Refining NZ earnings slashed by shutdown

New Zealand Refining's profit slipped due to costs associated with the shutdown. Photo/File.

New Zealand Refining reported a 62 per cent slide in full-year profit after a major shutdown reduced throughput and regional processing margins fell.

Net profit fell to $29.6 million in the 2018 calendar year, from $78.5 million in 2017. Revenue fell 13 per cent to $359.6 million, with average margins declining to US$6.31 a barrel from US$8.02 the year before.

Throughput fell to 40.44 million barrels, 3 per cent less than a year earlier. The company had previously indicated the shutdown, the largest in 15 years, would reduce full-year earnings by about $43.2 million after running over schedule.

Chief executive Mike Fuge said the impact of the shutdown was partially mitigated by record second-half throughput, healthy margins and a weakening exchange rate.

With no major shutdowns planned in 2019, he said the company "fully expects" to lift its operational performance further and achieve throughput of a record 44 million barrels this year. The current record was 42.67 million barrels in 2016. He noted South East Asian regional margins have declined since the start of 2019.

The plant at Marsden Point is the country's only oil refinery and produces about 70 per cent of the petrol, diesel and jet fuel used in New Zealand. It is 43 per cent-owned by Z Energy, BP and Mobil, and charges those customers processing fees based on refining margins in Singapore.

The company's shares last traded at $2.26, down almost 6 per cent the past year.

The firm, which trades as Refining NZ, has a raft of upgrade projects underway since completing the installation of the $365 million continuous catalytic regeneration unit in late 2015. It continues to invest to ensure it remains competitive against larger, more modern refineries its customers can also buy product from.

One of the projects the refinery is preparing is dredging to deepen and straighten the shipping channel at the mouth of Whangarei harbour. That will reduce refining costs and risk by enabling crude deliveries on fewer, but larger, tankers.

Fuge said no date has been set for that work, which still requires the completion of 12 months of environmental monitoring and final board approval.

The company said it is also re-thinking the final element of a three-stage project to increase the capacity of its fuel pipeline to Auckland. It is now considering using a drag reducing agent as an alternative de-bottlenecking option.

The company will pay a 4.5 cent final dividend on March 21, down from 12 cents a year earlier.

- BusinessDesk