Financial Analysis of NRL

Financial
Ananlysis
National Refinery Limited.

Farman Ali

1
 Financial Analysis of NRL

FIANANCIAL ACCOUNTING
INSTRUCTOR: ANNIE AHMAD
FARMAN ALI

Contents
Overview of the Industry...................................................................................3
National Refinery Limited.................................................................................4
LIQUIDITY RATIOs...........................................................................................5
1) Current Ratio:...............................................................................................5
2) Quick Ratio:.................................................................................................6
PROFITABILITY RATIOs:.................................................................................6
Gross Profit Margin:..........................................................................................6
Net Profit Margin:.............................................................................................7
Return on Total Assets:.....................................................................................8
Return on Common Equity:...............................................................................9
MARKET VALUE RATIOs:.............................................................................10
Market to Book Ratio:.....................................................................................10
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Financial Analysis of NRL

Earnings per share:..........................................................................................11

Price to Earnings Ratio.......................................................................................11
Dividend Yield Ratio:......................................................................................12
Dividend Payout Ratio:...................................................................................13
Dividend Cover Ratio......................................................................................14
DEBT MANAGEMENT RATIO:......................................................................14
1) Debt Ratio:.................................................................................................14
2) Long Term Debt Ratio:..............................................................................15
3) Time Interest Earned (TIE) Ratio:.............................................................16
ASSET MANAGEMENT RATIO:....................................................................16
Inventory Turnover Ratio:...............................................................................16
Receivables Turnover/ Days Sales Outstanding:............................................17
Payables Turnover Ratio/ Days Payables Outstanding:..................................18
Asset Turnover Ratio:......................................................................................18
Fixed Asset Turnover:.....................................................................................20
REERENCES:..................................................................................................22

Overview of the Industry :

Refinery industry in Pakistan is rapidly growing due to the increasing demand
for refinery products.
There are currently five refineries operating in Pakistan which include Attock
Refinery, National Refinery, Pak Arab Refinery, Pakistan Refinery and BYCO
Petroleum with 417,400 BPD oil installed
Capacity and a consumption of 19.68 million Tons (MTs) in FY 2020-2021. Pak
Arab Refinery Limited
(PARCO) has 100,000 BPD oil refining capacity, Attock Refinery Limited
(ARL) 53,400 BPD, Byco Petroleum Pakistan Limited (Byco) 150,000 BPD,
National Refinery Limited (NRL) 64,000 BPD and Pakistan Refinery Limited
50,000 BPD, according to the Economic Survey 2020-20.
In addition, Pakistan’s crude oil refinery capacity is expected to triple in 2023
with increasing at an average annual growth rate (AAGR) of 20.6% from 434

3
Financial Analysis of NRL

thousand barrels per day (mbd) in 2019 to 1,214 mbd in 2023, according to a
report by Global data.

In addition to this, six more oil refineries are at different stages of completion to
boost up the crude oil refining capacity by 5 % with Government offering them
‘unprecedented’ incentives to downstream sector to meet growing energy
demand.
Our Focal Company for this analysis is National (Six new refineries to boost oil
production by 1.1mln barrels/day, 2021) Refinery Limited and its competitors
are Attock Refinery Limited, Pakistan Refinery Limited and BYCO Petroleum
Limited.

National Refinery Limited :

National Refinery Limited (NRL) was formed on 19th August 1963 as a public
Limited company. As per the Economic Reforms Order, 1972 under the
Ministry of Production, Government of Pakistan took over the control of it. It
has the second largest capacity refinery in Pakistan in terms of crude oil
processing facilities and only lube oil refinery present in Pakistan.
Many products are offered by National Refinery to meet the rising demand of
people and the country. However, it specializes in Naphtha, Jet A-1, and
Liquefied Petroleum Gas (LPG). Since it’s a refinery so crude oil is refined and
made usable to be consumed.
Refinery is constantly working to improve the existing plant so increase the
production and efficiency and for those two projects are in consideration which
are Hydrocracker and CCR

4
Financial Analysis of NRL

(Continuous Catalyst Regeneration) Platforming Unit. These projects mainly

focus on Euro II and
Euro V standard projects which are sustainable and environment friendly

