Vision - Pakistan Refinery Limited

VisionTo be the Refinery of first choice for all stakeholders.

PRL is committed to remaining a leader in the oil refining business ofPakistan by providing value added products that are environmentallyfriendly, and by protecting the interest of all stakeholders in acompetitive market through sustainable development and qualityhuman resources.

Mission

Company Information

Board of Directors

Board Committees

Directors’ Review

Auditors' Report to the Members on Review of Interim

Financial Information

Condensed Interim Balance Sheet

Condensed Interim Profit and Loss Account

Condensed Interim Cash Flow Statement

Condensed Interim Statement of Changes in Equity

Notes to and Forming Part of the

Condensed Interim Financial Information

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Contents

Company InformationChief Financial OfficerImran Ahmad Mirza

Company SecretaryShehrzad Aminullah

AuditorsA. F. Ferguson & Co.Chartered Accountants

Legal AdvisorOrr Dignam & Co.

Registrar & Share Registration OfficeFAMCO Associates (Private) Limited.8-F, Next to Hotel Faran,Nursery Block-6, P.E.C.H.S.Shahra-e-Faisal, Karachi.

BankersAskari Bank LimitedBank Alfalah LimitedBank AL-Habib LimitedCiti Bank N.AFaysal Bank LimitedHabib Metropolitan Bank LimitedHabib Bank LimitedJS Bank LimitedMCB Bank LimitedMeezan Bank LimitedNational Bank of PakistanStandard Chartered Bank (Pakistan) LimitedSummit Bank LimitedUnited Bank Limited

Registered OfficeP.O. Box 4612, Korangi Creek Road,Karachi-75190Tel: (92-21) 35122131-40Fax: (92-21) 35060145, [email protected]

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Board of DirectorsMuhammad Aliuddin AnsariChairman

Aftab HusainManaging Director & CEO

Abdul Jabbar MemonDirector

Faisal WaheedDirector

Farooq Rahmatullah KhanDirector

Farrokh K. CaptainDirector

Jawwad Ahmed CheemaDirector

Muhammad Najam ShamsuddinDirector

Mumtaz Hasan KhanDirector

Sheikh Imran ul HaqueDirector

Yacoob SuttarDirector

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Audit Committee

The Audit Committee comprises of four members, from non-executive Directors of the Board all of whomhave sufficient financial management expertise. The Chief Internal Auditor is the Secretary of theCommittee.

The Board has determined the Terms of Reference of the Audit Committee and has provided adequateresources and authority to enable the Audit Committee to carry out its responsibilities effectively. TheAudit Committee recommends to the Board, the appointment of external auditors, their removal, auditfees and the provision by the external auditors of any service to the listed company in addition to auditof its financial statements. The Board gives due consideration to the recommendations of the AuditCommittee in all these matters.

Human Resources and Remuneration Committee (HR&RC)HR&RC comprises of four members, including its Chairman, from the non-executive Directors of theCompany. The CEO may be inducted as member of the committee but not as the Chairman of committee.The General Manager Human Resources - Pakistan Refinery Limited will act as the Secretary of theCommittee.

HR&RC has been delegated the role of assisting the Board of Directors in following matters:

recommending human resource management policies to the board;recommending to the Board the selection, evaluation, compensation (including retirementbenefits) and succession planning of the Managing Director & Chief Executive Officer;recommending to the Board the selection, evaluation, compensation (including retirementbenefits) of Managing Director & Chief Executive Officer, Chief Financial Officer, CompanySecretary and Chief Internal Auditor;consideration and approval on recommendations of Managing Director & Chief ExecutiveOfficer on such matters for key management posit ions who report directly toManaging Director & Chief Executive Officer.

Board Technical Committee

The Board Technical Committee is responsible for removing barriers for realising the upgradation projectfor the Company’s project team, institutionalising project execution process and governance for theupgradation project and endorsement of the investment decisions recommended by the Project SteeringCommittee. This committee also reviews and engages with technical managers for HSEQ matters.

Board Strategic CommitteeThe Board Strategic Committee has been set up to assist management in defining and putting up to theBoard of Directors a structured strategic plan that will ensure future sustainability of the business anddeliver sustainable returns to the shareholders.

Board Share Transfer CommitteeThe Board Share Transfer Committee comprises of two Directors and is set up to approve registrationof transfer of shares received by the Company. The Share Transfer Committee shall assist the Boardof Directors in the following matters:

approve and register transfer / transmission of shares;sub-divide, consolidate and issue their certificates; andissue share certificates in place of those which are damaged or in which the pages are completelyexhausted, provided the original certificates are surrendered to the Company.

Board Committees

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The Company posted a profit after tax of Rs. 145.27 million during the half year ended December 31, 2017as compared to a profit after taxation of Rs. 690.21 million in the corresponding period last year. Thisreduction in profit is primarily due to a sharp decline in the Dollar Rupee parity, depressed Refinery Marginstowards the end of the six months under review, the technical Isomerisation issue resulting in lower MSproduction and sale of Furnace Oil at lower prices.

The last few months have witnessed one of the worst times with regard to upliftment of Furnace Oil fromthe local refineries. With the advent of the Winter season low upliftment of Furnace Oil was experienced,due to shutting down of Furnace Oil based Power Plants. The daily consumption of Furnace Oil witnesseda decline from 24,000 Metric Tonnes a day to 6,000 Metric Tonnes, resulting in all refineries operating atreduced throughput. Refineries were operating on a day to day basis and it was only with the interventionof the Government and restarting of some of the power plants that had been shut that the situation hasimproved and somewhat eased.

