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Marsden Point refinery - Source: ONE News -
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The New Zealand Refining Co is expecting full-year net profit of between $10 million and $20 million, compared to $124.9 million for the 2008 calendar year.
Considerable uncertainty remained about the final result due to the way prices for refinery feedstock and products and the exchange rate were set under processing agreements with customers, the company said on Thursday.
Refining margins worldwide were under severe pressure and market indicators suggested negative margins were being experienced by many refineries. Pressure on margins was exacerbated by an over-supply in the global refining market, which NZ Refining expected would take some time to correct.
Margins realised at NZ Refining Co had been "very low" with a gross refining margin of $US1.16 per barrel being generated in the September/October period.
A high New Zealand dollar had further reduced processing fee income, NZ Refining said.
The premium it earned for producing fuel to meet New Zealand specifications and the advantage of being close to its home market provided some relief, while the floor mechanism in its processing agreements guaranteed a minimum refining income of about $118 million a year.
"We are in a better position than many of our competitors and expect a modest recovery margins. Our customers are continuing to utilise our available refining capacity," the company said.
Major shutdowns were scheduled for April and September next year and replacement of catalyst in the hydrocracker would see a significant non-discretionary capital spend.
Bank facilities were adequate to meet that expenditure.
In its half-year result for the six months to the end of June, NZ Refining reported a net profit of $52.5 million but said it expected to operate a loss in the second six months of 2009, so the full year profit would be less than the half year result.
NZ Refining shares were down 17 cents, or 4.2%, to $3.88 about an hour after the sharemarket opened on Thursday.