5
Financial Analysis of NRL

LIQUIDITY RATIOs
Liquidity ratios measure ability of a company to pay off short-term liabilities.
Most commonly used two liquidity ratios are as under:

1) Current Ratio:
Current ratio measures whether a company has enough current assets to pay off
its short-term financial obligations.
TREND ANALYSIS:
National Refinery Limited: Current ratio decreases 20% in 2017 as compared
to 2016, this can be explained by looking at the vertical analysis. There is a
decrease of 36.6% in current asset but there is only 5% decrease in current
liabilities. In 2018 we can se a
sudden decrease of 26.08% in 2017 2018 2019 2020 2021
current ratio, as we can see 1.84 1.36 1.24 0.89 0.65
that decrease in current asset
and current liabilities was Current Rati o
18.8% and 3% respectively in 2.00
Current Ratio

1.50
vertical analysis. Further in 1.00
0.50
2019 the graph continues to 0.00
decline which was a result of 2017 2018 2019 2020 2021
Years
8.8% decrease in current ratio.
This decline can be explained
Industry average National Refinary
by looking at vertical analysis
figures. There is a hike of 6.6% in current liabilities for 2019 because short
term debts have been secured to meet short term funding requirements through
running finance under mark-up arrangements.
The decreasing trend continues in 2020 and 2021 as the current ratio decreases
to 0.89 and 0.65 respectively. Analyzing the vertical analysis we conclude that
the current liabilities increase 21.3% in 2020 and minor decrease of 3% in 2021
but there is 16% decrease in current assets.
Du to the pandemic the company borrowed short term loans to pay salaries to
the employees.
• The aggregate facilities for short term running finance available from
various banks amounted to Rs. 21.65 billion.

6
Financial Analysis of NRL

Overall trend for Current ratio is decreasing and there are major changes.
Although overall current assets decrease with successive years but at same time
current liabilities slightly decrease as well.

2) Quick Ratio:
Quick ratio determines ability of a company to meet current liabilities using
short term quick assets.
TREND ANALYSIS: 2017 2018 2019 2020 2021

National Refinery 1.10 0.6 0.60 0.24 0.24

Limited: 5
Trend is showing pattern of Quick Rati o
continues decreasing in
1.50
quick ratio . Major decrease
Quick Ratio

1.00
of 0.45 in Quick ratio can be 0.50
observed in 2018. This is 0.00
2017 2018 2019 2020 2021
because of increase in Years
inventory and the company
took short term borrowing Industry Average National Refinary

and this trend continues.

Quick ratio less than 1 indicates that
the company might not pay its short-tern financial obligation. It indirectly
implies that company’s current assets are dependent mainly on inventory.

PROFITABILITY RATIOs:
Gross Profit Margin:
TREND ANALYSIS:
National Refinery Limited: Trend is decreasing. GPM increase by 7.16% as
the price of crude oil was drastically lower as compared to 2016 and then
declines 2% in 2018 because

1) During 2018 net sales 2017 2018 2019 2020 2021

increase to PKR 107
11.77% 9.12% 2.78% -2.77% -8.85%
billion from PKR 93
billion, but cost of crude oil increases from 82 billion to 97 billion which is
much more as compared to the sales.

7
Financial Analysis of NRL

Gross Profi t Margin

Gross Profit Margin

15.00%
10.00%
5.00%
0.00%
-5.00% 2017 2018 2019 2020 2021
-10.00%
Years
2) Higher prices of crude oil
contributed to relatively Industry Average 'National Refinery Limited'!

increase cost of production sales.

3) In 2019, the ratio decreased abruptly because of unsymmetrical increase
in crude oil and product prices. Beside higher operating cost, attributable
to newly commissioned units and continuous devaluation of Pak rupee
against US dollar.
4) In 2020, the gross profit margin is in negatives because of huge
devaluation of Pak rupee against US dollar. Which doubled the product
and crude oil prices.
5) In 2021, due to the covid-19 pandemic the company faced gross loss.

