KARACHI, Aug 22: Pakistan Refinery Limited (PRL) posted profit after tax of Rs2,110.744 million during 2007-08 as against the profit of Rs250.814 million earned during 2006-07.

The company’s earning per share worked out to Rs60.31 in the year under review against Rs7.17 the previous year.

The board in its meeting held on Thursday recommended a final cash dividend for the year at Rs1.4285 per share i.e. 14.285 per cent. That was in addition to the interim bonus shares already issued at 16.67 per cent, making a total distribution for the year 2007-08 at Rs100 million.

In a press statement the company said that the distribution of profit was in line with the Tariff Protection Formula announced in 2002 whereby refinery could only distribute maximum of 50 per cent of its paid-up capital as of July 1, 2002, which in case of PRL amounted to Rs200 million.

“As per the formula any profit after the said allowed distribution of profits is required to be transferred to a ‘Special Reserve’ to offset any future losses or to make investments for expansion or upgradation of the refinery”, the company stated.

General Manager Commercial and Corporate Affairs, PRL, Aftab Husain observed that the refinery’s financial performance was largely attributable to the unprecedented rise in global crude oil prices coupled with strong international refining margins during the current year and tariff protection formula.

He said: “In 2006-07 the refinery went under 28 days ‘turn around’ which severely impacted the financials of that year. Subsequent to June 2008 the government reduced custom/deemed duty on high speed diesel (HSD) from 10 to 7.5 per cent and to top this Motor Spirit (MS) price would now be calculated under a New Oil Formula on the basis of MS 95 RON with RON penalty under the unitary method.”

Mr Aftab added that the working had brought the price of MS lower than its feed stock i.e. naphtha. Earlier the government had completely withdrawn the deemed duty of kerosene and JP-8.

The said pricing mechanism of MS and the reduction in deemed duty would eliminate the profitability of the refinery and would jeopardise the ongoing refinery upgradation project which was envisaged to bring investment in excess of $400 million.

Keeping in perspective, the unsuitable pricing mechanism coupled with the unpredictable international oil prices and refining margin trends and the issue of circular debt would have serious implications on the financial health of the refinery.

PRL was said to be pursuing the government to revise the New Oil Formula in consultation with the stakeholders whereby a mutually beneficial pricing structure can be evolved, the statement said.