NZ Refining turns to first-half loss on slimmer refinery margin, high kiwi

Thursday 23rd August 2012

New Zealand Refining, which operates the nation's only oil refinery, turned to a first-half loss as its refinery margin shrank and a high kiwi dollar ate into its processing fee revenue.

The net loss was $1.5 million in the six months ended June 30, from a profit of $31 million a year earlier, the company said in a statement today. Revenue tumbled 28 percent to $113 million, while operating expenses rose 1.7 percent to $113.9 million.

The shares rose 2.3 percent to $2.66 and have fallen 8.9 percent this year. The company will pay a first-half dividend of 2 cents, against forecasts that it may omit this year's interim payment.

NZ Refining's average gross refinery margin was US$4.36 a barrel in the first half, down from US$6.56 in the same period last year. The kiwi dollar averaged 80 US cents in the last period from 78 cents in the first half a year earlier.

"The impact on the profitability of our competitor refineries is apparent with closures continuing in Europe, the US and Australia, where Shell brought forward the closure of its Clyde refinery and Caltex Australia revealed plans to close Kurnell near Sydney," the company said. "Further reduction of the overcapacity in the global refining sector will go some way to easing the pressure on refiners' margins."

It said margins have strengthened "slightly" since the end of June though it can't be sure that will be sustained for the remainder of the year. It didn't give a forecast for full-year earnings.

"Continuing poor growth in global economies, in particular, slowing growth in China and India, has contributed to a falling off in demand for oil products," it said.

The refining company said a highlight of the first half was winning shareholder approval for its $365 million continuous catalyst regeneration platformer project.

Energy companies are the biggest shareholders in the company. Mobil Oil New Zealand owns 19 percent, Z Energy owns 17 percent and BP New Zealand holds 15 percent.

BusinessDesk.co.nz

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