Pakistan Refinery Limited (Annual Report 2008)

PAKISTAN REFINERY LIMITED

Contributing to nation's energy needswith a difference

2008report

Balance Sheetas at June 30, 2008

(Rupees in thousand)

ASSETSNon-current assetsFixed assets 4 975,774 930,675 Intangible assets 5 14,091 21,443 Investment in associate 6 58,238 54,077 Long-term loans and advances 7 13,588 10,943 Long-term deposits 14,012 2,887 Deferred taxation - 38,583 Retirement benefit obligations - prepayments 8 9,520 39,809

1,085,223 1,098,417Current assetsStores, spares and chemicals 9 233,425 229,371 Stock-in-trade 10 9,102,109 5,107,781 Trade debts 11 10,427,821 4,789,762 Loans and advances 12 18,795 22,439 Accrued interest / mark-up 13 47 7,726 Trade deposits and short-term prepayments 14 48,844 49,091 Other receivables 15 21,180 15,891 Tax refunds due from Government - Sales tax 16 188,152 1,476,306 Investments 17 365 201,769 Cash and bank balances 18 2,646,115 1,698,277

22,686,853 13,598,413 Total assets 23,772,076 14,696,830

EQUITY AND LIABILITIESShare capital 19 350,000 300,000 Reserves 69,829 129,751 Special reserve 20 6,386,076 4,375,332

6,805,905 4.805,083LIABILITIESNon-current liabilitiesRetirement benefit obligations 7,078 4,373 Deferred taxation 21 40,042 -

47,120 4,373 Current liabilitiesTrade and other payables 22 15,904,758 9,537,222 Accrued interest / mark-up 77,558 1,989 Taxation - provision less payments 936,735 348,163

16,919,051 9,887,374 Total liabilities 16,966,171 9,891,747

Contingencies and commitments 24

Total equity and liabilities 23,772,076 14,696,830

The annexed notes 1 - 41 form an integral part of these financial statements.

43

paki

stan

refin

ery

limite

d

Farooq RahmatullahChairman

Ijaz Ali KhanChief Executive

2008Note 2007

Sales 25 95,564,006 57,404,065

Cost of sales 26 (91,232,240) (56,628,114)

Gross profit 4,331,766 775,951

Distribution cost 26 (129,400) (89,434)

Administrative expenses 26 (698,143) (134,977)

Other operating expenses 27 (252,177) (46,252)

Other income 28 230,897 73,746

Operating profit 3,482,943 579,034

Finance costs 29 (253,047) (81,718)

Share of income of associate 24,722 6,949

Profit before taxation 3,254,618 504,265

Taxation 30 (1,143,874) (253,451)

Profit after taxation 2,110,744 250,814

Earnings per share 31 Rs. 60.31 Rs. 7.17


Profit and Loss Accountfor the year ended June 30, 2008


44

annual report 2008Farooq RahmatullahChairman


2008Note 2007

CASH FLOW FROM OPERATING ACTIVITIES

Cash generated from operations 36 1,595,463 2,783

Mark-up paid (5,627) (83,431)

Income taxes paid (474,147) (285,894)

Receipts from / (contribution to) defined benefit retirement plans 8,210 (40,288)

Long-term loans and advances (net) (2,645) 288

Long-term deposits (net) (11,125) -

Net cash generated from / (used in) operating activities 1,110,129 (406,542)

CASH FLOW FROM INVESTING ACTIVITIES

Purchase of fixed assets (189,458) (268,919)

Proceeds from sale of fixed assets 571 2,254

Profit on deposits 118,692 30,732

Dividend received 8,504 6,803

Net cash used in investing activities (61,691) (229,130)

CASH FLOW FROM FINANCING ACTIVITIES

Dividend paid (100,600) (78)

Net increase / (decrease) in cash and cash equivalents 947,838 (635,750)

Cash and cash equivalents at the beginning of the year 1,698,277 2,334,027

Cash and cash equivalents at the end of the year 37 2,646,115 1,698,277


Cash Flow Statementfor the year ended June 30, 2008


45

paki

stan

refin

ery

limite

d



2008Note 2007

SHARE RESERVES SPECIAL TOTALCAPITAL CAPITAL REVENUE FAIR RESERVE

Exchange General Unappropriated VALUEEqualisation Reserve Profit RESERVE

Reserve


Balance as at June 30, 2006 250,000 897 1,050 69,698 5,385 4,224,518 4,551,548

Issue of 1 bonus share for every 5shares held 50,000 - - (50,000) - - -

Net profit for the year 2007 - - - 250,814 - - 250,814

Change in fair value reserve on account of available for saleinvestments of associate - netof deferred tax - - - - 2,721 - 2,721

Transferred to Special Reserve - - - (150,814) - 150,814 -

Balance as at June 30, 2007 300,000 897 1,050 119,698 8,106 4,375,332 4,805,083

Final dividend for the year ended June 30, 2007 @ Rs. 3.33 per share - - - (100,000) - - (100,000)

Issue of 1 bonus share for every 6shares held 50,000 - - (50,000) - - -

Net profit for the year 2008 - - - 2,110,744 - - 2,110,744

Change in fair value reserve onaccount of available for saleinvestments of associate - netof deferred tax - - - - (9,922) - (9,922)

Transferred to Special Reserve - - - (2,010,744) - 2,010,744 -

Balance as at June 30, 2008 350,000 897 1,050 69,698 (1,816) 6,386,076 6,805,905


Statement of Changes in Equityfor the year ended June 30, 2008

46

annual report 2008



Notes to and Forming Part of the Financial Statementsfor the year ended June 30, 2008

1. THE COMPANY AND ITS OPERATIONS

Pakistan Refinery Limited was incorporated in Pakistan as a public limited company in May 1960 and is quoted onKarachi and Lahore Stock Exchanges. The address of its registered office is Korangi Creek Road, Karachi. The Companyis engaged in the production and sale of petroleum products.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The significant accounting policies adopted in the preparation of these financial statements are set out below:

2.1 Basis of preparation

These financial statements have been prepared in accordance with approved accounting standards as applicable inPakistan and the requirements of the Companies Ordinance, 1984. Approved accounting standards comprise of suchInternational Financial Reporting Standards as have been notified under the provisions of the Companies Ordinance,1984. Wherever, the requirements of the Companies Ordinance, 1984 or directives issued by the Securities andExchange Commission of Pakistan differ from the requirements of these standards, the requirements of the CompaniesOrdinance, 1984 or the requirements of the said directives have been followed.

Amendment to published standard that became effective in the current year and is relevant

i. IAS 1 (Amendment) - 'Presentation of Financial Statements - Capital Disclosures', is mandatory for company'saccounting periods beginning on or after January 1, 2007. It introduces capital disclosure requirementsregarding how the entity manages its capital. Adoption of this amendment only impacts the format and extent ofdisclosures as presented in note 34 to the financial statements.

