The Marsden Point oil refinery of New Zealand Refining. Photo / Michael Cunningham
The Marsden Point oil refinery of New Zealand Refining. Photo / Michael Cunningham
New Zealand Refining more than tripled first-half profit as above-average margins bolstered earnings for the operator of the Marsden Point oil refinery, paving the way for a slightly higher dividend than expected.
Net profit jumped to $35.2 million, or 11.25 cents per share, in the six months ended June 30from $11.6m, or 3.71 cents, a year earlier, the Whangarei-based company said in a statement. Revenue gained 22 per cent to $190.6m, with a gross refinery margin of US$7.70 a barrel across the period, up from US$5.25/barrel a year earlier and beating the historical average margin of US$4-to-US$6/barrel.
"Margins continue to be supported by buoyant international and domestic demand for oil products," chief executive Sjoerd Post said. "We've taken full advantage of that margin environment through growth projects and excellent cost control, and generated a strong net income as a result."
The board declared a fully imputed interim dividend of 6 cents per share, payable on September 28 to shareholders on the register at the close of September 14.
That was more than the 5 cents per share payment predicted by Forsyth Barr analyst Andrew Harvey-Green, who was picking first-half profit of $33.9m on revenue of $196.3m, although he noted that there was "upside risk" to the dividend payout. He rates the stock an 'outperform', and the shares rose 1.6 per cent to $2.54.
The oil refining company has been upbeat about the outlook for calendar 2017 as record car sales and air traffic underscored demand for fossil fuels. Last year the company's profit sank from a record in 2015 when a global glut of oil depressed prices and fattened the refiner's margins. Still, upgrades to the refinery had helped improve profitability.
Post said the company will keep chasing better margins through "key projects with attractive payback periods".
He said expanding demand for jet fuel at Auckland International Airport is a key driver for investment to upgrade capacity at its product pipeline. The first tranche of the three-phase project has been completed, with the second phase expected to be wrapped up by the end of the year which will ultimately lift capacity by 5 per cent.
It's also going ahead with other programmes to beef up its facilities, with increased capacity on the refinery's gas pipeline from First Gas, the new owner of Auckland lines company Vector's old gas transmission pipeline, "significantly improved access to natural gas" and letting the company process more product for its customers. NZ Refining also plans to "apply for a resource consent to bring bigger crude shipments to Marsden Point" in coming weeks.
