National Refinery looking up

National Refinery Limited (PSX: NRL) posted its 1HCY17 result last Friday which saw a decrease in company revenue by 4 percent and a corresponding fall in cost of sales of 5 percent. The gross profit only saw a marginal increment and this coupled with a fall in other income by 42 percent had an unfavourable impact on the bottom line.

However, the finance cost of the company dropped by almost 73 percent as compared to the previous year. The item having the most favourable impact on the bottomline was the reduction in taxes which fell by almost 100 percent. This led to both the profit after tax and EPS to rise by 38 percent as compared to the 1HFY16.

Resultantly, even though the gross margins only picked up marginally, the net margins were boosted by almost 230 bps because of the reduction in finance cost and taxation.

NRL has ambitious expansion and up-gradation plans for the future with the work being divided in two phases. The company is undergoing up-gradation of its plant to comply with government directives to produce environmental friendly HSD and meet Pakistan's rising demand of motor gasoline.

A two stage unit at Lube-1 refinery is under process to augment the installed crude oil processing capacity from 12,050 barrel per stream day (bpsd) to 17,000 bpsd and vacuum fractionation capacity from 5,200 bpsd to 6,600 bpsd.