Standards, interpretations and amendments to published approved accounting standards that are consideredrelevant, but not yet effective

Following amendments to existing standards and interpretations have been published that are mandatory for accounting periods beginning on the dates mentioned below:

i. IAS 1 - 'Presentation of Financial Statements' was issued in September 2007 and will be effective for the periodsbeginning from or after January 1, 2009. The amendments to the standard mandate various disclosures andpresentation of transactions with owners in statement of changes in equity and with non-owners in theComprehensive Income Statement.

ii. IAS 23 (Amendment) - 'Borrowing Cost' effective for the periods beginning from or after January 1, 2009,requires an entity to capitalise borrowing costs directly attributable to the acquisition, construction or productionof a qualifying asset as part of cost of that asset.

iii. IFRIC 14 'IAS 19 - The limit on a defined benefit asset, minimum funding requirements and their interaction' wasissued in July 2007 and will be effective for the periods beginning from or after January 1, 2009. Thisinterpretation provides general guidance on the amount of a pension surplus that may be recognised as anasset.

Adoption of the above amendments, standard and interpretation does not have any effect on the amountsrecognised in these financial statements.

47

paki

stan

refin

ery

limite

d


Interpretations to published approved accounting standards that are not yet effective and are not consideredrelevant

i. IFRS 3 (Revised) - 'Business combinations' Effective from January 1, 2010

ii. IFRIC 11 - 'IFRS 2 - 'Group and treasury share transactions' Effective from January 1, 2008

iii. IFRIC 12 - 'Service Concession Agreements' Effective from January 1, 2008

iv. IFRIC 13 - 'Customer Loyalty Programmes' Effective from July 1, 2008

2.2 Overall valuation policy

These financial statements have been prepared under the historical cost convention except as stated below in therespective policy notes.

2.3 Fixed assets

Fixed assets are stated at cost less accumulated depreciation / amortisation except capital work-in-progress, which isstated at cost.

Depreciation / amortisation is charged to income by applying the straight-line method whereby the cost less residualvalue, if not insignificant, of an asset is written off over its estimated useful life to the Company. Full month's depreciation/ amortisation is charged in the month of acquisition and no depreciation / amortisation is charged in the month ofdisposal. Cost of leasehold land is amortised fairly over the period of lease.

Costs associated with developing or maintaining computer software programmes are recognised as an expense whenincurred. However, costs that are directly associated with identifiable and unique software products controlled by theCompany and that have probable economic benefits exceeding their cost and beyond one year, are recognised asintangible assets.

Assets' residual values and useful lives are reviewed and adjusted if expectations significantly differ from previousestimates, at each balance sheet date.

Company accounts for impairment, where indication exists, by reducing its carrying value to the assessed recoverableamount.

Maintenance and normal repairs are charged to income as and when incurred. Renewals and improvements arecapitalised and assets so replaced, if any, are retired.

Gains and losses on disposal of fixed assets are included in income currently.

2.4 Investment in associate

Investment in associate is accounted for using equity method of accounting and is initially recognised at cost. TheCompany's share in its associate post-acquisition profits or losses is recognised in the income statement and its share inpost-acquisition movements in reserves is recognised in reserves. The cumulative post-acquisition movements areadjusted against the carrying amount of the investment. When the Company's share of losses in an associate equals orexceeds its interest in the associate, including any other unsecured receivables, the Company does not recognise furtherlosses, unless it has incurred obligations or made payments on behalf of the associate.

48

annual report 2008


49

paki

stan

refin

ery

limite

d

2.5 Taxation

2.5.1 Current

Charge for the current taxation is based on applicable provisions of the Income Tax Ordinance, 2001.

2.5.2 Deferred

Deferred tax is provided in full, using the liability method, on temporary differences arising between the tax base of assetsand liabilities and their carrying amounts in the financial statements.

2.6 Stores, spares and chemicals

These are valued at cost, determined using weighted average method, less provision for obsolescence. Items in transitare valued at cost comprising invoice value plus other charges incurred thereon.

2.7 Stock-in-trade

Stock of crude oil is valued at lower of cost determined using “first-in first-out” method and net realisable value exceptcrude oil in transit which is valued at cost. Finished products are valued at lower of cost and net realisable value. Cost inrelation to finished products represents cost of crude oil and appropriate manufacturing overheads. Net realisable valueis the estimated selling price in the ordinary course of business, less the estimated costs of completion and estimatedcosts necessary to make the sale.

2.8 Trade debts

Trade debts are carried at the fair value of consideration to be received against goods and services. Provision is madein respect of doubtful debts, if any.

2.9 Investments

Financial assets at fair value through profit and loss

Financial assets held for trading are classified in this category. These are initially measured at fair value which isreassessed at each reporting date. Transaction cost, if any, are charged directly to income. In the case of investments inopen ended mutual funds, fair value is determined on the basis of period end Net Asset Value (NAV) as announced bythe Asset Management Company.

2.10 Cash and cash equivalents

Cash and cash equivalents are carried in the balance sheet at cost. For the purposes of the cash flow statement, cashand cash equivalents comprise cash in hand, with banks on current, savings and deposit accounts, running finance undermark-up arrangements and short-term finance.

2.11 Trade and other payables

Trade and other payables are carried at the fair value of the consideration to be paid for goods and services.


50

annual report 2008

2.12 Borrowing costs

Borrowing costs are recognised as an expense in the period in which these are incurred.

2.13 Provisions

Provisions are recognised when the Company has a present legal or constructive obligation as a result of past events; itis probable that an outflow of resources will be required to settle the obligation; and a reliable estimate of the amount canbe made.

2.14 Retirement benefits

The Company operates recognised Provident, Gratuity and Pension Funds for all its eligible employees. The ProvidentFund is a defined contribution plan. All others are defined benefit plans. Actuarial valuations of defined benefit plans arecarried out on periodical basis using the projected unit credit method and the latest valuations were carried out at thebalance sheet date (June 30, 2008). Actuarial gain / loss is amortised over a period of 11 years for the management staffgratuity and pension funds and 17 years for non-management staff pension and gratuity funds, if it exceeds the 10%corridor limit. The unrecognised past service cost is amortised over its vesting period.

2.15 Foreign currency translation

These financial statements are presented in Pak Rupees which is also the functional currency of the Company.

Transactions in foreign currencies are translated to rupees at the rates of exchange prevailing on the date of therespective transactions. Monetary assets and liabilities in foreign currencies are translated to rupees at rates prevailingat the balance sheet date. Gains and losses resulting from the above are recognised in the profit and loss account.

2.16 Financial instruments

All financial assets and liabilities are recognised at the time when the Company becomes a party to the contractualprovisions of the instrument.

The carrying values of all financial assets and liabilities reflected in the financial statements approximate their fair values.Any gains and losses on derecognition of financial assets and liabilities are taken to income statement currently.

