NZ Refining unveils interim profit, but no dividend

The Marsden Point oil refinery. Photo / Northern Advocate

The New Zealand Refining Company will not be paying an interim dividend because of the high New Zealand dollar and other factors.

The operator of the Marsden Point oil refinery today reported a $52.5 million profit after tax in the six months to June 30 and said the annual result will be less than this.

The processor of between 75 per cent and 80 per cent of transport fuels used in New Zealand expects to make a loss in the second half due to the strong New Zealand dollar, continuing pressure on margins and a planned four week shutdown in September.

The $52.5m interim profit is down 2.8 per cent on the same period last year.

It was achieved on operating revenue of $182.44m, down from $182.75m last year.

Profit before income tax was $75.11m, down from $77.17m in the same period last year.

The interim dividend last year was 15c a share.

"Low margins, a strong New Zealand dollar, the impact of two planned shutdowns on throughput and costs plus the completion of the Point Forward Project will put pressure on the company's cashflows this year," chairman David Jackson said.

"These factors have been taken into account by the board in determining that no interim dividend will be paid," he said.

The refinery processed 18.6 million barrels in the first six months of the year at an average gross refining margin of US$6.60 ($10.03) a barrel. Annual throughput is expected to be 3.7 per cent down on last year as a result of two planned shutdowns.

There is excess refining capacity around the world at a time when demand for transport fuels is slowing, resulting in a surplus of refined product and lower margins for refiners.

The company has traditionally benefited from processing cheaper, heavier crudes, which attracted premium margins.

"In the last six months we have seen a significant change in crude values with those heavy, sour crude oils trading at a much smaller discount resulting in lower margins," said Jackson.

The company did not comment on the issue of ownership. Its future is up in the air with several oil company shareholders looking to sell New Zealand assets. There has also been speculation that US refiner Valero may be eyeing the company.

The Point Forward expansion project will lessen the company's reliance on imported residue and grow the company by 15 per cent. The project is approximately 10 per cent over the original budget of $180 million, the company said today.

The plant employs 390 staff, down 5 per cent on last year. It is a major contributor to the Northland economy.

- NZPA