In Focus: Result Review NRL & PPL (31102008)o

NRL Result Review 1Q09
NRL has revealed depressing performance during its first quarter of FY09. The company has posted substantial decline of 114.6 percent in bottom line earnings, which was mainly due to 11 percent depreciation in Pak rupees against dollar on QoQ basis, resulting extensive exchange loss of Rs1.89bn in 1Q09.
Net exchange loss should be nil under IPP regime while tax benefit realised.
According to IAS21, a foreign currency transaction should be recorded initially at the exchange rate at the date of the transaction i.e. the rate when refineries enter into a future oil contract with third parity. The difference in exchange rate rising would be marked as loss or gain on currency as per settlement date. However, as company revenues are realised on Import parity basis which accounts for exchange rate changes, net impact from exchange rate changes should be nil apart from the tax benefit that is realised due to categorisation of this cost under financial charges. Under this treatment, company has obtained an estimated tax saving of Rs566mn in 1Q09.
Gross Refinery margins improved to 4.5%
Despite the fact that company has posted massive decline in bottom line earnings during the quarter due to massive exchange loss, gross refinery margin of the company have improved to 4.5 percent from 3.6 percent in corresponding period last year, mainly backed by average increase of 93.5 percent in ex-refinery prices against 59.8 percent increase in crude oil prices over same period last year.
Outlook
We expect company may again post exchange loss during second quarter of the year, due to further depreciation of 9.5 percent register in Pak rupees against dollar QTD. However, we expect company would post PAT of Rs3.3bn translating into EPS of Rs41 during FY09, showing substantial decline of 46 percent in bottom line earnings on YoY basis.
PPL Result Review 1Q09
PPL posted astonishing YoY growth of 68.1 percent in bottom line earnings of 1Q09 result as PAT witnessed an increase from Rs4.8bn to Rs7.8bn. Further, EPS of the company has increased to Rs9.36 from Rs5.79 in corresponding period last year. Moreover, company has marked ever high revenue of Rs15.8bn in one quarter resulting in increase of 53 percent over same period last year.
Key drivers for the growth in bottom line earnings were i) 59.8 percent increase in crude oil prices on YoY basis, ii) average increase of 20 percent increase in well head gas prices of Sui, Kandkhot, Sawn and Miano during the second half of last year these fields accounts 90 percent of total the company gas production and iii) Pak rupee averagely deprecated by 19.4 against dollar has further support earning of the company. As oil revenue of E&P stocks are realised in $ per barrel.