2.17 Revenue recognition

(a) Local sales are recorded on the basis of products pumped in oil marketing companies’ tanks.

(b) Export sales are recorded on the basis of products shipped to customers.

(c) The prices of refinery products are notified by the Oil & Gas Regulatory Authority (OGRA) which are primarilybased on import parity pricing formula. However, in order to enable certain refineries including the Company tooperate on a self financing basis, the Government effective from July 1, 2002 had introduced a tariff protectionformula under which deemed duty is built into the import parity based prices of some of the products. Under thisformula, any profit after taxation above 50% of the paid-up capital as it was on July 1, 2002 (Rs 200 million), isrequired to be transferred to a "Special Reserve" to offset any future losses or to make investment for expansionor upgradation of the respective refineries.

Discount on local crude, if any, wharfage and insurance is paid to Government.

(d) Dividends are recognised when the right of receipt is established.

(e) Income on bank deposits is recognised on accrual basis.

2.18 Government grants

Government grants related to costs are deferred and recognised in the income statement as a deduction from the relatedexpense over the period necessary to match them with the costs that they are intended to compensate.

2.19 Dividends

Dividend distribution to the Company's shareholders is recognised as a liability in the Company's financial statements inthe period in which the dividends are approved.

3. CRITICAL ACCOUNTING ESTIMATES, JUDGEMENTS AND POLICIES

The preparation of financial statements in conformity with approved accounting standards requires the use of certaincritical accounting estimates. It also requires management to exercise its judgement in the process of applying theCompany's accounting policies. The areas involving a higher degree of judgement or complexity, or areas whereassumptions and estimates are significant to the financial statements are; provision for income tax and provision for postemployment benefits.

The Company recognises provision for income tax based on best current estimates. However, where the final taxoutcome is different from the amounts that were initially recorded, such differences will impact the income tax provisionin the period in which such determination is made.

Significant estimates relating to post employment benefits are disclosed in note 8.

Estimates and judgements are continually evaluated and are based on historical experience and other factors, includingexpectations of future events that are believed to be reasonable under the circumstances.

Management believes that the change in outcome of estimates would not have a material effect on the amounts disclosedin the financial statements.

No critical judgement has been used in applying the accounting policies.

4. FIXED ASSETS

Property, plant and equipmentOperating assets - note 4.1 776,372 805,841 Capital work-in-progress - note 4.2 199,402 124,834

975,774 930,675


51

paki

stan

refin

ery

limite

d


2008 2007


52

annual report 2008

TANGIBLE Leasehold Buildings Processing Korangi Keamari Pipelines Steam Power Water Equipment Fire Vehicles TOTALland and on plant tank farm terminal generation generation, treatment including fighting and other

improvements leasehold plant transmission and furniture and tele- automotivethereon land and cooling communication equipment

distribution system systems(Rupees in thousand)

Net carrying value basis

Year ended June 30, 2008

Opening net book value (NBV) 2,186 34,036 383,363 52,254 38,519 51,740 16,211 42,822 32,602 117,243 22,997 11,868 805,841

Additions (at cost) - 17,843 19,776 1,218 9,269 15,276 - 10,109 - 31,233 3,310 6,856 114,890

Disposals (at NBV) - - - - - - - - - (528) - - (528)

Depreciation charge (39) (4,635) (74,592) (10,500) (3,008) (7,808) (3,437) (5,149) (5,273) (22,093) (1,862) (5,435) (143,831)

Closing net book value 2,147 47,244 328,547 42,972 44,780 59,208 12,774 47,782 27,329 125,855 24,445 13,289 776,372

Gross carrying value basis

At June 30, 2008

Cost 3,939 77,151 783,475 160,283 106,156 115,372 44,378 71,367 60,300 317,395 38,862 52,424 1,831,102

Accumulated depreciation (1,792) (29,907) (454,928) (117,311) (61,376) (56,164) (31,604) (23,585) (32,971) (191,540) (14,417) (39,135) (1,054,730)

Net book value 2,147 47,244 328,547 42,972 44,780 59,208 12,774 47,782 27,329 125,855 24,445 13,289 776,372


Year ended June 30, 2007

Opening net book value (NBV) 2,225 27,936 193,486 51,576 32,570 59,722 19,865 17,628 32,579 83,777 10,033 8,214 539,611

Additions (at cost) - 9,227 261,455 10,833 8,842 - - 27,695 5,204 53,290 14,251 8,355 399,152

Disposals (at NBV) - - - - - - - - - (284) - (528) (812)

Depreciation charge (39) (3,127) (71,578) (10,155) (2,893) (7,982) (3,654) (2,501) (5,181) (19,540) (1,287) (4,173) (132,110)

Closing net book value 2,186 34,036 383,363 52,254 38,519 51,740 16,211 42,822 32,602 117,243 22,997 11,868 805,841


At June 30, 2007

Cost 3,939 59,308 763,699 159,065 96,887 100,096 44,378 61,258 60,300 286,690 35,552 45,568 1,716,740

Accumulated depreciation (1,753) (25,272) (380,336) (106,811) (58,368) (48,356) (28,167) (18,436) (27,698) (169,447) (12,555) (33,700) (910,899)

Net book value 2,186 34,036 383,363 52,254 38,519 51,740 16,211 42,822 32,602 117,243 22,997 11,868 805,841

Depreciation rate

% per annum 1 5 to 20 10 to 33 10 5 to 10 10 10 10 10 10 to 33 5 to 10 25

4.1 OPERATING ASSETS

4.1.1 Details of disposals are:

Description Cost Accumulated Book Sale Mode of Particulars of depreciation value proceeds disposal purchaser


Net book value exceeding Rs 50,000:

Equipment includingfurniture 148 (59) 89 89 Negotiation Zafar Haleem

Ex-executive

'' '' 79 (21) 58 58 Negotiation Zubair A. SattarEx-executive

'' '' 86 (33) 53 3 Tender Muhammad Saleem Employee

313 (113) 200 150

Net book value not exceeding Rs 50,000:

Equipment includingfurniture (in aggregate) 2,100 (1,772) 328 421

2,413 (1,885) 528 571


4.2 Capital work-in-progress - at cost

Buildings 16,316 17,292 Processing plant 13,680 13,958 Korangi tank farm 92,068 52,454 Keamari terminal 10,135 9,554 Pipelines 3,790 3,455 Power generation, transmission and distribution 7,081 5,996 Water treatment and cooling systems 16,257 5,103 Equipments 11,691 12,806 Fire fighting and telecommunication systems 27,502 4,216 Vehicles and other automotive equipment 882 -

199,402 124,834


53

paki

stan

refin

ery

limite

d

2008 2007

2008 (Rupees in thousand)5. INTANGIBLE ASSETS - COMPUTER SOFTWARE


Opening net book value (NBV) 21,443 - Additions (at cost) - 22,056 Amortisation charge (7,352) (613)Closing net book value 14,091 21,443


Cost 33,834 33,834 Accumulated amortisation (19,743) (12,391)Net book value 14,091 21,443

Amortisation is charged at the rate of 33.33% per annum.

