Mol Nyrt, Hungary's largest energy company, said Q4 profit declined 53% from the same period last year, as its refining margins fell.
Net income for the quarter ended December 31 fell to Ft 24.5 billion ($125.6 million), or Ft 399 a share, from a restated Ft 52.3 billion, or Ft 511, the company said in a statement. The median estimate of 10 analysts surveyed by Bloomberg News was for profit of Ft 41.6 billion Budapest-based Mol Nyrt has spent more than $1 billion buying refineries in eastern Europe, counting on economic growth and fuel use outpacing the west. Now the shrinking price differential between Brent and Urals crude and a strengthening Hungarian currency are eroding profits.
A „significant drop in gasoline and diesel crack spreads, narrowing Brent-Ural differential” and a „weakening dollar,” contributed to lower earnings, the company said in the earnings report posted on the Budapest Stock Exchange's (BÉT) Web site. The company previously benefited from Urals crude, which it buys mostly from Russia's OAO Lukoil, being cheaper than North Sea oil, which determines product prices. The average crack spread on Urals crude was 16% lower in the Q4 than it was a year earlier, Bloomberg data show.
Sales in the Q4 were Ft 627.6 billion, compared with Ft 753.1 billion a year earlier. The median estimate of analysts was Ft 688 billion. Revenue was weighed down in part by a three-week scheduled maintenance shutdown of Mol's Bratislava refinery, which cut crude processing volumes by 11% from the previous quarter. The Hungarian currency's gains hurt Mol as the company shifted its focus to production of crude oil and gas.
Both are priced in dollars, so a stronger forint cut the value of its output. Mol bought out a Russian partner from a site in western Siberia, started to develop a Croatian-Hungarian gas field and is expanding production in Pakistan. Mol's exploration and production unit had earnings before interest and tax, or EBIT of Ft 17.4 billion in the Q4, compared with Ft 34.9 billion a year earlier. The refining and marketing division posted EBIT of Ft 19.5 billion, from Ft 58.7 billion in the Q4 of 2006.
The petrochemicals unit, which includes Hungary's largest chemicals producer TVK Nyrt, had EBIT of Ft 10.1 billion, up from Ft 5.5 billion a year go. Mol's gas transport business had EBIT of Ft 6.2 billion in the quarter, up from Ft 5.4 billion in 2005. (Bloomberg)