Net Profit Margin:

TREND ANALYSIS:
National Refinery Limited: NPM
trend is same as GPM. There is a 2017 2018 2019 2020 2021
sudden huge decline in NPM in 8.20% 7.49% 1.29% -5.40% -3.24%
2019 because:
Net Profi t Margin
Net profit margin

10.00%
1) Higher prices of crude oil and 5.00% Industry Average
0.00% 'National Refinery Lim-
continues devaluation of Pak -5.00%
20172018201920202021
ited'!
rupee against Us Dollar -10.00%
increased cost of sales. years

2) Higher operating cost mainly

attributable to newly commissioned units.
3) Finance costs increase by Rs. 1.5 billion due mark-ups on short-term
borrowings taken to meet higher crude oil prices.
These above-mentioned reasons contributed to a lower NPM. The company
faces loss during 2020 and 2021 because of huge devaluation of Pak rupee
against US dollar in 2020 coupled with uneven margins of product prices vs

8
Financial Analysis of NRL

crude oil played adverse role in the company’s profitability. In addition,

2021 made the lose worse because of the pandemic.

Return on Total Assets:

TREND ANALYSIS:
National Refinery Limited: Overall ROTA trend is decreasing with
highest decline in 2021 and major
2017 2018 2019 2020 2021
growth in 2017. Increase in 2017
is mainly due higher net profit 3.47% 2.55% 0.74% -1.44% -3.14%
from previous year. The company 4.00% Return On Total Assets
earned profit after tax of Rs 7.69 3.00%
return on total assets
2.00%
billion as compared to Rs 3.71 1.00% Industry Average
0.00% 'National Refinery Lim-
billion in the last year. There is -1.00% 2017 2018 2019 2020 2021 ited'!
minor change in 2018. -2.00%
-3.00%
On other hand, 2019 net profit is hit -4.00%
Years
hard by higher crude oil prices,
increased distribution costs, finance cost hike and continuous
depreciation of Pak Rupee against US dollar, These reasons
contribute to very lower net profit during 2019.which in turn resulted
in lowest ROTA. In the years 2020 and 2021 The company incurred
loss because of huge devaluation of Pak Rupee and worldwide
pandemic due to which the ROTA is negative.

Return on Common Equity:

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Financial Analysis of NRL

TREND ANALYSIS:
2017 2018 2019 2020 2021
National Refinery Limited:
Return on Common Equity 20.88% 18.56% 4.09% - -
(ROCE) increases Return On Common25.66% Equity13.62%

Return On Common Equity

aggressively during 2017 from 50.00%
12.31% to 20.88% because of 0.00%
2017 2018 2019 2020 2021
Industry Average
'National Refinery Lim-
higher profit. Higher profit -50.00%
ited'!
-100.00%
was due to lower crude oil -150.00%
prices in global markets. Also, Years
Stability of exchange rate and
interest income increased the profitability.
ROCE falls back sharply in 2018 due decreased in net profit Margin
because of cost of crude oil increases from 82 billion to 97 billion. Huge
increased in crude oil and product prices due to devaluation of Pak Rupee
contributed to decreased net profit in 2019 which results into decrease the ratio .
ROCE drastically decreases due to net loss face by the company due to huge
increase crude oil and product prices and continuous depreciation of Rupee in
2020. In 2021 The pandemic situation created a chaos for the company and
faces a loss.

10
Financial Analysis of NRL

MARKET VALUE RATIOs:

Market to Book Ratio:
TREND ANALYSIS:
National Refinery Limited: Trend for Market to Book ratio is increasing
till 2018 and from then onwards it 2017 2018 2019 2020 2021
is decreasing to 2020. It increases 1.09 1.16 0.64 0.30 2.53
by around 6.4% in 2018 because
of 52.8% hike in market value of
Market to Book Rati o

Market to Book Ratio

100.00
shares and also considerable
50.00 Industry Ratios
increase in book valve. Market 'National Refinery Lim-
0.00
value of shares rise due to -50.00
2017 2018 2019 2020 2021 ited'!

encouraging profitability ratios. -100.00

Years
The ratio decreases considerably in
2019 as market value of shares
decreases by 38.9% while book value increases instead.
Market to book ratio falls significantly in 2020 due to decline market share
prices which reduced to 34/share from 16/share in 2020. Share prices are
decreasing
mainly because of declining ATO and ROTA ratios as market capitalization is
falling. The ratio increases in 2021 due to sudden increase in market value per
share.