6. INVESTMENT IN ASSOCIATE

Investment in related party

In an unquoted associated company - equity method

850,401 (2007: 850,401) fully paid ordinary shares ofRs. 10 each of Pak Grease Manufacturing Company

(Private) Limited - note 6.1 58,238 54,077

6.1 The Company holds 27.26% (2007: 27.26%) of the investee's totalequity.

Opening balance 54,077 50,609 Share of income for the year 24,722 6,949 Change in fair value reserve on account of available

for sale investment (12,057) 3,322 Dividend received (8,504) (6,803)

58,238 54,077


54

annual report 2008

2008 2007


6.2 Summarised results of the Company's associate (2008: unaudited) are as follows:

Total assets 229,658 216,655 Total liabilities 15,828 18,061 Revenue 161,944 165,622 Profit after tax 90,689 25,686

7. LONG-TERM LOANS AND ADVANCES– secured and considered good

To executives 6,982 6,120 To other employees 16,911 14,292

23,893 20,412

Recoverable within one year – note 12Executives (3,506) (3,221)Other employees (6,799) (6,248)

(10,305) (9,469)13,588 10,943

Reconciliation of carrying amount of loans to executives:

Opening balance 6,120 6,864 Promotion to executive 318 63 Disbursements 9,254 4,514 Repayments (8,710) (5,321)

6,982 6,120

The maximum amount due from executives at the end of any month during the year was Rs 9.35 million (2007: Rs 7.33million).

The loans and advances to all eligible employees are given in accordance with the Company’s policy for payment ofhouse rent, to defray personal expenditure and for purchase of motor vehicles. These carry interest ranging from 1% to10% per annum and are repayable over a period of three to six years.


55

paki

stan

refin

ery

limite

d

2008 2007


56

annual report 2008

8. RETIREMENT BENEFITSPENSION FUNDS GRATUITY FUNDS

Management Non-Management Management Non-Management2008 2007 2008 2007 2008 2007 2008 2007

(Rupees in thousand)8.1 Expense / (income)

recognised during the yearCurrent service cost 16,821 16,351 677 834 2,914 2,856 449 562 Interest cost 45,312 38,367 2,061 2,210 4,855 4,227 631 729 Expected return on plan assets (45,739) (38,027) (779) (315) (5,553) (4,207) (3,129) (2,204)Amortisation of past service cost 145 145 543 543 - - - - Netactuarial loss / (gain)

recognised - - 203 673 - - (935) (484)16,539 16,836 2,705 3,945 2,216 2,876 (2,984) (1,397)

Amount not recognised as an asset - - - - 3,324 1,014 2,984 7,84316,539 16,836 2,705 3,945 5,540 3,890 - 6,446

8.2 Balance sheet reconciliation

Prepayment / (liability) as at July 1 34,649 22,780 (4,373) (5,628) 5,160 2,667 - 6,446 (Expense) / income recognised

during the year (16,539) (16,836) (2,705) (3,945) (5,540) (3,890) - (6,446)Payments made by the Fund

to the Company (17,031) - - - - - - -Payment made by the Company on

behalf of the fund - - - - 3,118 - - -Contributions - 28,705 - 5,200 5,703 6,383 - -Prepayment / (liability) as at June 30 1,079 34,649 (7,078) (4,373) 8,441 5,160 - -

8.3 Prepayment / (liability) as at June 30

Present value of obligations to members (523,037) (451,412) (23,622) (20,769) (53,564) (48,544) (7,654) (6,120)Obligation to Company - - - - - - (2,071) (2,071)Fair value of plan assets 477,166 456,440 7,326 7,740 61,565 55,871 34,425 31,325 Funded status (45,871) 5,028 (16,296) (13,029) 8,001 7,327 24,700 23,134 Unrecognised net actuarial loss / (gain) 45,502 28,028 5,816 4,711 4,778 (1,153) (13,873) (15,291)Unrecognised past service cost 1,448 1,593 3,402 3,945 - - - -Amount not recognised as an asset - - - - (4,338) (1,014) (10,827) (7,843)Prepayment / (liability) as at June 30 1,079 34,649 (7,078) (4,373) 8,441 5,160 - -

Actual return on plan assets 61,554 35,619 254 197 5,819 8,023 3,100 5,671

8.4 Movement in defined benefit obligation

Beginning of the year 451,412 424,303 20,769 24,634 48,544 48,401 6,120 8,283 Current service cost 16,821 16,351 677 834 2,914 2,856 449 562 Interest cost 45,312 38,367 2,061 2,210 4,855 4,227 631 729 Actuarial (gains) / losses 39,972 1,750 1,062 (5,951) 6,198 (240) 454 (3,454)Actual benefits paid by the Fund

during the year (30,480) (29,359) (947) (958) (8,947) (6,700) - - End of year 523,037 451,412 23,622 20,769 53,564 48,544 7,654 6,120

8.5 Movement in the fair value of plan assets

Beginning of the year 456,440 418,381 7,740 3,301 55,871 48,165 31,325 25,654 Expected return on plan assets 45,739 38,027 779 315 5,553 4,207 3,129 2,204 Actual contributions by / (refunds to) the employer (17,031) 28,705 - 5,200 5,703 6,383 - - Actual benefits paid by the Fund during the year (30,480) (29,359) (947) (958) (5,829) (6,700) - - Asset Gain / (Loss) 22,498 686 (246) (118) 267 3,816 (29) 3,467 End of year 477,166 456,440 7,326 7,740 61,565 55,871 34,425 31,325


57

paki

stan

refin

ery

limite

d

8.6 The principal actuarial assumptions used were as follows:

Discount rate 12% 10%Expected return on plan assets 12% 10%Future salary increases 12% 10%Future pension increases 7% 5%

8.7 Comparision for five years

2008 2007 2006 2005 2004(Rupees in thousand)

MANAGEMENT PENSION FUND

Present value of defined benefit obligation (523,037) (451,412) (424,303) (377,061) (315,022)Obligation to Company - - - - (8,522)Fair value of plan assets 477,166 456,440 421,475 351,129 311,579 Surplus / (deficit) (45,871) 5,028 (2,828) (25,932) (11,965)

Experience loss on obligation 39,972 1,750 11,722 44,420 22,764 Experience (loss) / gain on plan assets 22,498 (2,408) 8,474 35,602 26,710

NON-MANAGEMENT PENSION FUND

Present value of defined benefit obligation (23,622) (20,769) (24,634) (20,709) (22,618)Fair value of plan assets 7,326 7,740 3,301 4,095 4,737 Deficit (16,296) (13,029) (21,333) (16,614) (17,881)

