Pakistan Credit Rating Agency Limited revises long-term entity rating of National Refinery Limited

Lahore, October 23, 2013 (PPI-OT): The Pakistan Credit Rating Agency (PACRA) has revised the long-term entity rating of National Refinery Limited (NRL) to “AA+” (Double A Plus) [Previous: “AAA”] while the short-term entity rating of NRL has been maintained at “A1+” (A one Plus). These ratings denote a very low expectation of credit risk emanating from a very strong capacity for timely payment of financial commitments.

The ratings reflect NRL’s strong financial profile which emanates from its sizeable equity base and established ability to profits from operations. The company intends to expand and modernize its capacities. To fund this, it has decided to induce debt into its capital structure. While, this will create pressure on its financial profile, NRL should be able to manage based on current business performance that would be supplemented by alignment of debt repayments with commencement of new cash flows.

The ratings also incorporate NRL’s monopolistic position pertaining to Lube Base Oils (LBO) production in the domestic refining sector providing sustainability to NRL’s performance though profits have come down. The company’s association with the country’s only fully integrated oil group – Attock Group (AG) which on a net basis remains low leveraged – remains a source of synergistic benefits.

The ratings remain dependent on NRL’s ability to maintain its leading position in the domestic lube segment. The completion of projects within the stipulated timeline avoiding cost overruns or a revenue loss, remains critical. Any significant downturn in profit margins or mismatch arising in new projects cash flows and debt repayments, in turn, impacting NRL’s financial profile may result in a rating downgrade.

For more information, contact:
Hammad Rashid
Analyst
The Pakistan Credit Rating Agency Limited (PACRA)
Awami Complex, FB1, Usman Block New Garden Town,
Lahore – Pakistan
Tel: +9242 586 9504 -6
Fax: +9242 583 0425
Email: hammad.rashid@pacra.com
Web: www.pacra.com