The Company continues to be burdened by negative effects of pricing mechanism of High Speed Diesel(HSD) whereby the refineries are required to pay the difference between actual import price and a notionalex-refinery price. The Company has suffered a further dent of Rs. 243 million in the form of HSD PriceDifferential in the six months ended December 31, 2017, whereas this adverse pricing mechanism whichwas introduced by the Government in March 2013 has so far eroded Rs. 4,508 million worth of profits ofthe Company. The Refinery has taken up this issue with the Ministry of Energy (Petroleum Division).

Although, the Refinery was not able to meet the time line of June 30, 2017 prescribed for the installationof Diesel Hydro Desulphurisation (DHDS) Unit to produce EURO II compliant HSD, it continues to moveforward in this regard and has completed work with an international consultant on the detailed feasibilitystudy which has evaluated different options for upgradation of the Refinery including installation of DHDSand the same is under review of the Board of Directors. Nonetheless, this non-compliance has exposedthe Refinery to downward revision of HSD pricing due to higher sulphur content and occasioned a lossof Rs. 45 million on this account during the half year ended December 31, 2017.

Health, Safety, Environment and Quality continue to remain first priority of the Company.

The Board of Directors express their gratitude and appreciation to all our stakeholders including shareholders,term finance holders, customers, suppliers, banks, employees and concerned Government Ministries fortheir continuous support.

On behalf of the Board of Directors

Muhammad Aliuddin AnsariChairman

Karachi: January 31, 2018

Directors’ ReviewH

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Introduction

We have reviewed the accompanying condensed interim balance sheet of Pakistan Refinery Limitedas at 31 December 2017 and the related condensed interim profit and loss account, condensed interimcash flow statement and condensed interim statement of changes in equity together with the notesforming part thereof for the half year then ended (here-in-after referred to as the “interim financialinformation”). Management is responsible for the preparation and presentation of this interim financialinformation in accordance with approved accounting standards as applicable in Pakistan for interimfinancial reporting. Our responsibility is to express a conclusion on this interim financial information basedon our review. The figures of the condensed interim profit and loss account for the quarters ended 31December 2017 and 2016 have not been reviewed, as we are required to review only the cumulativefigures for the half year ended 31 December 2017.

Scope of Review

We conducted our review in accordance with International Standard on Review Engagements 2410,“Review of Interim Financial Information Performed by the Independent Auditor of the Entity”. A reviewof interim financial information consists of making inquiries, primarily of persons responsible for financialand accounting matters, and applying analytical and other review procedures. A review is substantiallyless in scope than an audit conducted in accordance with International Standards on Auditing andconsequently does not enable us to obtain assurance that we would become aware of all significantmatters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the accompanyinginterim financial information as of and for the half year ended 31 December 2017 is not prepared, in allmaterial respects, in accordance with the approved accounting standards as applicable in Pakistan forinterim financial reporting.

Material Uncertainty Related to Going Concern

We draw attention to Note 2.3 to the interim financial information, as stated in the Note, as at31 December 2017 the Company has accumulated loss of Rs. 4.6 billion resulting in net negative equityof Rs. 0.25 billion. Further, current liabilities of the Company exceed its current assets by Rs. 7.96 billion.As stated in Note 2.3, these events or conditions, along with other matters as set forth in Note 2.3,indicate that a material uncertainty exists that may cast significant doubt on the Company's ability tocontinue as a going concern. Our conclusion is not modified in respect of this matter.

Chartered AccountantsKarachi

Dated: 12 February 2018

Name of the engagement partner: Farrukh Rehman

Auditors' Report to the Members on Review of InterimFinancial Information

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Condensed Interim Balance SheetAs at December 31, 2017

ASSETSNon-current assets

Fixed assets 4 12,786,910 12,246,829Intangible asset 4,259 6,080Investment in associate 73,111 84,012Long-term loans and advances 5,685 4,972Long-term deposits 21,198 21,198Retirement benefit prepayments 26,803 26,990

12,917,966 12,390,081Current assets

Stores, spares and chemicals 5 351,861 367,937Stock-in-trade 6 7,502,745 6,128,132Trade debts 6,326,953 4,470,649Loans and advances 25,882 29,919Trade deposits and short-term prepayments 78,554 18,250Other receivables 7 661,826 1,009,852Taxation - payments less provision 613,715 798,200Cash and bank balances 8 851,862 712,186

16,413,398 13,535,125 29,331,364 25,925,206

EQUITY Share capital 9 2,940,000 2,940,000Exchange equalisation reserve 897 897General reserve 1,050 1,050Special reserve 2.2 1,405,313 1,405,313Accumulated loss 2.3 (4,598,941) (4,744,206)Fair value reserve (4,303) 300

(255,984) (396,646)

SURPLUS ON REVALUATION OFFIXED ASSETS 3,497,928 3,497,928

LIABILITIESNon-current liabilities

Long-term borrowing 1,400,000 1,600,000Deferred taxation 10 16,193 18,709Retirement benefit obligations 299,921 299,921Unearned income - 6,667

1,716,114 1,925,297Current liabilities

Trade and other payables 11 17,606,811 13,908,222Term finance certificates 229,390 234,390Short-term borrowings 12 4,569,043 4,963,636Running finance under mark-up arrangements 4,635 358,764Current portion of long-term borrowing 400,000 400,000Accrued mark-up 117,323 135,095Payable to government - sales tax 1,446,104 898,520

24,373,306 20,898,627 26,089,420 22,823,924

Contingencies and commitments 13 29,331,364 25,925,206

The annexed notes 1 to 21 form an integral part of this condensed interim financial information.