Experience (gain) / loss on obligation 1,062 (5,951) 2,472 3,335 3,158 Experience (loss) / gain on plan assets (246) (118) (189) (164) (171)

MANAGEMENT GRATUITY FUND

Present value of defined benefit obligation (53,564) (48,544) (48,401) (39,985) (33,233)Obligation to Company - - - (8,162) (2,134)Fair value of plan assets 61,565 55,871 48,165 39,695 33,927 Surplus / (deficit) 8,001 7,327 (236) (8,452) (1,440)

Experience (gain) / loss on obligation 6,198 (240) 3,729 4,856 3,398 Experience gain on plan assets 267 3,816 4,424 3,230 2,551

NON-MANAGEMENT GRATUITY FUND

Present value of defined benefit obligation (7,654) (6,120) (8,283) (5,954) (8,852)Obligation to Company (2,071) (2,071) (2,071) (2,071) (1,395)Fair value of plan assets 34,425 31,325 25,654 21,427 18,019 Surplus 24,700 23,134 15,300 13,402 7,772

Experience (gain) / loss on obligation 454 (3,454) 1,326 (56) 725 Experience gain on plan assets (29) 3,467 2,361 1,892 1,518

2008 2007

8.8 Plan assets comprise the following:

PENSION FUNDS GRATUITY FUNDSManagement Non-Management Management Non-Management

2008 2007 2008 2007 2008 2007 2008 2007

Equity 47.5% 6.6% 40.5% 0.0% 15.0% 0.6% 19.8% 0.7%Debt 50.1% 92.5% 0.0% 96.9% 78.7% 93.9% 70.2% 99.3%Others 2.4% 0.9% 59.5% 3.1% 6.3% 5.5% 10.0% 0.0%

100% 100% 100% 100% 100% 100% 100% 100%

The average life expectancy of a pensioner retiring at age 60 on the balance sheet date is as follows:

Years

Male 16.8 16.8Female 21.2 21.2

The average life expectancy of a pensioner retiring at age 60, 20 years after the balance sheet date is as follows:

Male 17.8 17.8Female 21.7 21.7

8.9 During the year, Company recognised Rs 9.99 million (2007: Rs 7.83 million) as contribution for employees’ providentfund.

(Rupees in thousand)9. STORES, SPARES AND CHEMICALS

Stores 29,769 23,634 Spares 218,569 214,347 Chemicals 16,050 16,406

264,388 254,387

Provision for slow moving stores, spares and chemicals (30,963) (25,016)233,425 229,371

10. STOCK-IN-TRADE

Raw materialCrude oil [including in transit Rs 912.8 million(2007: Rs 38.50 million)] 6,589,352 3,279,878

Finished products 2,512,757 1,827,903 9,102,109 5,107,781


58

annual report 2008

2008 2007

2008 2007

(Rupees in thousand)11. TRADE DEBTS – considered good

Due from related parties – note 11.1 7,732,582 4,125,393 Others 2,695,239 664,369

10,427,821 4,789,762

11.1 These represent receivables from Pakistan State Oil Company Limited, Shell Pakistan Limited, Chevron (Pakistan)Limited and Pak Arab Refinery Company Limited, and are in the normal course of business.

12. LOANS AND ADVANCES – considered good

(Rupees in thousand)Loans and advances recoverable within one year – note 7

Executives 3,506 3,221 Other employees 6,799 6,248

10,305 9,469 Advances for supplies and services 8,490 12,970

18,795 22,439

13. ACCRUED INTEREST / MARK UP

This represents interest accrued on term deposits.

14. TRADE DEPOSITS AND SHORT-TERM PREPAYMENTS

Trade deposits 914 664 Short-term prepayments 47,930 48,427

48,844 49,091 15. OTHER RECEIVABLES

Receivable from related partiesProvident Fund 2,900 1,876 Non-management staff gratuity fund 2,071 2,071

Insurance commission receivable 14,543 7,606 Workers' profits participation fund – note 22.5 - 2,915 Others [including Rs 1.02 million (2007: Rs 1.02 million)

receivable from related parties] 1,666 1,423 21,180 15,891

16. TAX REFUNDS DUE FROM GOVERNMENT - SALES TAX

Refundable from Government 1,310,150 1,476,306 Payable to Government (1,121,998) -

188,152 1,476,306

The Federal Government, through S.R.O. 1164(I)/2007 dated November 30, 2007 has directed that sales tax shall becharged at the rate of zero percent on Petroleum Crude Oil. Sales tax refund due from Government represents therefunds due before the said change.


59

paki

stan

refin

ery

limite

d

2008 2007

2008 2007

(Rupees in thousand)17. INVESTMENTS

Financial assets at fair value through profit and loss

Investment in open ended mutual fund - held for trading3,537 (2007:1,830,198) units of United Money Market Fund 365 201,769

18. CASH AND BANK BALANCES

With banks oncurrent accounts 1,881,055 13,350 savings accounts 570,100 652,082 term deposits 189,695 1,027,794

Cash and cheques in hand 5,265 5,051 2,646,115 1,698,277

As at June 30, 2008 the effective rates of mark-up on savings accounts and term deposits range from 6% to 9% perannum (2007: 0.50% to 12% per annum). Maturity of term deposits ranges from 7 days to 89 days (2007: 2 days to 89 days).


19. SHARE CAPITAL

Authorised40,000,000 'A' ordinary shares of Rs. 10 each 400,000 400,000 60,000,000 'B' ordinary shares of Rs. 10 each 600,000 600,000

1,000,000 1,000,000

Issued, subscribed and paid-upordinary shares of Rs 10 each

2008 20072,400,000 2,400,000 ‘A’ ordinary shares fully paid in cash 24,000 24,000

3,600,000 3,600,000 ‘B’ ordinary shares fully paid in cash 36,000 36,0006,000,000 6,000,000 60,000 60,000

11,600,000 9,600,000 ‘A’ ordinary shares issued as fully paid bonus shares 116,000 96,000

17,400,000 14,400,000 ‘B’ ordinary shares issued as fully paid bonus shares 174,000 144,000

29,000,000 24,000,000 290,000 240,00035,000,000 30,000,000 350,000 300,000


60

annual report 2008

2008 2007

2008 2007

2008 2007

Number of shares(In thousand)

19.1 Reconciliation of number of ordinary shares outstanding

At the beginning of the year 30,000 25,000 Issue of 1 bonus share for every 6 (2007: 5) shares held - Note 19.2 5,000 5,000 At the end of the year 35,000 30,000

19.2 Issue of bonus shares

The Company made a bonus issue of 16.67% (i.e. one bonus share for every six shares held) accumulating to Rs 50million out of the reserves available as at December 31, 2007 in its extraordinary general meeting held on March 17,2008.

19.3 As at June 30, 2008 the number of ordinary shares held by associates was 21,012,250 shares of Rs 10 each (2007:18,009,580 shares).

