NZ Refining anticipates FY profit on cheap crude, better margins, favourable currency

Tuesday 20th January 2015

New Zealand Refining, which operates the Marsden Point refinery, will report an annual profit in 2014 after widening margins, cheaper crude oil and a favourable exchange rate turned around the company's performance from the middle of the year.

The Whangarei based company said net profit was between $9.5 million and $10.5 million in calendar 2014, turning around a loss of $5 million a year earlier. NZ Refining reported a first half loss of $7 million, and its profit matrix projected an annual loss of as much as $23 million if margins and the exchange rate continued to work against the company.

The result "represents a major improvement over the company's half year result and is significantly better than the profit matrix published at the start of the year," it said in a statement. "The expected FY 2014 result has been driven by the company's 2014 margin initiatives, a gross refinery margin of US$9.98 for November/December (the highest in five years), excellent operational and cost performances, favourable crude prices and an improved USD exchange rate."

NZ Refining has been on a drive to improve its margins after its oil company customers had to make top up payments due to the collapse in global refining margins was exacerbated by costs associated with a longer than expected maintenance shutdown. Those margins have improved in recent months as the price of crude oil, an input cost for the refinery, have tumbled.

In a separate statement, the company reported throughput of 7.1 million barrels in November/December at a gross refinery margin of US$9.98 a barrel, taking the annual total to 39.7 million barrels at a gross refinery margin of US$4.96/barrel.

That delivered processing fee income of $168.4 million in the year, allowing the company to fully repay its oil company customers and shareholders who had made top up payments of $36 million in the first six months of the company's financial year.

The processing fee paid to the oil companies sees them get a rebate of 30 percent of the gross refining margin, and has come under attack by minority shareholders who have faced significant falls in the share price.

Shares of NZ Refining last traded at $2.29, and have gained 9.1 percent over the past 12 months. The stock is rated an average 'buy' based on four analyst recommendations compiled by Reuters, with a median target price of $2.64.

BusinessDesk.co.nz

Comments from our readers

No comments yet