PACRA Maintains Entity Ratings of Attock Refinery Limited

The ratings reflect ARL's very strong risk absorption capacity emanating from sizable equity base. ARL's core business remains exposed to the vicissitudes in international crude oil and refined product margins. Herein, ARL's product slate with large contribution of high margin products provides comfort. Post completion of expansion project along with DHDS and isomerization plant came online in FY17, the company has started accruing benefits in sales volume as well as price, except FO which came into limelight due to Government unannounced closure of FO based power plants. Incremental benefits could not be reaped in terms of profitability, emanating from squeezed margins and steep rupee devaluation. Free Cashflows from operations took a dip. Nevertheless, ARL's strategic investments and sizable bank placements continue to provide risk absorption capacity and a stable source of recurring non-core income. Financial risk remains in comfortable range reflected by strong coverages. The company’s association with the country's only integrated oil group - Attock Group (AG), moderately leveraged - remains a source of comfort for the ratings.

The ratings remain dependent on ARL's ability to effectively shield its business profile from volatility in international oil prices. ARL's financial profile, in turn, its ratings, could be negatively impacted from persistent downturn in refining margins, or un-expected drop in dividend stream. The continuity of deemed duty on Diesel is crucial.

About the Entity
AG, through Attock oil Company (61%) and its group company Attock Petroleum Limited (APL) (2%) retains the majority stake (63%), and management control in ARL. Other major shareholders comprise: a) Mutual Funds (6.8%), b) Foreign Investors (1.4%), c) Banks and other Financial Institutions (5.2%), d) Joint stock companies (3%). The remaining stake rests with the general public. ARL's Board of Directors comprises seven members. Out of these six are representatives of AOC - family - while the remaining one is an independent director. The Chairman of the BoD, Mr. Shuaib A. Malik, is also CEO of Attock Oil Group. Mr. Adil Khattak, the CEO, has extensive experience in the petroleum sector. He is supported by an experienced management team which has demonstrated stability over time.

During FY17, ARL has completed the following projects a) Pre-Flash Unit - to enhance refining capacity by 10,400 bpd. b) Isomerization Unit - to enhance production of PMG; c) The Diesel Hydro Desulphurization (DHDS) - to reduce Sulphur content in diesel d) Expansion of existing captive power plant by 18 Mega Watt.