ASSETSNon-current assets

Fixed assets 4 12,786,910 12,246,829Intangible asset 4,259 6,080Investment in associate 73,111 84,012Long-term loans and advances 5,685 4,972Long-term deposits 21,198 21,198Retirement benefit prepayments 26,803 26,990

12,917,966 12,390,081Current assets

Stores, spares and chemicals 5 351,861 367,937Stock-in-trade 6 7,502,745 6,128,132Trade debts 6,326,953 4,470,649Loans and advances 25,882 29,919Trade deposits and short-term prepayments 78,554 18,250Other receivables 7 661,826 1,009,852Taxation - payments less provision 613,715 798,200Cash and bank balances 8 851,862 712,186

16,413,398 13,535,125 29,331,364 25,925,206

EQUITY Share capital 9 2,940,000 2,940,000Exchange equalisation reserve 897 897General reserve 1,050 1,050Special reserve 2.2 1,405,313 1,405,313Accumulated loss 2.3 (4,598,941) (4,744,206)Fair value reserve (4,303) 300

(255,984) (396,646)

SURPLUS ON REVALUATION OFFIXED ASSETS 3,497,928 3,497,928

LIABILITIESNon-current liabilities

Long-term borrowing 1,400,000 1,600,000Deferred taxation 10 16,193 18,709Retirement benefit obligations 299,921 299,921Unearned income - 6,667

1,716,114 1,925,297Current liabilities

Trade and other payables 11 17,606,811 13,908,222Term finance certificates 229,390 234,390Short-term borrowings 12 4,569,043 4,963,636Running finance under mark-up arrangements 4,635 358,764Current portion of long-term borrowing 400,000 400,000Accrued mark-up 117,323 135,095Payable to government - sales tax 1,446,104 898,520

24,373,306 20,898,627 26,089,420 22,823,924

Contingencies and commitments 13 29,331,364 25,925,206


(Rupees in thousand)

December 31,2017

AuditedUnauditedJune 30,

2017Note

Imran Ahmad MirzaChief Financial Officer



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Condensed Interim Profit and Loss Account For the half year ended December 31, 2017 (Unaudited)




Net sales 14 21,095,757 17,084,826 39,552,822 34,343,429

Cost of sales (20,969,966) (16,532,247) (38,611,209) (33,267,756)

Gross profit 125,791 552,579 941,613 1,075,673

Distribution cost (51,248) (40,762) (101,816) (89,561)

Administrative expenses (98,152) (88,669) (176,953) (155,042)

Other operating expenses (9,662) (47,871) (69,965) (109,836)

Other income 41,074 408,614 66,330 441,256

Operating profit 7,803 783,891 659,209 1,162,490

Finance cost (132,822) (153,407) (253,661) (317,348)

Share of income of associate 41 980 568 2,348

Profit / (loss) before taxation (124,978) 631,464 406,116 847,490

Taxation 15 (78,363) (63,464) (260,851) (157,279)

Profit / (loss) after taxation (203,341) 568,000 145,265 690,211

Other comprehensive income / (loss)

Change in fair value reserveof available for sale investments

of associate (1,839) 6,424 (5,939) 9,215

Deferred tax relating to componentof other comprehensive income 413 (1,445) 1,336 (2,073)

(1,426) 4,979 (4,603) 7,142

Total comprehensive income / (loss) (204,767) 572,979 140,662 697,353

Earnings per share 16 (Rs. 0.66) Rs. 1.85 Rs. 0.47 Rs. 2.24



For the half year

Net sales 14 21,095,757 17,084,826 39,552,822 34,343,429

Cost of sales (20,969,966) (16,532,247) (38,611,209) (33,267,756)

Gross profit 125,791 552,579 941,613 1,075,673




Other income 41,074 408,614 66,330 441,256


Finance cost (132,822) (153,407) (253,661) (317,348)



Taxation 15 (78,363) (63,464) (260,851) (157,279)




of associate (1,839) 6,424 (5,939) 9,215


(1,426) 4,979 (4,603) 7,142




Note

For the quarterOctober -December

2017

October -December

2016

July -December

2017

July -December

2016





Net sales 14 21,095,757 17,084,826 39,552,822 34,343,429

Cost of sales (20,969,966) (16,532,247) (38,611,209) (33,267,756)

Gross profit 125,791 552,579 941,613 1,075,673




Other income 41,074 408,614 66,330 441,256


Finance cost (132,822) (153,407) (253,661) (317,348)



Taxation 15 (78,363) (63,464) (260,851) (157,279)




of associate (1,839) 6,424 (5,939) 9,215


(1,426) 4,979 (4,603) 7,142





For the half year

Net sales 14 21,095,757 17,084,826 39,552,822 34,343,429

Cost of sales (20,969,966) (16,532,247) (38,611,209) (33,267,756)

Gross profit 125,791 552,579 941,613 1,075,673




Other income 41,074 408,614 66,330 441,256


Finance cost (132,822) (153,407) (253,661) (317,348)



Taxation 15 (78,363) (63,464) (260,851) (157,279)




of associate (1,839) 6,424 (5,939) 9,215


(1,426) 4,979 (4,603) 7,142




Note


2017

October -December

2016

July -December

2017

July -December

2016





Net sales 14 21,095,757 17,084,826 39,552,822 34,343,429

Cost of sales (20,969,966) (16,532,247) (38,611,209) (33,267,756)

Gross profit 125,791 552,579 941,613 1,075,673




Other income 41,074 408,614 66,330 441,256


Finance cost (132,822) (153,407) (253,661) (317,348)



Taxation 15 (78,363) (63,464) (260,851) (157,279)




of associate (1,839) 6,424 (5,939) 9,215


(1,426) 4,979 (4,603) 7,142





For the half year

Net sales 14 21,095,757 17,084,826 39,552,822 34,343,429

Cost of sales (20,969,966) (16,532,247) (38,611,209) (33,267,756)

