Mol Fourth-Quarter Profit Triples on Wider Margins
Mol Nyrt., Hungarys largest oil
refiner, said fourth-quarter profit more than tripled because
margins on processing crude widened, boosting income from products
such as diesel.
Net income rose to 94.3 billion forint ($525 million) from
24.5 billion forint a year earlier, the Budapest-based company said
today in an e-mailed statement. Operating profit doubled to 91.7
billion forint, Budapest-based Mol said.
The company, fighting a hostile takeover attempt by Austrian
rival OMV AG, benefited from refined-product prices rising and
eastern Europes growth. Mol is waiting for a ruling by the
European Union on whether its takeover defense is legal and if a
combined company would have to sell assets to comply with
antimonopoly regulations.
“Mol had a very decent performance, their luck is that
theres very healthy demand and margins for diesel, said Akos
Herczenik, a Budapest-based analyst at Raiffeisen International
Bank AG. The fate of the takeover bid hinges on whether assets such
as refiners would have to be sold, he added.
Mol fell 175 forint, or 0.8 percent, to 23,150 forint in
Budapest, compared with a 1.7 percent decline in Hungarys
benchmark BUX Index. The stock declined after analysts including
Hootan Yazhari at Merrill Lynch said the company didnt take full
advantage of widening margins.
`Key Delta
“The key delta versus our operating forecasts came in the
refining division, Yazhari, who analyzes Mol from London, wrote
in a note to clients. “Significantly weaker margin capture, higher
crude costs and operating costs and weaker marketing margins were
the key drivers.
Oil in New York gained 57 percent last year, the biggest
annual percentage increase since 2002. Mol increased refined
product sales by 23 percent to 4.5 million metric tons in the
fourth quarter, compared with 5.39 million tons at OMV.
The spread on gasoline, or the difference between the cost of
crude and the price of the refined product it yields, was 47
percent wider in the period than a year earlier. The spread on
diesel rose 30 percent, Mol said.
“The economic environment was definitely much more
favorable, Jakub Zidon, a Prague-based analyst at Erste Bank AG,
wrote in a note to clients today. “The main reason for the
remarkable profit improvement was the strong increase in downstream
and petrochemical sales volumes, strong crude prices and high
diesel crack spreads.
`Healthy Spreads
Mol expects “healthy crack spreads and fuel demand this
year, co-Chief Executive Officer Gyorgy Mosonyi said in a
conference call with investors. The price difference between Brent
crude and the Ural blend used by the company is stable near $3, he
said at a press conference later today.
Sales in the quarter increased 25 percent to 785.3 billion
forint. Full-year net income fell 23 percent from a record in 2006
to 254.1 billion forint last year.
Net profit without “special items was 73.5 billion forint,
beating the 71.9 billion-forint median estimate of six analysts
surveyed by Bloomberg News. Operating profit, or earnings before
interest and tax calculated without “special items, advanced 44
percent to 67.4 billion forint.
Mol is shifting its focus to crude oil and natural-gas
production after buying refineries and filling stations in
countries including Slovakia, Croatia and Romania.
The company is seeking further acquisition targets this year,
including several production sites in Russia, Libya, West Africa,
Pakistan and India, Mosonyi said, adding that Mol is studying
“many possible targets.
`Very Quickly
Croatias INA Industrija Nafte d.d., in which Mol already
holds 25 percent, is the main target, and the Hungarian company is
“confident it can increase its involvement, Mosonyi said on the
conference call.
“Im basing my optimism on the extremely good co-operation
weve had so far, he said. “Whats needed is to accelerate the
refinery upgrades. We can very quickly discuss how to proceed.
Mol began negotiations in September with China Petroleum %26amp;
Chemical Corp., Asias biggest refiner, on potential joint
exploration projects. It bought out a Russian partner from a site
in western Siberia, agreed to expand production in Pakistan and is
searching for oil in India.
Divisions
Operating profit at Mols refining and marketing business, the
companys largest division, rose to 38.4 billion forint after Mol
sold 8 percent more fuel and crack spreads widened. Demand for
Mols diesel was driven by economic growth and refinery shutdowns
in central Europe, such as a stoppage at the Litvinov plant in the
Czech Republic, operated by Unipetrol AS.
Profit by the same measure at the exploration and production
unit climbed 29 percent to 20.1 billion forint, Mol said, citing
rising product prices.
Production may be “somewhat lower in 2008, followed by a
“stable picture in 2009 and “significant growth from the year
after, said Zoltan Aldott, the companys executive vice president
for exploration and production.
Operating profit at the petrochemicals business, which
includes Hungarys largest chemicals producer TVK Nyrt., dropped 62
percent to 3.9 billion forint as a gain in base material costs and
declining petrochemicals prices squeezed margins, Mol said.
The company maintained plans to increase its dividend to 40
percent of earnings this year from last years 21 percent, pending
shareholder approval, Chief Financial Officer Jozsef Molnar said.
Management will also seek approval to cancel some shares it bought
back.
Mol may pay a lower dividend on about 18 percent of shares it
lent to OTP Bank Nyrt. and MFB Zrt., Hungarys state-owned
development bank, Molnar said. The company could cancel those
shares or use them for an acquisition before the annual shareholder
meeting in April, he added.
