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NZ Refining profit sinks 69 per cent

NZN 27/02/2017 Sophie Boot

New Zealand Refining's annual profit has sunk 69 per cent from a record a year earlier with margins significantly lower than 2015, when low global oil prices bolstered earnings.

Net profit fell to $47.2 million in calendar 2016, from $150.8m a year earlier, the Whangarei-based company said on Tuesday.

Revenue dropped 21 per cent to $354.2m, while processing fees, NZ Refining's main source of revenue, dropped 27 per cent to $276.6m.

Gross refinery margin averaged $US6.47 per barrel over the year, down from $US9.20 in 2015. The first half of the year was weaker, with gross refining margins at $US5.25 a barrel from $US9.09 in 2015.

Stronger margins in the second half were helped by strong demand for gasoline on the back of new vehicle growth in New Zealand and Asia and a 19 per cent year-on-year increase in jet fuel demand driven by record visitor numbers to Auckland International Airport, chief executive Sjoerd Post said.

NZ Refining earned its highest ever processing fees in 2015 when it processed a record number of barrels. Its refining margins were boosted by a weaker kiwi dollar and a sharp drop in oil prices and as investments in upgrades and efficiencies started to pay off.

The company's $365m Te Mahi Hou upgrade, which opened at the end of 2015 after four years of development and construction, contributed US90c per barrel in gross refining margin, Mr Post said.

The upgrade allows the plant to produce an extra 2 million barrels of petrol annually and reduce its greenhouse gas emissions by 120,000 tonnes of carbon dioxide annually owing to energy efficiency improvements

The company declared a final dividend of 6 cents per share. In 2015, it paid a 20c final dividend.

The shares dropped 4 per cent to $2.67, and have fallen 25 per cent in the past year.

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