Earnings per share:

TREND ANALYSIS:
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Financial Analysis of NRL

National Refinery Limited: Trend for earnings per share is same as that of net
profit margin as number share
2017 2018 2019 2020 2021
issued is same for 2017-2021 and
only net profit changes. EPS 96.14 100.61 22.14 (108.70) (50.82)
increase in 2017 then goes through Earning per Share
a slight increase in 2018. The 150

Earning per share

increase in 2017 is attributed due 100
50
lower price of crude oil and other 0
2017 2018 2019 2020 2021
products which contributed to -50
-100
increase in overall in net income. As -150
share issued remain same as in Years

previous year, increased net income

National Refinary Ltd
in 2017 leads to bigger earning per
share. NRL experiences drastic decline in EPS in 2019 because of sharp
decrease in net income which was largely fueled by higher crude oil and
product prices and these are due to unstable political scenario and depreciation
of Pak Rupee. Company Faces loss on earning per share in 2020 and 2021
respectively due to continuous fall in the value of Pak Rupee against Dollar
and world wide pandemic.

Price to Earnings Ratio:

TREND ANALYSIS:
National Refinery limited: 2017 2018 2019 2020 2021
Overall P/E trend is increasing
4.94 7.22 20.01 -1.04 -2.11
from 2017 to 2019 with significant
Price to earning ratio

jump in 2019 and then drastically Price to earning ratio

26.90
decreasing in 2020. The rise in 17.22 15.68
13.30
2019 can be explained by looking 4.28 5.29
at net profit Margin figure which 2017 2018 2019
-1.49
-2.12
2020 2021
-10.05
has reduced sharply due to
-21.06
noticeably increased cost of sales.
Although market value Industry Average
Years 'National Refinery Limited'!

capitalization has decreased but the proportion by which net profit has declined
is way much higher and thus resulting in very high P/E ratio. Net profit in 2019
declines because:
1. Higher prices of crude oil and continues devaluation of Pak rupee against
Us Dollar increased cost of sales

12
Financial Analysis of NRL

2. Higher operating cost mainly attributable to newly commissioned units.

3. Finance costs increase by Rs. 1.5 billion due mark-ups on short-term
borrowings taken to meet higher crude oil prices.
P/E decreases again in 2020 because of net loss. It reduces further in 2021
because of the loss faced by the company due to Pandemic situation and market
capitalization.

Dividend Yield Ratio:

TREND ANALYSIS:
National Refinery Limited: Dividend yield ratio trend is decreasing till
2019. This is due to the market
value per share is higher while the 2017 2018 2019 2020 2021
dividend per share is lower. 4.21 3.10 2.26 0.00 0.00
In 2020 and 2021 dividend yield
ratio is zero because the company Dividend Yield Ratio
did not paid dividends to its
Divident Yield Ratio

200000.00
shareholders. This was because the 150000.00 Industry Average
100000.00
company faced huge loss. 50000.00
'National Refinery Lim-
ited'!
0.00
2017 2018 2019 2020 2021
Years

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Financial Analysis of NRL

Dividend Payout Ratio:

TREND ANALYSIS:
2017 2018 2019 2020 2021
National Refinery Limited:
20.80% 22.36% 45.17% 0% 0%
Dividend
Payout is showing pattern of

Dividend Payout Ratio

alternating increase and Increase. Dividend Payout Rati o
Prominent increase of 102% can 1.20
1.00
observed in 2019. This is 0.80 Industry Average
attributable to decreased EPS of 0.60 'National Refinery Lim-
0.40 ited'!
22.14/share (decreased by almost 0.20
77.82% from previous year). DPS 0.00
-0.20 2017 2018 2019 2020 2021
also decreased by 55.55% but years
decreasing effect of EPS was
significant and thus resulting in hike
of Dividend payout. EPS is decreased because of lower net profit produced in
2019.
Reasons of lower profit are increased cost of sales, cost of finance, Depreciation
of Pak Rupee and unstable political condition in 2019.In 2020 and 2021 the
ratio is 0 because the dividend are not paid to the shareholder since the company
faced huge loss during these years.

Dividend Cover Ratio

TREND ANALYSIS:

14
Financial Analysis of NRL
2017 2018 2019 2020 2021
National Refinery
4.81 4.47 2.21 0 0
Limited:
As dividend cover is
reciprocal of dividend Dividend Cover
payout the pattern for 50000.00

Dividend Cover
0.00
trend is same but increase -50000.00 2017 2018 2019 2020 2021
and then decrease. Major -100000.00
-150000.00
decline can be seen in -200000.00
2019 due to same reasons Years
that contributed to rise in
dividend payout in 2019. Industry Average 'National Refinery Limited'!

