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Hungary's MOL says it can create value alone

Oil firm MOL spurned what it said was a hostile approach from Austrian rival OMV and presented new financial targets. Mol transfers further shares. 

Hungarian oil firm MOL Nyrt spurned what it said was a hostile approach from Austrian rival OMV and on Monday presented new financial targets, which it said proved it was on track for growth. MOL said its core profit will rise by a compounded annual 6.5% through 2011 even without acquisitions and the firm will return more money to shareholders by sharply raising its dividend payment and buying back shares. But some analysts said MOL's new numbers may still be too ambitious and they also indicate the firm has loosened its previous commitment to growth via acquisitions. “Organic growth and our dividend policy mean such a creation of shareholder value which will make MOL attractive in the next five years as an independent company,” MOL Chief Executive György Mosonyi told a news conference.

MOL's move comes three weeks after OMV raised its stake in MOL to 18.6% from 10% and proposed closer ties. MOL has repeatedly rejected the approach, has begun aggressively buying its own shares and has already amassed control over more than a third of its stock. In Monday's presentation, MOL said it will raise its earning before interest, taxes, depreciation and amortization or EBITDA, to $2.9 billion in 2011 from 2.1 billion in 2006 and will invest $5.3 billion in capital expenditure to fuel the growth.
But Mosonyi added that the targets were based on the oil sector's 2006 operating figures and if current analyst forecasts and futures market data were used to make forecasts, annual growth would be less than half, at around 3%. Mosonyi also said that MOL would raise its dividend payment to around 40% of net profit by 2008 after 15% this year and may cancel some of its treasury shares. “In sum, we view the targets as remaining ambitious, particularly in the exploration and production division,” Citibank said in a note. “A 22% hike in annualized capex expectations reflects some broader scope of activities, but also a measure of cost inflation.”

Others said the new numbers were proof that MOL has been forced to give up at least some of its acquisition strategy, especially in the upstream segment where the company has been bidding to acquire oil and gas assets. “We think that the company realized its limited acquisition opportunities especially in Russia, therefore the targets were lowered,” KBC said in a note. “We believe that the company does not count anymore with the majority position in (Croatia's) INA, which might explain lowered targets in refining and crude production levels as well,” KBC added. MOL's Mosonyi admitted acquisitions had been slow but said the firm was still on the lookout, particularly for production assets in Russia and refining and marketing assets in Serbia and Croatia. “Acquisitions are going a bit slower than we predicted in 2005 ... so we have started a review of our strategy to see what we can achieve without acquisitions,” Mosonyi said. (

Mol has announced lending further 1,553,884 of its shares to MFB Invest Zrt in accord with the agreement published on July 3, thus increasing its stake in Mol to 10%. In the meantime the company has also continued purchasing its own papers, buying 225,000 and 148,884 shares on July 12 and July 13 respectively at the Budapest Stock Exchange (BÉT). Following the latest transactions conducted with the participation of OTP Bank and ING Bank, Mol now owns 1,811,925 of its 'A' series stocks. (Napi Gazdaság)