Gross profit 125,791 552,579 941,613 1,075,673




Other income 41,074 408,614 66,330 441,256


Finance cost (132,822) (153,407) (253,661) (317,348)



Taxation 15 (78,363) (63,464) (260,851) (157,279)




of associate (1,839) 6,424 (5,939) 9,215


(1,426) 4,979 (4,603) 7,142




Note


2017

October -December

2016

July -December

2017

July -December

2016





Net sales 14 21,095,757 17,084,826 39,552,822 34,343,429

Cost of sales (20,969,966) (16,532,247) (38,611,209) (33,267,756)

Gross profit 125,791 552,579 941,613 1,075,673




Other income 41,074 408,614 66,330 441,256


Finance cost (132,822) (153,407) (253,661) (317,348)



Taxation 15 (78,363) (63,464) (260,851) (157,279)




of associate (1,839) 6,424 (5,939) 9,215


(1,426) 4,979 (4,603) 7,142





For the half year

Net sales 14 21,095,757 17,084,826 39,552,822 34,343,429

Cost of sales (20,969,966) (16,532,247) (38,611,209) (33,267,756)

Gross profit 125,791 552,579 941,613 1,075,673




Other income 41,074 408,614 66,330 441,256


Finance cost (132,822) (153,407) (253,661) (317,348)



Taxation 15 (78,363) (63,464) (260,851) (157,279)




of associate (1,839) 6,424 (5,939) 9,215


(1,426) 4,979 (4,603) 7,142




Note


2017

October -December

2016

July -December

2017

July -December

2016

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Condensed Interim Cash Flow StatementFor the half year ended December 31, 2017 (Unaudited)

CASH FLOWS FROM OPERATING ACTIVITIES

Cash generated from operations 17 2,350,878 1,413,226

Mark-up paid (256,163) (193,085)

Income taxes paid (77,546) (31,116)

Contribution to defined benefit retirement plans (44,447) (44,242)

(Increase) / decrease in long-term loans and advances (713) 1,697

Net cash generated from operating activities 1,972,009 1,146,480

CASH FLOWS FROM INVESTING ACTIVITIES

Purchase of fixed assets (906,115) (534,282)

Proceeds from disposal of fixed assets 51 6

Return received on deposits 7,028 57,813

Dividend received 5,527 5,527

Net cash used in investing activities (893,509) (470,936)

CASH FLOWS FROM FINANCING ACTIVITIES

Dividend paid (57) (90,147)

Proceeds from foreign currency loans - 8,582,965

Repayment of long term loan (200,000) -

Redemptions against term finance certificates (5,000) (1,732,130)

Net cash (used in) / generated from financing activities (205,057) 6,760,688

Net increase in cash and cash equivalents 873,443 7,436,232

Cash and cash equivalents at the beginning of the period (4,610,214) (2,818,894)

Exchange gains on cash and cash equivalents 14,955 220

Cash and cash equivalents at the end of the period 19 (3,721,816) 4,617,558


Note


December 31,2017

December 31,2016




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Condensed Interim Statement of Changes in EquityFor the half year ended December 31, 2017 (Unaudited)

Balance as at July 1, 2016 2,940,000 897 1,050 (4,753,066) 479,300 1,380 (1,330,439)

Final cash dividend for the year

ended June 30, 2016

- Rs. 0.31 per share - - - (91,140) - - (91,140)

Profit for the half year ended

December 31, 2016 - - - 690,211 - - 690,211

Other comprehensive income - - - - - 7,142 7,142

Total recognised profit for the

half year ended December 31, 2016 - - - 690,211 - 7,142 697,353

Balance as at December 31, 2016 2,940,000 897 1,050 (4,153,995) 479,300 8,522 (724,226)

Balance as at July 1, 2017 2,940,000 897 1,050 (4,744,206) 1,405,313 300 (396,646)


December 31, 2017 - - - 145,265 - - 145,265

Other comprehensive loss - - - - - (4,603) (4,603)


half year ended December 31, 2017 - - - 145,265 - (4,603) 140,662

Balance as at December 31, 2017 2,940,000 897 1,050 (4,598,941) 1,405,313 (4,303) (255,984)


SHARECAPITAL

SPECIALRESERVE(note 2.2)

FAIRVALUE

RESERVETOTALREVENUE

RESERVESGeneralreserve

Accumulatedloss


CAPITALRESERVE




Exchangeequalisation

reserve




ended June 30, 2016

- Rs. 0.31 per share - - - (91,140) - - (91,140)


December 31, 2016 - - - 690,211 - - 690,211







December 31, 2017 - - - 145,265 - - 145,265






SHARECAPITAL


FAIRVALUE

RESERVETOTALREVENUE


Accumulatedloss


CAPITALRESERVE





reserve




ended June 30, 2016

- Rs. 0.31 per share - - - (91,140) - - (91,140)


December 31, 2016 - - - 690,211 - - 690,211







December 31, 2017 - - - 145,265 - - 145,265






SHARECAPITAL


FAIRVALUE

RESERVETOTALREVENUE


Accumulatedloss


CAPITALRESERVE





reserve




ended June 30, 2016

- Rs. 0.31 per share - - - (91,140) - - (91,140)


December 31, 2016 - - - 690,211 - - 690,211







December 31, 2017 - - - 145,265 - - 145,265






SHARECAPITAL


FAIRVALUE

RESERVETOTALREVENUE


Accumulatedloss


CAPITALRESERVE





reserve

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Notes to and Forming Part of the Condensed InterimFinancial InformationFor the half year ended December 31, 2017 (Unaudited)

1. THE COMPANY AND ITS OPERATIONS

Pakistan Refinery Limited was incorporated in Pakistan as a public limited company in May 1960 and is quoted onPakistan Stock Exchange. The registered office of the Company is at Korangi Creek Road, Karachi. The Companyis engaged in the production and sale of petroleum products.