The ratio again decrease to 0 in 2020 and 2021.

Dividend cover ratio trend can be explained by same
reasons that were listed to analyze dividend payout.

DEBT MANAGEMENT RATIO:

1) Debt Ratio:
TREND ANALYSIS: 2017 2018 2019 2020 2021
0.31 0.29 0.34 0.56 0.53
National Refinery Limited:
The debt ratio exhibits a sharp Debt to Asset Rati o
decline for NRL from 0.37 to
Debt to Asset Ratio

20.00
0.00
0.29 between FY15 and FY17. 2017 2018 2019 2020 2021
-20.00
and increase was till FY 2021. -40.00
Total assets decreased by -60.00
8.93% while total debt Years

decreased by only 0.32%

Industry Average 'National Refinery Limited'!
leading to decreasing debt to
asset ratio. From FY18-19 total assets increased by 15.8% while debt increased
by approx 89% resulting in slightly steeper increase. The major contributors to
this were fixed asset and stock-in-trade which in the assets
section which increased greatly and trade and other payables in the debts section
which decreased greatly due to paying off debts.

15
Financial Analysis of NRL

2) Long Term Debt Ratio:

TREND ANALYSIS:
National Refinery Limited: 2017 2018 2019 2020 2021
Long term debt ratio varies 0.01 0.02 0.01 00 0.01
wildly between FY16-FY20 for Long term debt rati o
IA but for NR it was relatively

Long Term Debt Ratio

0.08
stable with a small rise till 0.02 in 0.06 Industry Average
0.04 'National Refinery Lim-
FY17. Taxation was significantly 0.02 ited'!
lower compared to the previous 0.00
2017 2018 2019 2020 2021
year’s therefore shareholder
equity increased. Years

From FY16-FY17 long term

debt increased by approx. 128% while equity increased by 18% resulting in a
rise in ratio. From FY17-FY18 long term debt decreased by approx. 74% while
equity barely changed resulting in the ratio
decreasing. The major contributor to this was National Refinery taking more
long-term loans during this time.
IA decreased in 2018 as companies took advantage of lower tax rates to increase
equity and pay off debts resulting in lower long term debt ratio. Overall the
company did not take any long borrowing during these five years.

3) Time Interest Earned (TIE) Ratio:

TREND ANALYSIS:

16
Financial Analysis of NRL

National Refinery Limited: 2017 2018 2019 2020 2021

TIE ratio increases during 2017 37.62 46.56 -1.51 1.09 4.91
and then decreases reasonably in Times Interest Earned Rati o

Time Interest Earned Ratio

2018. Onward from 2018-19 it 20.00
remains almost constant with 0.00
2017 2018 2019 2020 2021
-20.00
slight decrease/increase. TIE -40.00
increases in 2017 and 2018 -60.00
Years
because:
• This can be attributed to Industry Average 'National Refinery Limited'!

higher operating profit which increased EBIT. Interest expenses also

reduced during this time resulting in steep increase .
This was followed by a steep decrease in ratio after 2018 as NR had a
high interest expense most likely to pay off debts. Profits also decreased
dramatically and went into negatives. A major factor in this was
depreciation which increased dramatically in FY17 and FY18 and
caused EBIT to decrease. In 2021 it slightly increases again it is because
the interest rate was low. Government gives financial support during the
pandemic to cover the financial debts of company,

ASSET MANAGEMENT RATIO:

Inventory Turnover Ratio:

2017 2018 2019 2020 2021

6.19 8.14 10.26 7.99 6.73
TREND ANALYSIS:
Inventory
5.00 turnover
National Refinery Limited: Inventory 4.00
Inventory turnover

3.00
Turnover ratio sees major increase in 2.00
1.00
from 2017 to 2019. This is due to 0.00
increased in cost of sales and decreased -1.00 2017 2018 2019 2020 2021
-2.00
in inventory. During 2019 -3.00
Industry Average Years
National Refinary

