KARACHI, Aug 31: During the past 20 months since January 2003, the 10-rupee share in National Refinery Limited (NRL) has perhaps been one of the top performers at the stock exchanges.

The share of the par value of Rs10 was priced at Rs81 on January 1, 2003. It is now trading at Rs218 reflecting an incredible gain of 169 per cent.

The stock is decidedly expensive for the small investor, but something that the institutions and funds may have found to be an exceedingly wise investment decision, in case their entry timing was right.

Interestingly, the NRL stock had hit the bottom in 1998, when the share price had dipped to as low as Rs9 a piece. A pauper who may have picked up the stock then, would now be a millionaire. But no one including the legendary investment guru Warren Buffet could have predicted such a surge in NRL's stock price.

On Monday, National Refinery Limited announced the financial results for the year ended June 30, 2004 and recommended the dividend. The company posted 37 per cent growth in after tax earnings, which amounted to Rs1.84 billion, compared with Rs1.35 billion the earlier year.

The profit after tax translated into earnings per share (eps) of Rs27.75. On the current stock price, the price to earnings (p/e) ratio works out to 7.8x. The Board recommended cash dividend at 100 per cent, which was in addition to the interim already paid at 25 per cent, making a total of 125 per cent.

NRL, located at Karachi is the country's second largest refinery after Parco and the largest among the listed refineries. NRL posted 11.98 per cent increase in net sales, which amounted to Rs40.4 billion for the year ended June 30, 2004, from a year ago net sales at Rs36.1 billion.

Gross profit increased to Rs2.95 billion, from Rs2.08 billion and the gross margin was up to 7.31 per cent, from 5.76 per cent, reflecting improvement of 150 bps. Other income surged by 114 per cent to Rs629 million, from Rs299 million, which was quite instrumental in lifting the bottom line.

Mohsin Ahsan, analyst at Global Securities, while commenting on the results, said that the earnings at NRL had risen on the back of strong refining margins and lube earnings.

He observed that oil prices had been on the rising trend, since April 2003 while shortage of global refining capacity had pushed up refining margins. "For NRL, refining margins are slightly better compared to fuel only refineries as 60-70 per cent of furnace oil, which is a loss making product is consumed internally by the lube refineries".

The analyst stated that lube earnings had shown exceptionally good performance due to strong product prices and demand. Local prices of base oils and asphalt had risen on the back of international prices while strong local demand had led to shortage.

"NRL tried to import asphalt to gain from trading but tender had to be scrapped due to very high prices", said the analyst, adding that lube's contribution in current year's earnings was expected to be over 50 per cent.

Tanvir Abid, Head of Research at Jahangir Siddiqui Capital Markets stated in a pre-result review that higher profitability was to be a result from upbeat fuel refinery margins, growing white oil demand and spurt in fuel oil sales during 2H/FY04 following higher thermal electricity generation.

"Furthermore", said Tanvir Abid, "NRL's unique advantage of producing lube base oils in which it enjoys a market share of more than 90 per cent coupled with the sanguine margins in this segment are to contribute immensely to the profitability growth".

He also predicted drop in financial charges amidst soft interest rate environment, which bode favourably for the bottom line. Financial charges stood halved to Rs18 million for the year under review.

For raising production, NRL's more profitable lube base oil sector, the company was said to have executed the process Design Package Agreement and Dill Chill Process Licence agreement with Exxon Mobil, USA. "The project cost is estimated at approximately Rs950 million and is expected to be commissioned during the second half of 2005", said the analyst.