NZ Refining warns of profit dampener ahead

By CHRIS DANIELS energy writer

New Zealand Refining, owner of the Marsden Pt oil refinery, has warned the market of looming challenges in the new year.

This warning came despite the announcement of a $52.5 million pre-tax operating profit for the last 11 months, a result the company said was "significantly ahead of budget".

But a big shutdown next year, coupled with a costly conversion of the refinery to produce cleaner fuel, may put a dampener on future profits and dividends.

Company chairman Ian Farrant said "significant cash outflows" would be used to pay for the new construction, most of which would come from bank loans and retained earnings.

NZ Refining wanted to "signal" to its shareholders that its record of high dividend payouts may change as a result of the construction and high exchange rates.

The refinery has planned shutdowns every three years, but does continue producing some fuels during these times. The 2004 shutdown will involve most major processing units at Marsden Pt closing and will take about a month to complete.

Farrant said that apart from the income loss, the additional cost when compared with a normal year would be around $14 million, plus $8.9 million for a replacement part.

Though listed on the NZX, New Zealand Refining is tightly held, with the four big oil companies and Canadian venture capital company Emerald Capital owning just under 87 per cent of all its shares.

The company's share price has remained relatively steady for most of this year, ranging between $15 and $18 a share.

The company closed down 35c at $16.10 yesterday.