20. SPECIAL RESERVE

This represents the reserve created under the Ministry of Petroleum and Natural Resources’ (the Ministry) directivemaking the new tariff protection formula applicable to the Company, as described in note 2.17(c). This amount is notavailable for distribution to shareholders.

The Ministry through its directive further clarified that the refineries can distribute dividend out of net profit after tax up toa maximum of 50% of the paid-up capital of the company as at the date of applicability of the tariff protection formula i.e.July 1, 2002 and the remaining amount should be transferred to the Special Reserve.


21. DEFERRED TAXATION

Debit / (credit) balance arising in respect oftemporary differences:- stores, spares and chemicals 9,320 8,756 - property, plant and equipment (58,232) (7,852)- investment in associate (20,081) (5,320)- old outstanding liabilities offered for tax 28,951 - - excess of minimum tax over normal tax - 42,999

(40,042) 38,583


61

paki

stan

refin

ery

limite

d

2008 2007

2008 2007


22. TRADE AND OTHER PAYABLES

Creditors – note 22.1, 22.2 13,177,426 7,796,524 Accrued liabilities 207,657 196,228 Advances from Customers – note 22.1 7,452 127,483 Payable to the Government – note 22.3 and 22.4 2,340,889 1,346,764 Retention money 4,245 3,969 Workers' profits participation fund – note 22.5 23,381 - Workers' welfare fund 117,035 44,263 Unclaimed dividend 18,371 18,971 Tax deducted at source 988 2,033 Others 7,314 987

15,904,758 9,537,222 22.1 Related party balances

Creditors note 22.1.1 2,468,750 1,045,451 Advances from customers 3,211 20,014

22.1.1 These include payables to Pak Arab Refinery Company Limited, and advances from Pakistan State Oil CompanyLimited, Shell Gas LPG (Pakistan) Limited and Chevron (Pakistan) Limited.

22.2 These include Rs 1.41 billion (2007: Rs 679.47 million) representing amount payable in respect of local crude suppliesexceeding the maximum slab rates for calculation of discount to Government of Pakistan (GoP) as provided in therespective Crude Oil Sale and Purchase Agreements (COSAs). The Ministry of Petroleum and Natural Resources (MoP& NR) through its directive dated December 17, 2005, instructed the refineries to withhold such payments until the matteris resolved among the parties to the above agreements. A directive was issued by MoP & NR dated December 4, 2007requiring the amounts above the maximum slab rates to be equally distributed to the GoP and Oil Exploration Companies(E&Ps). However, payments of such amounts have again been directed to be withheld through notification dated March7, 2008 in case E&Ps do not get the supplement COSAs signed till May 10, 2008.

Further, an amount of Rs 523.9 million (2007: Rs 279.35 million) has been withheld on amounts of COSAs not finalisedunder the directive of MoP & NR.

Under the directives of MoP & NR dated May 31, 2006 and December 23, 2006 respectively, the amounts being withheldas mentioned above are required to be kept at 90 days interest bearing deposits, to be paid with the principal amountwhen the matter is finalised.

22.3 As also discussed in 22.2, the balance includes Rs 1.25 billion (2007: Rs 679.47 million) representing amount payablein respect of local crude supplies exceeding the maximum slab rates provided in respective COSAs. These amounts arealso required to be kept at 90 days interest bearing deposits to be paid with the principal amount when the matter isfinalised.

22.4 The balance is net of Rs 410.92 million (2007: Rs 134 million) receivable from the Government of Pakistan in respect ofprice differential claims. Such claims resulted from restricting the ex-refinery prices charged by the Company to the oilmarketing companies on instructions from the MoP & NR.


62

annual report 2008

}

2008 2007

(Rupees in thousand)22.5 WORKERS’ PROFITS PARTICIPATION FUND

Balance as at July 1 (2,915) 21,515

Allocation for the year 171,296 27,106

Interest on funds utilised in Company's business - 464 168,381 49,085

Amount paid toTrustees (145,000) (30,000)Government - (22,000)

(145,000) (52,000)

Balance as at June 30 23,381 (2,915)

23. SHORT-TERM BORROWINGS

Running finance under mark-up arrangements

The running finance facilities available under mark-up arrangements from various banks amounted to Rs 9.05 billion(2007: Rs 2.57 billion).

The arrangements are secured by way of hypothecation over stock of crude oil and finished products and trade debts ofthe Company.

The rates of mark-up range between 9.23% to 13.88% per annum as at June 30, 2008 (2007: 9.12% to 11.5% perannum). The purchase prices are payable by September 2008.

23.1 Unutilised credit facility

The facility for opening letters of credit and guarantees as at June 30, 2008 amounted to Rs 18.89 billion (2007: Rs 13.29billion) of which the amount remaining unutilised at year end was Rs 14.53 billion (2007: Rs 11.4 billion).

24. CONTINGENCIES AND COMMITMENTS

24.1 The Company has to-date raised claims to certain oil marketing companies (OMCs) in respect of late payments againstsales receivables cumulating to Rs 363.64 million. However, these have not been recognised in the financial statementsas these have not been acknowledged by the OMCs in view of their contention that delays in making payments isattributed to their non-receipts from the Government of Pakistan.

24.2 Bank guarantees of Rs 369.36 million (2007: Rs 30.9 million) were issued in favour of third parties.

24.3 Aggregate commitments for capital expenditure as at June 30, 2008 amounted to approximately Rs 33.2 million (2007:Rs 18.89 million).


63

paki

stan

refin

ery

limite

d

2008 2007

24.4 Commitments for rentals under lease agreements amounted to Rs 38.47 million (2007: Rs 32.19 million), payable asfollows:


Not later than 1 year 11,901 9,477 Later than 1 year but not later than 5 years 26,573 22,717

38,474 32,194

25. SALES

Gross sales – note 25.1 and 25.2 107,300,775 67,385,920 Less:- Sales tax (10,811,924) (7,681,796)- Excise duty and development levy / surcharge (924,845) (2,300,059)

95,564,006 57,404,065

25.1 These include price differential claims from the Government amounting to Rs 514.78 million (2007: Rs 86.21 million).

25.2 Sales pertaining to the year are based on prices notified by OGRA which are subject to policy clarification from theFederal Government. Any subsequent adjustment arising therefrom shall be accounted for as and when the said policyis finalised.


