Pakistan Refinery Ltd. (PRL) held its corporate briefing session today to discuss FY24 financial results and provide insights on the future outlook. Key takeaways from the call are as follows:

·         Company posted topline of PkR306bn in FY24 compared to PkR262bn in FY23, up 17%YoY, led by volumetric growth.

·         Earnings for the year clocked in at PkR4.1bn (EPS: PkR6.45) compared to PkR1.8bn (EPS: PkR2.90) in SPLY.

·         Total HSD production for the year reached 660,180 tons, with the highest average daily production recorded at 2,013 tons. MS-92 also saw output growth, with an annual production of 265,710 tons and a peak average daily production of 830 tons. Additionally, MS-95 production totalled 16,005 tons, of which 1,940 were EURO-V compliant.

·         Management stated that crude intake is continuously adjusted to optimize yields and select crudes that better align with the refinery’s configuration. Throughout FY24, Aramco’s crude intake remained the highest.

· Additionally, management has focused on reducing furnace oil output in the production mix while increasing the share of High-Speed Diesel and Motor Spirit, as margins for furnace oil are unfavourable.

·         Refinery Expansion and Upgradation Project (REUP) aims to achieve (1) production of EURO V compliant HSD and MS/Petrol, (2) installation of advanced deep conversion refinery technology to reduce the production of HSFO, and (3) expanding the refinery’s capacity from 50,000 bpd to 100,000 bpd.

· The company has already spent US$50mn for feed study for the upgradation and expansion project.

The upgradation project aims to change the shape of the product barrel

·         FEED study completion is expected by 2QFY25, followed by submission of EPC-F bids in 3QFY24, selection of EPCC-f contractor in 4QFY25, and the award of the EPC contract & financial close by 2QFY26. Once financial closure is obtained, the construction and EPC phase and project commissioning are expected to be completed by 4QFY28.

·         Regarding the refining policy, PRL has already signed it, but the process may be delayed as other refineries are still signing. However, PRL is already receiving incentives under the Refinery Policy, which are allocated to the Special Reserve head and will be accessible after achieving financial close.

·         The deadline set by SIFC for resolving issues related to the refinery upgrade policy has passed. However, management stated that SIFC remains fully involved in addressing the issue. The delays are due to the policy being announced in the budget, and removing it would require parliamentary action or a mini-budget. As a result, discussions are ongoing regarding alternative options to compensate or facilitate refineries.

·         Management stated that under the Refinery Policy’23, their dividend-paying capacity is neither capped nor restricted.

·         The scrip is not in our formal coverage. We believe that the company’s production is immune to subdued demand amid the adoption of solar-powered tube wells and the increasing acceptance of EVs and hybrid cars due to the country’s heavy reliance on imports. Additionally, with the expansion, the company’s plan to phase out its furnace oil production aligns well with the country’s shift in its power mix. However, diesel smuggling remains a key threat to the refining sector.

Courtesy – AKD Research