NZ Refining turns a first-half loss on slimmer refinery margin, high kiwi

BUSINESSDESK: New Zealand Refining, operator of the country's only oil refinery, turned a first-half loss as its refinery margin shrank and a high kiwi dollar ate into its processing fee revenue.

The net loss was $1.5 million in the six months ended June 30 from a profit of $31 million a year earlier, the company says. Revenue tumbled 28% to $113 million, while operating expenses rose 1.7% to $113.9 million.

The shares rose 2.3% to $2.66 and have fallen 8.9% this year. The company will pay a first-half dividend of 2 cents, against forecasts that it may omit this year's interim payment.

NZ Refining's average gross refinery margin was $US4.36 a barrel in the first half, down from $US6.56 in the same period last year. The kiwi dollar averaged 80 US cents in the last period from 78 cents in the first half a year earlier.

"The impact on the profitability of our competitor refineries is apparent with closures continuing in Europe, the US and Australia, where Shell brought forward the closure of its Clyde refinery and Caltex Australia revealed plans to close Kurnell near Sydney," the company says.

"Further reduction of the overcapacity in the global refining sector will go some way to easing the pressure on refiners' margins."

It says margins have strengthened "slightly" since the end of June though it can't be sure that will be sustained for the remainder of the year. It did not give a forecast for full-year earnings.

"Continuing poor growth in global economies, in particular, slowing growth in China and India, has contributed to a falling off in demand for oil products." 

A highlight of the first half was winning shareholder approval for its $365 million continuous catalyst regeneration platformer project.

Energy companies are the biggest shareholders. Mobil Oil NZ owns 19%, Z Energy 17% and BP New Zealand 15%.

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The shareholding figures for the energy companies are incorrect. BP owns 23.66%, Mobil 19.2%, Z 17.14% and Chevron 12.69%.

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