New Zealand Refining, operator of the country's only oil refinery, declared a 66 per cent increase in net profit for the year to December 31, despite repair costs and lost sales totalling $14.3 million from the failure of the pipeline between the plant at Marsden Point and Auckland in September.
Net profit for the year was $78.5m, from $47.2m a year earlier.
Driving the result were historically high average refining margins of US$8.02 per barrel of oil processed, lower than the recent high point of US$9.02 in 2015 but well up on the 2016 average margin of US$6.47, with total revenues 16 per cent higher than the previous year, at $411.6m. Free cashflow more than doubled to $103m, compared with $47m the previous year.
"For much of the year refining margins remained in a range of US$7-to-US$11 per barrel, with only January and December dropping to below US$6 per barrel," chief executive Sjoerd Post, who announced his resignation yesterday after five years with the company, during which time he has overseen a $365m upgrade to modernise the facility and last year's pipeline rupture, which severely disrupted international airline connections to New Zealand's largest city for some 10 days.
Post is leaving the company prior to an inquiry into the rupture, although has said he will remain in place until the end of July, while a replacement is found.
The company's accounts show the refinery spent $6m repairing the pipeline, which failed on farmland near Ruakaka, close to the Whangarei, and lost $6.3m in processing fees and a further $2m in distribution fees attributable to the disruption to supply.
Insurers had paid out $2.9m already on the refinery's policy covering environmental damage and the company has been advised its claim for material damage and business interruption cover has been accepted, with quantification of recoveries to be reported in the current financial year.
The board declared a final dividend of 12 cents per share, taking total distributions for the year to 18 cents per share, fully imputed, compared to 9 cents per share in total last year and a 6 cents per share final dividend.
A simplified dividend policy has been declared, with the company committing to pay 80 per cent of free cashflow as ordinary dividends "subject to the company's medium term asset investment programme, 20 per cent targeted gearing level and future outlook".
For the year ahead, Post gave no guidance but signalled the requirement for a maintenance shutdown in the second quarter of 2018.
He confirmed also that the Refinery to Auckland (RAP) pipeline would return to full pressure in the second or third quarter of this year.
Of the rupture, Post said that it was "pleasing" that the Northland Regional Council had found the refinery "had no causative role" and had decided not to prosecute the company.