Increase in cost of sales is 94% from base year i.e. from Rs. 141610.76 million
to Rs.133172.93 million. Due to Poor political scenario and depreciation of Pak
rupee cost of crude oil and other raw materials increased in the market. As a
result, piled up inventory is sold promptly due to which inventory decreases
leading to higher inventory turnover. However, in the FY 2020, the inventory
17
Financial Analysis of NRL

turnover ratio was balanced back to its average. In comparison to its previous
year, there was an inventory buildup which resulted into such a drop in this
figure for NRL and the company also incurred a loss of Rs. 8.69 billion due to
different economic pressures including lower demand for furnace oil that led to
a decline in its sales. (NRL, 2020) These pressures did not only affect NRL as
could be seen that the industry average also suffered due to lower demand,
government regulations and availability of alternate energy. BYCO’s inventory
turnover ratio also decreased from 7.18 to 6.36 this year.
ITO decreases because inventory during 2020 increases by around 33.7%. At
the same time cost of sales also increases by 17.8% in 2020.

Receivables Turnover/ Days Sales Outstanding:

The Receivables turnover ratio shows the ratio of net credit sales to average
receivables.
TREND ANALYSIS: 2017 2018 2019 2020 2021
16.56 15.33 17.69 27.9 62.46
National Refinery Limited:
3
It can be seen from the graph that it is
receivable turnover

increasing from FY 2018 to FY 2021 20.00

Receivables turnover
Industry Averages'!
and so is the industry average which 0.00 'National Refinery
Limited'!
indicates that the collection of accounts 17 18 19 20 21
20 20 20 20 20
receivables is becoming efficient. years

It can be concluded from the graph, that

NRL is better and quicker at receiving trade debts from its customers than its
competitors, except for
BYCO Petroleum whose receivables turnover ratio was at 32.22 and 36.63 in
the year 2019 and 2020, respectively. It was higher from all the other refineries
in this sector, however other companies’ ratio averaged it out close to NRL.

Payables Turnover Ratio/ Days Payables Outstanding:

A high payable turnover ratio suggests that a company is efficient in paying its
credit suppliers.
TREND ANALYSIS: 2017 2018 2019 2020 2021
5.41 6.22 7.10 8.24 9.44

18
Financial Analysis of NRL

National Refinery Limited:

PTO show overall positive trend Payables turnover
and keeps increasing from 2020 10.00

Payable turnover
to 2021. The lowest payable 5.00 'Industry Averages'!
National Refinery Lim-
turnover ratio among the five 0.00 ited'!
2017 2018 2019 2020 2021
years was observed in FY 2017, -5.00
this is related to the fact that Yeaes

purchases and trade payables

both were lower for National Refinery Limited for this year. In the FY 2020, the
shift in payable turnover ratio was by 2.33 times compared to the
increase of industry’s difference of 0.77 times from 2019 to 2020. Even though
the high payable turnover in FY 2020 is considered good for a company’s
performance but it can be an indicator that NRL is either not taking full
advantage of credit facilities or taking the advantage of the discounts offered on
early payment by its credit suppliers. In 2021 The ratio is very high It is due
increased in credit purchases and decreased in payables due to pandemic
situation.

Asset Turnover Ratio:

Total Assets Turnover measures 2017 2018 2019 2020 2021
how efficiently a business is 1.85 1.87 2.15 2.27 1.80
using its total assets to generate Total Asset Turnover
revenue. It measures the amount 2.00
total asset turnover

of revenue per unit of total asset 1.50

Industry Averages
is generating. The higher the 1.00 National Refinery Lim-
0.50 ited
Total Assets Turnover; the more
0.00
efficiently a business is utilizing 2017 2018 2019 2020 2021
its total assets. years

TREND ANALYSIS:
National Refinery Limited:
As shown in graph above the Total Assets Turnover of NRL is little bit higher
compared to that of Industry. This means that NRL is utilizing its total assets
more efficiently compared to most of the other companies in industry. Between
2016 and 2017 NRL purchased new Property, Plant and Equipment which