2. BASIS OF PREPARATION

As per the requirements of circular no. CLD/CCD/PR(11)/2017 dated October 4, 2017 issued by the Securities &Exchange Commission of Pakistan (SECP), companies whose financial year, including quarterly and other interimperiods, closes on or before December 31, 2017, shall prepare their financial statements, including interim financialstatements in accordance with the provisions of the repealed Companies Ordinance, 1984.

Accordingly, this condensed interim financial information has been prepared in accordance with the requirementsof the International Accounting Standard (lAS) 34, Interim Financial Reporting and provisions of and directives issuedunder the repealed Companies Ordinance, 1984. In case where requirements differ, the provisions of or directivesissued under the repealed Companies Ordinance, 1984 have been followed.

This condensed interim financial information does not include all the information required for a complete set offinancial statements and should be read in conjunction with the annual financial statements for the year ended June30, 2017.

The accounting policies and methods of computation adopted for the preparation of this condensed interim financialinformation are the same as those applied in the preparation of the annual financial statements of the Company forthe year ended June 30, 2017.

2.1 Changes in accounting standards, interpretations and pronouncements

a) Standards, interpretations and amendments to published approved accounting standards that areeffective and relevant

IAS 7, 'Statement of cash flows' amendments introduce an additional disclosure that will enable users offinancial statements to evaluate changes in liabilities arising from financing activities. The amendment is partof the IASB’s Disclosure Initiative, which continues to explore how financial statement disclosure can beimproved.

The Change will impact the disclosures of the Company's annual financial statements.

b) Standards, interpretations and amendments to published approved accounting standards that areeffective but not relevant

The new standards, amendments and interpretations that are mandatory for accounting periods beginning onor after July 1, 2017 are considered not to be relevant for Company's financial statements and hence havenot been detailed here.

c) Standards, interpretations and amendments to published approved accounting standards that are notyet effective but relevant

The following are the new standards, amendments to existing approved accounting standards and newinterpretations that will be effective for the periods beginning on or after July 1, 2018 that may have an impacton the financial statements of the Company.

IFRS 9 'Financial instruments' - This standard replaces the guidance in IAS 39. It includes requirements onthe classification and measurement of financial assets and liabilities; it also includes an expected credit lossmodel that replaces the current incurred loss impairment model.

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IFRS 15 'Revenue from contracts with customers' - IFRS 15 replaces the previous revenue standards: lAS18 Revenue, lAS 11 Construction Contracts, and the related interpretations on revenue recognition.

IFRS 15 introduces a single five-step model for revenue recognition and establishes a comprehensive frameworkfor recognition of revenue from contracts with customers based on a core principle that an entity shouldrecognise revenue representing the transfer of promised goods or services to customers in an amount thatreflects the consideration to which the entity expects to be entitled in exchange for those goods or services.

The management is in the process of assessing the impact of changes laid down by these standards on itsfinancial statements.

2.2 Under directive from the Ministry of Energy (MoE), any profit after taxation above 50% of the paid-up capital as onJuly 1, 2002 is required to be transferred to a "Special Reserve" to offset any future losses or to make investmentfor expansion or upgradation of the refineries, and is not available for distribution to shareholders. The formula underwhich deemed duty is built into the import parity based prices of some of the products, was introduced in order toenable certain refineries, including the Company, to operate on a self financing basis.

On March 27, 2013, the Government of Pakistan issued a policy framework for up-gradation and expansion of refineryprojects, amended through a letter dated April 25, 2016, which interalia state that:

- till completion of the projects refineries will not be allowed to offset losses, if any, for year ended June 30, 2013or subsequent years against the amount of profit above 50% accumulated or to be accumulated in the SpecialReserve Account as per current pricing formula; and

- the refineries are required to install Diesel Hydro Desulphurisation (DHDS) plant by June 30, 2017. If anyrefinery fails to install DHDS by June 30, 2017 then the ex-refinery price of High Speed Diesel (HSD) basedon Import Parity Price (IPP) formula will be adjusted / reduced due to higher sulphur content.

2.2.1 The Company has not transferred any amount to special reserve for the half year ended December 31, 2017 sinceit continues to consider transfer to Special Reserve on annual basis.

2.3 As at December 31, 2017 the Company has accumulated loss of Rs. 4.60 billion (June 30, 2017: Rs. 4.74 billion)resulting in negative equity of Rs. 255.98 million (June 30, 2017: Rs. 396.65 million) and its current liabilities exceedits current assets by Rs. 7.96 billion (June 30, 2017: Rs. 7.36 billion). Further, under the policy framework for up-gradation and expansion of refinery projects issued by the MoE on March 27, 2013, refineries were required to installDHDS by June 30, 2017 to produce Euro II compliant HSD and in case of non-compliance, the ex-refinery price ofHSD based on IPP formula will be downward adjusted due to higher Sulphur content. The Company did not meetthe aforementioned deadline of setting up DHDS unit and therefore, it is subject to downward adjustments in HSDpricing until the setting up of DHDS unit. These conditions may cast a significant doubt on the Company's ability tocontinue as a going concern and the Company may be unable to realise its assets and discharge its liabilities in thenormal course of business.

During the half year ended December 31, 2017, the Company earned profit after taxation of Rs. 145.27 million. Inaddition, the Company has available running finance facilities of Rs. 9.75 billion to support its liquidity management.Based on these facts and projected profitability and cash flows, the management believes that the current negativeequity / liquidity situation will be overcome in future. Accordingly, this condensed interim financial information hasbeen prepared on a going concern basis.