64

annual report 2008

2008 2007


65

paki

stan

refin

ery

limite

d

26. OPERATING COSTAdministrative

Cost of sales Distribution cost expenses Total2008 2007 2008 2007 2008 2007 2008 2007


Crude oil consumed - note 26.1 91,019,969 56,317,752 - - - - 91,019,969 56,317,752Stores, spares and chemicals 106,127 148,919 - - - - 106,127 148,919 Consultancy 4,228 10,078 - - - - 4,228 10,078 Transportation and

handling charges - - 13,846 3,000 - - 13,846 3,000 Fuel, power and water 249,723 247,794 6,401 6,390 1,640 1,793 257,764 255,977 Salaries and wages 218,626 198,210 14,774 17,230 76,357 58,057 309,757 273,497 Retirement benefits 25,320 30,004 2,204 2,020 7,252 6,921 34,776 38,945 Repairs and maintenance 60,611 92,638 12,457 15,530 1,796 2,088 74,864 110,256 Insurance 33,017 34,730 12,655 12,580 3,519 3,946 49,191 51,256 Staff transport 12,384 9,742 1,838 1,549 4,449 4,362 18,671 15,653 Lease rentals 6,090 4,123 168 326 4,617 4,154 10,875 8,603 Depreciation 120,066 115,035 11,815 11,408 11,950 5,667 143,831 132,110 Amortisation of intangible 7,352 613 - - - - 7,352 613 Travelling and entertainment 15,471 4,753 1,206 405 10,858 8,794 27,535 13,952 Subscription 4,569 4,888 3,604 2,916 2,252 2,395 10,425 10,199 Rent, rates and taxes 13,457 19,485 43,262 12,628 - - 56,719 32,113 Security expenses 7,372 7,210 4,414 2,812 828 - 12,614 10,022 Publicity - - - - 2,561 2,461 2,561 2,461 Printing and stationery - - - - 4,680 4,247 4,680 4,247 Computer related and software

license expenses - - - - 7,144 4,929 7,144 4,929 Communication - - - - 6,660 5,353 6,660 5,353 Directors' fee - - - - 408 272 408 272Legal and professional

charges - - - - 5,639 4,861 5,639 4,861 Auditors' remuneration - note 26.2 - - - - 3,120 3,694 3,120 3,694 Refinery upgradation studies - note 26.3 - - - - 516,889 - 516,889 - Other expenses 12,712 8,722 756 640 25,524 10,983 38,992 20,345 Cost of goods manufactured 91,917,094 57,254,696 129,400 89,434 698,143 134,977 92,744,637 57,479,107 Opening stock of finished

products 1,827,903 1,201,321 Closing stock of finished

products (2,512,757) (1,827,903)91,232,240 56,628,114

26.1 Crude oil consumed

Opening stock 3,279,878 2,642,301 Purchases 92,980,134 56,086,782 Discount to Government 1,349,309 868,547 Closing stock (6,589,352) (3,279,878)

91,019,969 56,317,752


26.2 Auditors' remuneration

Audit fee 600 550 Taxation services 625 1,500 Limited review, special reports and certifications, consultation

services and audit of staff retirement funds 1,630 1,394 Out of pocket expenses 265 250

3,120 3,694 26.3 Refinery upgradation studies

These represent costs incurred in respect of planning phase and other related studies for future upgradation of refinery.


27. OTHER OPERATING EXPENSES

Donations - note 27.1 8,110 8,855 Workers' profits participation fund 171,296 27,106 Workers' welfare fund 72,771 10,291

252,177 46,252 27.1 Donations

Donations include the following in which a director, Mr. Farooq Rehmatullah is interested:

Interest in Donee Name and address of DoneeMember Resource Aga Khan University Hospital

Development Committee Stadium Road, Karachi 300 1,000

28. OTHER INCOME

Income from financial assetsProfit on savings accounts and term deposits 111,013 37,187 Gain on redemption of open ended mutual fund units 8,586 2,444 Gain on re-measurement of fair value of open ended

mutual fund units 11 1,769 Others

Rent of equipment, storage and handling charges[including Rs. 2.61 million (2007: Rs 1.58 million) fromrelated parties] 12,026 10,050

Insurance commission 14,643 7,606 Sale of scrap 643 7,250 Gain on disposal of fixed assets 43 1,442 Exchange gain - net 82,902 -Others 1,030 5,998

230,897 73,746


66

annual report 2008

2008 2007

2008 2007


29. FINANCE COSTS

Mark-up on running finance under mark-up arrangements 81,196 76,638 Interest on amounts withheld against purchases of

local crude oil under directives of MoP & NR- notes 22.2 and 22.3 167,908 -

Exchange loss - net - 3,300 Interest on workers' profits participation fund - 464 Bank charges 3,943 1,316

253,047 81,718 30. TAXATION

Current - for the year 1,153,180 288,440 Deferred (9,306) (34,989)

1,143,874 253,451

30.1 Relationship between tax expense and accounting profit

Accounting profit 3,254,618 504,265

Tax at the applicable tax rate of 35% 1,139,116 176,493 Expenses not deductible for tax purposes 43,628 24,295 Income not subject to tax (3,009) (1,475)Effect of applicability of final tax (35,861) 54,138 Tax expense for the year 1,143,874 253,451

31. EARNINGS PER SHARE

Profit after taxation attributable to ordinary shareholders 2,110,744 250,814

Number (in thousand) of ordinary shares of Rs 10 eachissued and subscribed at the end of the year 35,000 35,000

Basic earnings per share Rs. 60.31 Rs. 7.17

For the purposes of calculating earnings per share, number of ordinary shares outstanding as at June 30, 2007 has beenincreased to reflect the bonus shares issued during the year.

There were no dilutive potential ordinary shares in issue as at June 30, 2007 and 2008.


67

paki

stan

refin

ery

limite

d

2008 2007


68

annual report 2008

32. REMUNERATION OF DIRECTORS, CHIEF EXECUTIVE AND EXECUTIVES

The aggregate amounts of remuneration including all benefits to Directors, Chief Executives and Executives of theCompany are as follows:

2008 2007Directors Chief Executives Directors Chief Executives

Executives Executives(Rupees in thousand)

Fees 408 - - 272 - - Managerial remuneration - 3,625 44,982 113 3,003 42,365 Leave encashment - 1,820 915 - - 1,747Bonus - 2,094 9,810 - 1,324 13,279Ex gratia allowacne - 1,457 - - - 2,744Honorarium 600 - - 600 - - Retirement benefits - 789 9,623 - 1,018 12,882 Housing - 1,631 17,920 - 1,351 15,863 Utilities - 362 4,156 - 300 3,732 Leave passage - 1,135 5,004 - 348 4,260 Club memberships - 1,048 5,224 - - 1,515 Others 36 436 13,015 36 72 3,630

36 4,612 45,319 36 2,071 29,000 1,044 14,397 110,649 1,021 7,416 102,017

Number of persons 10 2* 42 10 1 36

One director, the Chief Executive and certain executives of the Company are provided with free use of cars and household equipments.

* During the year Mr. Zafar Haleem completed his tenure as Chief Executive and Mr. Ijaz Ali Khan took over the position.

