so we don’t know how bad the situation is.”

Nevertheless, the board of directors announced a cash dividend of Rs12.5 per share. APL stock was down 2.7% on the stock exchange.

Published in The Express Tribune, January 28^th, 2015. 

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