3. ACCOUNTING ESTIMATES, JUDGEMENTS AND FINANCIAL RISK MANAGEMENT

3.1 The preparation of interim financial information requires management to make judgements, estimates and assumptionsthat affect the application of accounting policies and the reported amounts. Actual results may differ from thesejudgements, estimates and assumptions.

However, management believes that the change in outcome of judgements, estimates and assumptions would nothave a material impact on the amounts disclosed in this condensed interim financial information.









































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3.2 The Company's financial risk management objectives and policies are consistent with those disclosed in the financialstatements as at and for the year ended June 30, 2017.

4. FIXED ASSETS

Following are additions to fixed assets during the period:

4.3 Capital work-in-progress

Buildings 1,277 -Processing plant 733,354 279,888Korangi tank farm 109,271 37,115Keamari terminal 125,843 204,298Pipelines 63,351 139,519Power generation, transmission and distribution 367,249 214,104Water treatment and cooling system 17,064 2,088Firefighting and telecommunication systems 97,609 19,626Equipment including furniture 5,085 -Advances to contractors / suppliers 48,010 325,233

1,568,113 1,221,871

4.3.1 During the period, the Company has capitalised borrowing costs amounting to Rs. 23.17 million (June 30, 2017: Rs.29.27 million). Borrowing costs were capitalised at the current weighted average rate of its general borrowings of6.84% (June 30, 2017: 7.75%) per annum.

4.3 Capital work-in-progress

Buildings 1,277 -Processing plant 733,354 279,888Korangi tank farm 109,271 37,115Keamari terminal 125,843 204,298Pipelines 63,351 139,519Power generation, transmission and distribution 367,249 214,104Water treatment and cooling system 17,064 2,088Firefighting and telecommunication systems 97,609 19,626Equipment including furniture 5,085 -Advances to contractors / suppliers 48,010 325,233

1,568,113 1,221,871

4.3.1 During the period, the Company has capitalised borrowing costs amounting to Rs. 23.17 million (June 30, 2017: Rs.29.27 million). Borrowing costs were capitalised at the current weighted average rate of its general borrowings of6.84% (June 30, 2017: 7.75%) per annum.

Processing plant, tank farm, terminal,pipelines and power generation 691,758 90,243

Buildings 88 -Equipment including furniture 4,903 10,360Vehicles and other automotive equipment 6,541 -Fire fighting and telecommunication systems - 4,738Major spare parts and stand by

equipments - net of transfers (143,417) (67,759)Capital work-in-progress - net of transfers 346,242 496,700

906,115 534,282

4.1 During the period, assets costing Rs. 1.06 million (2016: Rs. 0.5 million) having written down value of Rs. Nil (2016:Rs. Nil) were disposed off.

4.2 During the period, major spare items costing Rs. 2.37 million (2016: Rs. Nil) having carrying value of Rs. 1.58 million(2016: Rs. Nil) were written off.

Processing plant, tank farm, terminal,pipelines and power generation 691,758 90,243

Buildings 88 -Equipment including furniture 4,903 10,360Vehicles and other automotive equipment 6,541 -Fire fighting and telecommunication systems - 4,738Major spare parts and stand by

equipments - net of transfers (143,417) (67,759)Capital work-in-progress - net of transfers 346,242 496,700

906,115 534,282

4.1 During the period, assets costing Rs. 1.06 million (2016: Rs. 0.5 million) having written down value of Rs. Nil (2016:Rs. Nil) were disposed off.

4.2 During the period, major spare items costing Rs. 2.37 million (2016: Rs. Nil) having carrying value of Rs. 1.58 million(2016: Rs. Nil) were written off.



December 31,2017

December 31,2016


As atDecember 31,

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As atJune 30,

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5. STORES, SPARES AND CHEMICALS

During the period, store items costing Rs. 9.56 million having carrying value of Rs. 8.24 million were written off.

6. STOCK-IN-TRADE

6.1 This includes crude oil in transit amounting to Rs. 0.13 billion (June 30, 2017: Rs. 2.76 billion).

6.2 As at December 31, 2017 stock of crude oil has been written down by Rs. 41.5 million (June 30, 2017: Nil) andfinished goods by Rs. Nil (June 30, 2017: Rs. 18.12 million) to arrive at its net realisable value.

7. OTHER RECEIVABLES

This includes an amount of Rs. 659.08 million (June 30, 2017: Rs. 979.88 million) receivable from refineries in respectof import of crude oil, freight and other charges on sharing basis.

8. CASH AND BANK BALANCES

With banks on

- current accounts - note 8.1 19,117 11,572 - savings accounts - notes 8.2 & 8.3 [including

foreign currency account Rs. 308.10 million (June 30, 2017: Rs. 230.73 million)] 831,863 699,544

Cash in hand 882 1,070851,862 712,186

8.1 These bank balances are maintained under current accounts and do not carry any interest.

8.2 The rates of mark-up on savings accounts during the year ranged from 3.75% to 5.75% per annum (June 30,2017: mark-up on savings accounts ranged from 3.75% to 5.75% per annum).

8.3 This includes local and foreign currency balances maintained with Faysal Bank Limited - a related party of Rs.2.20 million and Rs. 308.10 million (June 30, 2017: Nil and Rs. 230.73 million) respectively.

9. SHARE CAPITAL

During the year ended June 30, 2016, the Company issued 259 million right shares out of the total size of issueof 280 million right shares at the rate of Rs. 10 each. 21 million right shares have not been issued due to therestraining order obtained under Suit No. 931 of 2015 by one of the Class B shareholder 'Pakistan State OilCompany Limited' against another Class B shareholder 'Chevron Global Energy Inc. (Chevron)'. The order in thesuit interalia directs all the defendants to maintain status quo in respect of the letters of rights issued to and sharesheld by Chevron; and restrains Chevron from creating any third party interest in respect of shares offered to itunder the letters of rights issued to another class B shareholder namely Shell Petroleum Company Limited.