19
Financial Analysis of NRL

increased Non-current Assets of NRL by approximately 190.4%; thus, leading

to an increase in overall total assets of NRL. For example, According to
Directors’ Report of FY-2017 NRL installed Nitrogen Gas Generator, Reverse
Osmosis Plant IV, Effluent Treatment Plant and NRL indulged in in Turnaround
of Fuel Refinery. According to Directors’ report of FY-2017, even though Sale
volume of Bitumen increased, the Financial Statements showed an overall
decrease in Gross Sales of NRL by approximately 25.2% in FY-2017 combined
with increase in amount of Sales Tax by approximately 18.8% and increase in
amount of Custom Duty by approximately 712.1%. This all led to a larger
percentage decrease in Net Sales of NRL. However, the Total Assets Turnover
of NRL increased by approximately 23.4% from 2017 to 2020.
According to Financial Statements, this is mainly because Net sales of NRL
increased by approximately 71.6% between 2017 and 2020. Even though Gross
Sales increased by approximately 48.2% between 2017 and 2020, amount of
Sales tax decreased by approximately 17%. This all led to a larger percentage
increase in Net Sales. On looking the graph closely increase in Total Assets
Turnover was steeper between 2017 and 2019 compared to increase in Total
Assets Turnover between 2019 and 2020. According to Director’s Report of
FY-2020, this is because there was a decrease in sales of HSD due to lower
country wide consumption and lower demand of Bitumen due to lesser road
infrastructure development expenditure by the Government in FY-2020.

Fixed Asset Turnover:

Fixed Assets Turnover measures how efficiently a business is utilizing its fixed
assets to generate revenue. It states the amount of revenue per unit of fixed
assets is generating. The higher the fixed asset turnover; the more efficiently a
business is using its fixed assets.
TREND ANALYSIS: 2017 2018 2019 2020 2021
National Refinery Limited: 5.92 3.46 3.59 4.38 3.59
Fixed Asset turnover
Trend for FATO is same as it is
3.50
for ATO.
fixed asset turnover

3.00
2.50
2.00 Industry Average
1.50 National Refinary
201.00
0.50
0.00
2017 2018 2019 2020 2021
yeras
Financial Analysis of NRL

Then Fixed Assets Turnover of NRL decreased very sharply by approximately

41.55% and got almost equal to that of Industry. According to Financial
Statements, this is because Non-Current Assets of NRL increased by
approximately 377.9% and Net Sales of NRL decreased by approximately
27.6% between 2017 and 2018. Increase in

Non-Current Assets occurred because NRL made huge purchases of Property,

Plant and Equipment in both financial years, FY-2017 and FY-2018. For
example, According to Directors’ Report of FY-2017 NRL installed Nitrogen
Gas Generator, Reverse Osmosis Plant IV, Effluent
Treatment Plant and NRL indulged in Turnaround of Fuel Refinery. Similarly,
According to Directors’ Report of FY-2018, NRL upgraded existing Turbo
Generator, installed Water Demineralization plant, installed DCS at Lube-I
Refinery and indulged in Turnaround of Lube-II Refinery. According to
Financial Statements, Even though Gross sales decreased by approximately
20.3% between 2017 and 2018 amount of Custom Duty increased by a larger
percentage.
However, Fixed Assets Turnover of NRL increased from 2018 to 2020 by
approximately 26.6%. According to Financial Statements, this is mainly
because Net Sales increased by approximately 39% as amount of Non-Current
Assets remained almost unchanged. Even though Fixed Assets Turnover of
NRL increased between 2018 and 2020, it was still lower than that of industry,
indicating inefficiency of NRL towards utilizing its Non-Current Assets
compared to other companies in the industry. But in 2021 the ratio equals to the
ration FY 2019 It is mainly because of Covid 19 pandemic due to which the
Industries were shut down and sales were decreased.

21
Financial Analysis of NRL

REERENCES:

http://www.nrlpak.com/pdf/FinancialReport/2020-20/
NRL_AR_2021_High.pdf
http://www.nrlpak.com/pdf/FinancialReport/2019-19/
NRL_Annual_Reoprt_2020_HighFINAL.pdf
http://www.nrlpak.com/pdf/FinancialReport/2018-
18/National_Refinery_Limited_Annual_Report_2019_final.pdf
http://www.nrlpak.com/pdf/FinancialReport/2017-17/NRL-AR-2018-2-10-
2018.pdf
http://www.nrlpak.com/pdf/FinancialReport/2016-16/NRL_ANNUAL_RE
PORT_2017.pdf

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