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New Zealand Refining Company said its interim profit fell 9.8 per cent from a year ago because it had to pay more for electricity.
The operator of New Zealand's only oil refinery at Marsden Point in Northland said net profit of $54 million in the six months to June 30 was down from $59.86m in the same period last year.
Record refinery margins and high plant utilisation combined to generate revenues of $183m, up 13.4 per cent on last year.
However, the profit was affected by an $8.6m increase in electricity costs, despite hedging.
The processor of close to 80 per cent of New Zealand's transport fuels is signalling tougher trading conditions in its second half as demand slows and capacity increases internationally as new refineries open.
The refinery processed 19.6 million barrels of oil in the first half and achieved an average gross refining margin of US$13.53 ($19) per barrel.
Chairman David Jackson said the company has a $180m expansion project under way that will increase capacity by 20 per cent.
During the first half the company has accumulated a "margin buffer" of about US$88m, which arises from a refining margin in excess of US$9 per barrel.
This "buffer" allows the company to top up margins that drop below US$9 per barrel for the rest of the financial year.
"The buffer that has been accumulated ensures that margins would have to fall below an average of US$3 per barrel for the balance of the year before processing fees are impacted."
The US dollar exchange rate and other factors will still affect the company but it is in a strong position for the second half of the year.
Two major shutdowns are scheduled for 2009 that will reduce refining capacity.
The company declared an interim dividend of 15c a share payable on September 25 to shareholders on the register on September 18.
- NZPA
