NZ Refining predicts second-half loss, posts 2.8% fall in half-year profit

Tuesday 18th August 2009

NZ Refining Co., the country’s only oil refinery, is facing an operating loss in the second half of the year after it reported a 2.8% fall in half-year earnings as the strong kiwi dollar continued to put pressure on the company’s margins and surplus refined oil supplies dragged down prices.

Net income was $52.5 million, or 44 cents a share, in the six months ended June 30, down from $54 million, or 45 cents a year earlier, the Northland-based company said in a statement. Sales fell 0.2% to $182.4 million.

“With a relatively strong New Zealand dollar, continuing pressure on margins and our planned four-week shutdown in September, we therefore expected that in the second half of the year the company will operate at a loss,” said chairman David Jackson.

“The worldwide supply of finished product is not something we can influence and refining margins will only recover as the supply-demand imbalances correct."

Gross Refining Margin in May and June as US$4.83 a barrel, compared with US$6.32 in March/April and almost half the margin achieved in January/February of US$8.84 per barrel.

The outlook is for future margins to be lower again, with potential for further negative impacts if the NZ dollar strengthens further, the company warned in its operating report to the NZX earlier this week.

The shares fell 4.4% to $6.60 and have gained 19% so far this year.

Chief executive Ken Rivers said the company cut its interim dividend in response to the cash flow pressures from the strong currency, planned shutdowns and cost of completing the Point Forward Project.

The budget for the Marsden Point expansion has increased nearly 10% to around $200 million due to extra work being required, Rivers said.

Earlier this year, Royal Dutch Shell Plc. said it is looking to offload its 17% stake in the company, and hopes to complete a sale by the end of the year.

US company Valero Energy Corp. has been reported as showing an interest in making a full or partial takeover of the refining company.

Businesswire.co.nz

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