PACRA Maintain Entity Ratings of National Refinery Limited

National Refinery Limited’s assigned ratings reflect its position as a strategic pillar of Pakistan’s downstream energy sector and a key entity within the diversified Attock Group. Pakistan's refining sector remains highly exposed to global petroleum price dynamics, with refinery gross margins (GRMs) sensitive to movements in crude oil and refined product benchmarks. Accordingly, shifts in international oil markets, driven by geopolitical developments, supply-demand imbalances, and crude price volatility, directly impact sector profitability. In FY26, a late February regional conflict temporarily closed the Strait of Hormuz, Pakistan's key crude import route, driving crude prices from around USD 69 to USD 167 per barrel while sharply increasing freight and insurance costs. Despite supply-side challenges, product crack spreads widened significantly, enabling the sector to swing from losses to a collective profit in Q3, with outcomes varying across refineries based on sourcing flexibility, operational agility, and exposure to seaborne supply chains. Within this environment, NRL reported a net profit of PKR 9.07 billion for 9MFY26, reversing a net loss of PKR 14.49 billion in SPLY, supported by favorable market conditions and management-driven strategic positioning. A strategic shift in the crude slate toward a higher proportion of Arab Extra Light crude improved middle distillate yields, allowing NRL to benefit from widening crack spreads. As reflected in December's and March's results, these actions delivered a positive bottom line and stronger cash flow, underscoring that the outcome was supported by both market conditions and proactive operational planning. During the March sea-route disruption, when a key cargo was stranded due to the Strait of Hormuz closure, management demonstrated strong execution capability by actively managing crude sourcing across multiple regions. Local crude and condensate covered nearly one-third of requirements, Gulf volumes were rerouted via the Red Sea, and additional spot cargoes were arranged through Fujairah, pushing throughput to 1.59 million MT (approximately 70% utilization) in 9MFY26 versus 54% last year. Net revenue rose 29.1% to PKR 291.6 billion, driven by a 55.2% increase in HSD sales and a 40.9% rise in Mogas sales, while finance costs declined 28% to PKR 5.75 billion. The profit was achieved alongside extraordinary market conditions, though any gradual downward correction in oil prices and its impact on inventory valuation remains an ongoing consideration for the Company. On the upgrading front, NRL has planned upgradations mentioned under the Brownfield Refinery Policy 2023 (updated in February 2024) to materially enhance conversion efficiency and product slate. However, implementation remains delayed due to unresolved policy-related matters under discussion with the government. Meanwhile, the Company continues strengthening operational resilience through enhanced asset management practices, including Risk-Based Inspection and Reliability-Centered Maintenance, supporting long-term profitability once policy clarity is achieved.
Going forward, the rating will remain dependent on the sustainability of the Company's profitability, which will be primarily based on the successful implementation of its own strategic initiatives, including the optimization of high-margin product mix, strategic crude procurement policies, agile crisis response capabilities, and operational throughput management. The rating will also factor in the Company's ability to generate consistent cash flows and meet debt servicing obligations, while progress on the Brownfield Refinery Policy and the associated upgrade plans will remain an important consideration.

About the Entity
NRL is the third-largest refinery in Pakistan with a designed capacity of ~23.1MBPA, comprising two lube and one fuel refinery. The Attock Group retains majority ownership of 51% through Attock Refinery Limited (25%), Pakistan Oilfields Limited (25%), and Attock Petroleum Limited (1%). Other significant shareholders include the Islamic Development Bank (15%), and institutional investors collectively encompassing banks, insurance companies, NBFIs, joint stock companies, investment companies, Modarabas, mutual funds, and trusts (12%). The general public holds (22%) of the issued share capital. Mr. Shuaib A. Malik, a veteran with over 40 years in Attock Group, serves as Chairman of the Board, while Mr. Asad Hasan serves as a CEO, appointed in December 2024.