Capacity gap leads to profit surge

Profits at New Zealand Refining have skyrocketed thanks to a shortage of refinery capacity around the world.

The country's only oil refinery reported a full-year profit of $139.8 million, up 43 per cent on the previous year.

Chairman Ian Farrant said the higher profits were due to high refining margins and "a world-class operating performance" at the Marsden Pt Refinery in Northland.

Revenue of $356.1 million was up 41 per cent on the previous year.

A worldwide shortage of refining capacity due to demand for better quality fuel and high oil prices pushed up refining margins - the amount earned per barrel of oil processed.

Refining margins were high over 2004, but even better in 2005, but are unlikely to be as high this year. In fact, refining shrank at the end of 2005 and beginning of 2006.

The company will use profits to retire debt. It will pay a full-year dividend of 32.5c. The shares ended up 10c at $6.10 yesterday.