(Rupees in thousand)33. TRANSACTIONS WITH RELATED PARTIES

Relationship Nature of transaction

(i) Associated companies Dividend received 8,504 6,803 Sale of goods 75,959,940 44,796,012 Sale of services 2,608 1,580 Purchase of goods 27,921,379 17,005,260 Purchase of services 3,079 13,297

(ii) Entities whose directors and that of the Company have been appointed by the same person(s)

Sale of goods - 1,206,089 Purchase of services 505,756 6,060

Sale of certain products is transacted at prices fixed by the Oil & Gas Regulatory Authority. Other transactions with related parties are carried out on commercially negotiated terms.

2008 2007

(Rupees in thousand)(iii) Key management compensation:

Salaries and other short-term employee benefits 39,171 43,722 Post-employment benefits 2,884 6,115

42,055 49,837

The status of outstanding balances in respect of related parties as at June 30, 2008 is included in trade debts, otherreceivables and trade and other payables.

34. CAPACITY AND ACTUAL PERFORMANCE

Against the designed nominal annual capacity of 2,133,705 metric tons, the actual throughput during the year was2,123,145 metric tons (2007: 1,978,563 metric tons).

35. FINANCIAL INSTRUMENTS

35.1 Financial assets and liabilities

Interest / mark-up bearing Non-interest bearing TotalMaturity Maturity Total Maturity Maturity Total

up to after one up to after one one year year one year year


FINANCIAL ASSETS

Loans to employees 10,043 13,533 23,576 262 55 317 23,893 Deposits - - - 914 14,012 14,926 14,926 Trade debts 2,348,574 - 2,348,574 8,079,247 - 8,079,247 10,427,821Accrued interest /

mark-up - - - 47 - 47 47 Other receivables - - - 21,180 - 21,180 21,180 Financial assets at

fair value throughprofit and loss - - - 365 - 365 365

Cash and bank balances 759,795 - 759,795 1,886,320 - 1,886,320 2,646,1152008 3,118,412 13,533 3,131,945 9,988,335 14,067 10,002,402 13,134,3472007 1,686,862 8,976 1,695,838 5,022,820 4,854 5,027,674 6,723,512

FINANCIAL LIABILITIES

Trade and other payables 3,185,629 - 3,185,629 12,570,273 - 12,570,273 15,755,902Accrued interest /

mark-up - - - 77,558 - 77,558 77,5582008 3,185,629 - 3,185,629 12,647,831 - 12,647,831 15,833,4602007 1,358,932 - 1,358,932 8,003,480 - 8,003,480 9,362,412


paki

stan

refin

ery

limite

d

69

2008 2007


70

annual report 2008

35.2 Financial risk management objectives and policies

The Company's objectives when managing capital are to safeguard the Company's ability to continue a going concernin order to provide returns for shareholders and benefit for other stakeholders. However, as also mentioned in note - 2.17,the Company operates under tariff protection formula whereby profits after tax in excess of 50% of the paid up capital asof July 1, 2002 are diverted to special reserve.

Taken as a whole, risk arising from the Company's financial instruments is limited as there is no significant exposure toprice and cash flow risk in respect of such instruments.

(i) Concentration of credit risk

Credit risk represents the accounting loss that would be recognised at the reporting date if counterparties failed to performas contracted. The financial assets that are subject to credit risk amount to Rs 13.09 billion (2007: Rs 6.5 billion).

The Company believes that it is not exposed to any major credit risk as it operates in an essential products industry andhas as its customers only a few sound organisations.

(ii) Foreign exchange risk

Foreign currency risk arises mainly when payables exist due to transactions in foreign currencies. Amounts exposed tosuch risk included in creditors are Rs 5.23 billion (2007: Rs 2.82 billion). The Company believes that it is not materiallyexposed to foreign exchange risk as its product prices are linked to the currency of its imports.

(iii) Liquidity Risk

The Company manages liquidity risk by maintaining sufficient cash balances and the availability of financing throughbanking arrangements.

(iv) Fair values of financial assets and liabilities

The carrying values of all financial assets and liabilities reflected in the financial statements approximate their fair values.

(Rupees in thousand)36. CASH FLOW FROM OPERATING ACTIVITIES

Profit before taxation 3,254,618 504,265 Adjustments for non-cash charges and other items

Depreciation / amortisation 151,183 132,723 Share of income of associate (24,722) (6,949)Gain on disposal of property, plant and equipment (43) (1,442)Profit on deposits (111,013) (37,187)Mark-up expense 249,104 76,638 Provision for slow moving stores and spares 5,947 - Unrealised gain on revaluation of investments at fair value through

profit and loss (11) (1,769)Provision for defined benefit retirement plans 24,784 31,117

295,229 193,131 Working capital changes – note 36.1 (1,954,384) (694,613)Cash generated from operations 1,595,463 2,783

36.1 Working capital changes

(Increase) / decrease in current assetsStores, spares and chemicals (10,001) 53,426 Stock-in-trade (3,994,328) (1,264,159)Trade debts (5,638,059) (1,104,691)Loans and advances 3,644 3,413 Trade deposits and short-term prepayments 247 6,934 Other receivables (5,289) (12,359)Tax refunds due from Government - Sales tax 1,288,154 (642,635)Investments 201,415 (197,801)

(8,154,217) (3,157,872)Increase in trade and other payables 6,199,833 2,463,259

(1,954,384) (694,613)

37. CASH AND CASH EQUIVALENTS

Cash and bank balances 2,646,115 1,698,277


71

paki

stan

refin

ery

limite

d

2008 2007


72

annual report 2008

38. CORRESPONDING FIGURES

Previous year's figures are re-arranged and re-classified wherever necessary for the purpose of comparison.

Major changes made for better presentation during the year are as follows:

Note Reclassification from Note Reclassification to (Rupees in component component thousand)

11 Trade debts - others 11 Trade debts - Related parties 2,92211 Trade debts - Related parties 22 Trade and other payables - creditors 10,297

Reclassifications due to directives of MoP & NR in relation to local crude purchases are as follows:

Note Reclassification from Note Reclassification to (Rupees in component component thousand)

22 Trade and other payables - creditors 22 Trade and other payables - payable 679,466to government

39. PROPOSED DIVIDEND

The Board of Directors in their meeting held on August 21, 2008 have proposed a cash dividend of Rs 1.42 per shareaccumulating to a total of Rs 50 million, that has not been accounted for in these financial statements.

40. DATE OF AUTHORISATION

These financial statements were authorised for issue on August 21, 2008 by the Board of Directors of the Company.

41. EVENT OCCURRING AFTER THE BALANCE SHEET DATE

Subsequent to the year end, the Government has changed the pricing formula of certain products including reduction indeemed duty impacting future selling prices of the products.



PAKISTAN REFINERY LIMITEDP.O. Box 4612, Korangi Creek Road, Karachi-74900, Pakistan.

Tel: (92-21) 5122131-40, Fax: (92-21) 5060145, 5091780Email: [email protected] Website: http://www.prl.com.pk

Pakistan Refinery Limited (Annual Report 2008)

Documents

Transcript of Pakistan Refinery Limited (Annual Report 2008)