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TVK Q1-Q3 profit down 72% because of the unrealized forex losses

Hungarian chemicals company TVK, majority owned by oil and gas company Mol, had net profits of Ft 1.24 billion (€4.773 million) in Q1-Q3 2006, down 72% compared to the same period a year earlier, the company said in its consolidated report for the period, prepared with International Financial Reporting Standards (IFRS) and published on Saturday.

The company attributed the decline to unrealized exchange rate losses of Ft 5.51 billion on foreign currency-denominated loans. Q1-Q3 revenue increased a marked 28.6% to Ft 224.65 billion compared to the same period a year earlier as the result of higher sales volume and higher prices of polymer and olefin products. During the same period, cost of materials rose 30.7% to Ft 194.66 billion. EBITDA increased 19% to Ft 19.28 billion. TVK said results were hurt by the fact that feedstock prices rose faster than product prices as well as an unfavorable €/$ exchange rate and a rise in energy prices.

However, results were helped by increased production using new technologies and improved efficiency. Alone in Q3, TVK had net profits of Ft 4.26 billion, compared to losses of Ft 2.44 billion in the same period a year earlier. Q3 EBITDA increased 192% to Ft 6.60 billion and operating profits rose to Ft 3.55 billion, compared to operating losses of Ft 132 million in Q3 2005. In Q1-Q3, TVK had financial losses of Ft 8.417 billion, compared to financial losses of Ft 3.260 billion in the same period a year earlier. Of the Ft 49.2 billion increase in revenue in Q1-Q3, TVK attributed Ft 28.37 billion to price changes, Ft 14.34 billion to foreign exchange rate changes and Ft 6.495 billion to increased production volume.

Exports accounted for 48% of sales revenue compared to 46% in Q1-Q3 2005. Of the Ft 28.18 billion increase in the cost of feedstock, Ft 25.597 billion was due to price changes and Ft 11.254 billion to exchange rate changes. Costs were reduced Ft 8.67 billion by lower volumes. Operating profits rose 10.6% to Ft 10.12 billion. TVK's subsidiaries contributed Ft 1.641 billion to operating profit. TVK's biggest revenue-generator was HDPE (high-density polyethylene, bringing in Ft 72.608 billion. Export sales of HDPE came to Ft 63.101 billion and domestic sales totaled Ft 9.507 billion. Olefin sales amounted to Ft 63.95 billion, mainly from domestic sales to BorsodChem.

Polypropylene sales generated revenue of Ft 58.14 billion, half from exports. Sales of LDPE (low-density polyethylene) generated revenue of Ft 24.73 billion, including Ft 14.94 billion from exports. TVK had consolidated total assets worth Ft 229.15 billion on September 30, 2006. Its stock of long-term liabilities rose 11.9% to Ft 72.46 billion, largely due to the consolidation of TVK-WTP Vízelőkészítő. Short-term liabilities fell 4.3% to Ft 31.33 billion, including short-term loans worth less than Ft 1 billion. Net assets rose 1.8% to HUF 118.00 billion at the end of September, 1.8% more than one year earlier. Mol directly owns 44.55% of TVK shares. It holds a further 8.06% through its Slovakian unit Slovnaft. CE Oil and Gas, (CEOG), part of the Vienna Capital Partners group, holds 31.56% of TVK shares. (Mti-Eco)