6. STOCK-IN-TRADE






With banks on



Cash in hand 882 1,070851,862 712,186




9. SHARE CAPITAL


As atDecember 31,

2017

As atJune 30,

2017

(Audited)



6. STOCK-IN-TRADE






With banks on



Cash in hand 882 1,070851,862 712,186




9. SHARE CAPITAL




6. STOCK-IN-TRADE






With banks on



Cash in hand 882 1,070851,862 712,186




9. SHARE CAPITAL




6. STOCK-IN-TRADE






With banks on



Cash in hand 882 1,070851,862 712,186




9. SHARE CAPITAL


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10. DEFERRED TAXATION

Deferred tax debit balances of Rs. 2.39 billion (June 30, 2017: Rs. 2.3 billion) in respect of unabsorbed depreciation,tax losses, minimum tax and deductible temporary differences have not been recognised as their recoverabilityis not expected.

11. TRADE AND OTHER PAYABLES

This includes Rs. 2.31 billion (June 30, 2017: Rs. 1.83 billion) as differential of regulatory / custom duty levied onimport of crude oil and sale of petroleum products based on SROs issued by Government of Pakistan and directivesissued by MoE. Oil and Gas Regulatory Authority (OGRA) in compliance with the directives of MoE has approveda recovery mechanism for regulated products through which refineries will operate on no gain / loss basis on thisaccount. OGRA has directed Oil Companies Advisory Committee (OCAC) to ensure the implementation of thesaid mechanism.

12. SHORT-TERM BORROWINGS - Secured

Short-term bank borrowings - note 12.1 4,569,043 4,963,636

12.1 This represents mark-up based short term finance from commercial banks repayable immediately after the dateof balance sheet (June 30, 2017: 34 to 59 days) at a mark-up ranging from 6.30% to 6.31% (June 30, 2017: 6.49%to 6.63%) per annum.

13. CONTINGENCIES AND COMMITMENTS

13.1 Contingencies

13.1.1 Claims against the Company not acknowledged as debt amount to Rs. 4.85 billion (June 30, 2017: Rs. 4.82 billion).These include Rs. 4.15 billion (June 30, 2017: Rs. 4.13 billion) on account of late payment surcharge on purchaseof crude oil. The Company has raised similar claims aggregating to Rs. 7.36 billion (June 30, 2017:Rs. 7.36 billion) relating to interest on late payments against trade receivables from certain Oil Marketing Companies.

13.1.2 Bank guarantees of Rs. 53 million (June 30, 2017: Rs. 53 million) were issued in favour of third parties.

13.2 Commitments

As at December 31, 2017 commitments outstanding for capital expenditure amounted to Rs. 1.3 billion (June 30,2017: Rs. 1.07 billion).

Outstanding letters of credit as at December 31, 2017 amounted to Rs. 8.20 billion (June 30, 2017: Rs. 8.23 billion).

Aggregate commitments in respect of ijarah arrangements of motor vehicles and equipment amounted to Rs. 23.16million (June 30, 2017: Rs. 26.51 million).




This includes Rs. 2.31 billion (June 30, 2017: Rs. 1.83 billion) as differential of regulatory / custom duty leviedon import of crude oil and sale of petroleum products based on SROs issued by Government of Pakistan anddirectives issued by MoE. Oil and Gas Regulatory Authority (OGRA) in compliance with the directives of MoE hasapproved a recovery mechanism for regulated products through which refineries will operate on no gain / lossbasis on this account. OGRA has directed Oil Companies Advisory Committee (OCAC) to ensure the implementationof the said mechanism.





13.1 Contingencies



13.2 Commitments









This includes Rs. 2.31 billion (June 30, 2017: Rs. 1.83 billion) as differential of regulatory / custom duty leviedon import of crude oil and sale of petroleum products based on SROs issued by Government of Pakistan anddirectives issued by MoE. Oil and Gas Regulatory Authority (OGRA) in compliance with the directives of MoE hasapproved a recovery mechanism for regulated products through which refineries will operate on no gain / lossbasis on this account. OGRA has directed Oil Companies Advisory Committee (OCAC) to ensure the implementationof the said mechanism.





13.1 Contingencies



13.2 Commitments




As atDecember 31,

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As atJune 30,

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14. NET SALES

Local sales 54,336,761 49,963,942Export sales 2,957,223 1,095,330Gross sales 57,293,984 51,059,272Less:

- Sales tax (10,966,668) (9,916,748) - Excise duty and petroleum levy (4,535,032) (4,693,101) - Surplus price differential (456,970) (567,708) - Regulatory duty - note 14.1 (1,782,492) (1,538,286)

39,552,822 34,343,429

14.1 This represents regulatory duty on sale of products subject to regulatory duty.

14.2 Sales of regulated products are based on prices notified by OGRA which are subject to policy clarification fromthe Federal Government. Sales of certain de-regulated products (MS, HOBC, HSD, LDO and Aviation Fuels) arebased on prices determined in the light of notifications of the MoE.

15. TAXATION

Current for the year - note 15.1 262,030 3,268Deferred (1,179) 154,011

260,851 157,279

15.1 This includes tax charge of Rs. 108.07 million (December 31, 2016: Rs. Nil) in respect of tax on undistributed profitfor the year ended June 30, 2017 under section 5A of the Income Tax Ordinance, 2001 which was amended bythe Government of Pakistan through Finance Act, 2017. The amendments introduced income tax at the rate of 7.5%on accounting profit before tax on every public company that derives profit for a tax year but does not distribute atleast forty percent of its after tax profits within six months of the end of the tax year through cash or bonus shares.During the current period, Honorable High Court of Sindh has granted stay from recovery of this tax from theCompany.

