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Hungary MOL’s Q2 net seen boosted by forex gains

Hungarian oil and gas firm MOL is seen quadrupling its Q2 net income from a year ago with hefty forex gains on its debts boosting its bottom line, and on a strong downstream performance.

Downstream profits were boosted by a jump in diesel crack spreads and also inventory gains, despite a weak dollar which had a negative impact on MOL’s upstream and downstream segment. MOL is expected to report a Ft 107.65 billion ($691.3 million) Q2 net profit, compared with Ft 26.9 billion in the Q2 of 2007, according to average estimates from nine analysts in a Reuters poll on Friday. MOL’s operating profit is seen declining by 5.9% to Ft 83.15 billion from Ft 88.4 billion reported a year ago.

Analysts said MOL’s net income soared as unrealized paper gains on the revaluation of its foreign-currency denominated debt boosted profits due to a sharp firming of the forint. “MOL had a good 2Q08 period, although the bottom line is mainly driven by foreign exchange gains on EUR and USD denominated loans. On the operational side, Refining & Marketing had good quarter, which is counterbalanced by a disastrous petrochemical profit,” said Tamás Plester, analyst at ING.

MOL’s upstream segment benefited from rising crude prices which offset the impact of a weak dollar. Soaring diesel crack spreads worked in MOL’s favor as MOL’s product slate is geared towards diesel, but the company’s petrochemicals segment is seen posting big losses as margins collapsed due to a surge in feedstock prices, analysts said. “The result will not be the main driver of the stock price: investors are concentrating more on the negotiations with the Croatian government to buy INA and/or the potential talks with Austria’s OMV to buy back MOL shares,” ING’s Pletser said.

Austrian oil and gas group OMV called off its unsolicited $23 billion bid for MOL on Wednesday, ending a long-standing deadlock, but OMV still holds a 20.2% stake in MOL.

MOL, which has a 25% stake in Croatia’s INA, has said it would bid for all INA shares not held by the Croatian government and is expected to give details of its bid by August 14. (Reuters)