In addition, the Company has also approached MoE, Ministry of Finance and the Federal Board of Revenueexplaining the conflict between applicable policy framework laid down by MoE as explained in note 2.2 to thiscondensed interim financial information and the requirements of the Income Tax Ordinance, 2001 in respect ofpayment of dividends.

14. NET SALES



39,552,822 34,343,429



15. TAXATION


260,851 157,279

15.1 This includes tax charge of Rs. 108.07 million (December 31, 2016: Rs. Nil) in respect of tax on undistributed profitfor the year ended June 30, 2017 under section 5A of the Income Tax Ordinance, 2001 which was amended bythe Government of Pakistan through Finance Act, 2017. The amendments introduced income tax at the rate of7.5% on accounting profit before tax on every public company that derives profit for a tax year but does not distributeat least forty percent of its after tax profits within six months of the end of the tax year through cash or bonus shares.During the current period, Honorable High Court of Sindh has granted stay from recovery of this tax from theCompany.


14. NET SALES



39,552,822 34,343,429



15. TAXATION


260,851 157,279





December 31,2017

December 31,2016


14. NET SALES



39,552,822 34,343,429



15. TAXATION


260,851 157,279



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16. EARNINGS PER SHARE

Profit after taxation attributable toordinary shareholders (203,341) 568,000 145,265 690,211

Weighted average number ofordinary shares outstanding duringthe period (in thousand) 307,741 307,741 307,741 307,741

Basic earnings per share (Rs. 0.66) Rs. 1.85 Rs. 0.47 Rs. 2.24

There were no dilutive potential ordinary shares in issue as at December 31, 2017 and 2016.

17. CASH GENERATED FROM OPERATIONS

Profit before taxation 406,116 847,490Adjustments for non-cash charges and other items:

Depreciation and amortisation 366,279 433,350Stores and spares written off 8,232 -Major spares written off 1,577 -Mark-up expense 238,391 310,602Provision for defined benefit retirement plans 44,634 39,211

Exchange gains on cash and cash equivalents (14,955) (220) Share of income of associate (568) (2,348)

Return on deposits (7,028) (60,620)Gain on disposal of fixed assets (51) (6)

Agreement signing fee (6,667) (6,667) Working capital changes – note 17.1 1,314,918 (147,566)

Cash generated from operations 2,350,878 1,413,226

























For the half yearFor the quarter

October -December

2017

October -December

2016

July -December

2017

July -December

2016













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18. TRANSACTIONS WITH RELATED PARTIES


Relationship Nature of transactions


December 31,2017

December 31,2016

17.1 WORKING CAPITAL CHANGES

Decrease / (Increase) in current assetsStores, spares and chemicals 7,844 (40,054)Stock-in-trade (1,374,613) (2,376,367)Trade debts (1,856,304) (150,424)Loans and advances 4,037 49,080Trade deposits and short-term prepayments (60,304) 9,765Other receivables 348,026 (963,964)

(2,931,314) (3,471,964)Increase in current liabilities Trade and other payables 3,698,648 2,861,761 Payable to government - sales tax 547,584 462,637

4,246,232 3,324,3981,314,918 (147,566)

17.1 WORKING CAPITAL CHANGES

Decrease / (Increase) in current assetsStores, spares and chemicals 7,844 (40,054)Stock-in-trade (1,374,613) (2,376,367)Trade debts (1,856,304) (150,424)Loans and advances 4,037 49,080Trade deposits and short-term prepayments (60,304) 9,765Other receivables 348,026 (963,964)

(2,931,314) (3,471,964)Increase in current liabilities Trade and other payables 3,698,648 2,861,761 Payable to government - sales tax 547,584 462,637

4,246,232 3,324,3981,314,918 (147,566)

Transactions duringthe period


December 31,2017

December 31,2016

Associated companies

Key management compensation

Staff retirement benefit plans

Directors

Sale of goods - netSale of servicesServices receivedMark-up paidDividend paidDividend receivedInterest claimed on late paymentsBank charges

Salaries and other short term employee benefitsPost-employment benefits

Contributions to retirement plansMarkup paid on TFCs

Fee including honorariumDividend paid

32,708,583552

38,33926,372

-5,528

-168

64,0205,787

76,8924,042

2,300 -

31,871,445561

36,2686,680

64,6745,5281,368

162

51,6237,728

74,0494,042

1,64326

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

Key management personnel comprises of members of Refinery Leadership Team.

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19. CASH AND CASH EQUIVALENTS

Cash and bank balances 851,862 4,617,558Short-term borrowings (4,569,043) -Running finance under mark-up arrangements (4,635) -

(3,721,816) 4,617,558

20. CORRESPONDING FIGURES

Following reclassifications have been made for the purpose of better presentation and comparison:

Reclassification from Reclassification to Rupees incomponent component thousand

Profit and loss account- Other income Net sales 38,795

21. DATE OF AUTHORISATION FOR ISSUE

This condensed interim financial information was authorised for issue by the Board of Directors of the Companyon January 31, 2018.





19. CASH AND CASH EQUIVALENTS

Cash and bank balances 851,862 4,617,558Short-term borrowings (4,569,043) -Running finance under mark-up arrangements (4,635) -

(3,721,816) 4,617,558

20. CORRESPONDING FIGURES

Following reclassifications have been made for the purpose of better presentation and comparison:

Reclassification from Reclassification to Rupees incomponent component thousand

Profit and loss account- Other income Net sales 38,795

21. DATE OF AUTHORISATION FOR ISSUE

This condensed interim financial information was authorised for issue by the Board of Directors of the Companyon January 31, 2018.


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Vision - Pakistan Refinery Limited

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