NZR
21/02/2012 16:24
FLLYR
REL: 1624 HRS The New Zealand Refining Company Limited
FLLYR: NZR: Amended Refining NZ Full Year Announcement
Reporting Period 12 months to 31 December 2011
Previous Reporting Period 12 months to 31 December 2010
The Director's of the New Zealand Refining Company Limited today announced
the Company's financial results for the year to 31 December 2011, details of
which are attached.
This report, including the results for the previous corresponding year, is
consistent with the audited financial statements of the New Zealand Refining
Company Limited for the year ended 31 December 2011.
Consolidated Results
1. Results $NZ 000
Revenue from ordinary activities
Current year $291,076
Down <1%
Previous corresponding year $291,230
Profit from ordinary activities after tax attributable to security holder.
Current year $34,449
Down 40%
Previous corresponding year $57,654
Net profit attributable to security holders.
Current year $34,449
Down 40%
Previous corresponding year $57,654
2.Final Dividend
Amount per security NZ 9 cents per share
Imputed amount per security NZ 3.5 cents per share
(Fully imputed)
Record Date 21 March 2012
Dividend Payment Date 28 March 2012
There is no dividend reinvestment plan in place.
3. Net Tangible Assets Per Security
As at 31 December 2011 $2.03
As at 31 December 2010 $2.13
Commentary/Media Release
Refining NZ Full Year Results Announcement
Directors support expansion on back of sound financial performance
The Directors of Refining NZ (NZR) today announced an after tax profit of NZD
34.5 million (2010 NZD 57.7 million) for the year ending 31 December, 2011.
Earnings before interest, tax and depreciation (EBITDA) were NZD 132.2
million (2010 NZD 156.7 million). At the same time the Directors confirmed
their support for a NZD 365 million project to expand and update the
Refinery's petroleum processing units.
Chairman of the Northland based company Mr David Jackson said the result was
a sound performance in a challenging business environment, made more
difficult by a slump in refiners' margins at the end of the year.
"A return to healthier margins in January 2011 continued for much of the year
falling off at the end of the year as Singapore margins fell on the back of
Asia Pacific gasoline prices. A pronounced decline of USD 5 a barrel was
unexpected, and reflects the current sector volatility. Despite this, the
average margin achieved for the 2011 financial year was USD 6.11. This
compares to a margin of USD 6.17 per barrel in 2010.
"Throughout 2011 we also had to contend with a persistently weak US dollar.
The USD/ NZD exchange rate rose from USD 0.75 cents in January peaking at USD
0.88 cents in August. The exchange rate average of USD 0.79 cents over the
year has had a marked impact on processing fee revenue.
"Overall, our Net Profit after Tax was in line with the profit matrix issued
in our 2010 Annual Report. While volatile refiners' margins can quickly
impact our business this result highlights our continued ability to withstand
variable and challenging business conditions.
"The strength of Refining NZ is built around a clear vision, and a tried and
tested Business Plan and strategy. We support this through world class
reliability and safety, talented and capable people, and robust processing
arrangements which generate strong cash flows for our business and
shareholders. This is evidenced by our repaying a further NZD 60 million of
debt during the year. Borrowings at the end of the year amounted to NZD 25
million, and means that we have effectively paid off the debt associated with
the NZD 190 million Point Forward Project only two years after commissioning
the plant.
"The resulting year-on-year profitability continues to get us through
difficult business conditions and our strong balance sheet creates a platform
for sustainable growth, going forward".
Mr Jackson said the state of global refining reflected the weakness in global
economies.
"Generally there is reduced demand for oil products, particularly in the US
and Europe and while the economic powerhouses of China and India continue to
grow, China's growth rate is less than predicted. Rationalisation and the
emergence of new and efficient refineries, means that over capacity will
remain an issue for some time.
"Concerns about crude supply in the Middle East (particularly Libya and Iran)
have dominated while continuing excess refining capacity, notably in Europe
and other OECD countries continues to cause volatility in refining margins."
Safety Performance
Mr Jackson said 2011 had been a testing time for the Company's safety and
reliability performance.
"The safe and reliable running of our refinery depends on employees and our
contracting companies keeping safety top-of-mind. In September we achieved
1.5 million hours without a Lost Time Injury (LTI). This is a great
achievement that reflects the aspiration to achieve an impeccable safety
performance set out in our Safety Action Plan. We had four Total Recordable
Cases - all minor incidents - however, our aspiration is for all of our
people to go home safely every day so we will strive to make further
progress.
"Cyclone Wilma brought extreme weather to Northland in January. This resulted
in severe flooding and contributed to a localised fire on a processing unit.
The fire was quickly contained without injury to emergency and operational
staff or significant damage to the plant or the environment," he said.
Planned shutdowns
Refining NZ's world-class reliability is built on continued investment in the
refinery and a programme of planned maintenance. In 2011 Refining NZ achieved
a product outturn of 33.1 million barrels. (2010: 34.2 million barrels).
Said Mr Jackson: "In August we successfully completed the planned shutdown on
selected processing units for maintenance and to replace catalyst on the
hydrocracker (top-bed-skim). The seven day shutdown means we are in a
position to extend the cycle on the hydrocracker unit from three to four
years.
"On the downside, the January fire and repairs to the Hydrogen Manufacturing
unit led to an annualised unplanned downtime rate of 1.3%. While this is
still a world-class performance it was slightly behind our 1% target for
2011. Analysis of such unplanned downtime and improvements to processes and
systems will ensure we continue to operate safely and reliably.
"Output was also constrained by a predominance of high naphtha and nitrogen
crudes which were quick to hit bottlenecks in the downstream naphtha
processing units. This reinforces to the Board the importance of the Growth
Project which will remove these unit constraints."
Mr Jackson said that good progress had been made on managing energy and non
energy cash costs to close the gap on Asia Pacific competitors.
Growth
Last February the Board Directors agreed to fund a Front End Engineering
Design (FEED) report for a Growth Project. The report with detailed costings
and schedule of work was included in an investment proposal to the Board on
21 February 2012.
Mr Jackson said, "The Growth Project is highly attractive to shareholders
from a financial perspective and is expected to deliver a significant
increase in intake volumes and refining margins leading to increased revenue,
profitability and dividends. The Project will deliver higher margins as a
result of improved energy efficiency, reduced fuel losses and better product
yields."
"Having considered the investment proposal the Directors support and
recommend the project to shareholders for approval at the Company's Annual
Meeting on 27 April, 2012.
"The Board is firmly of the opinion that the investment will provide
sustained, long-term benefit to our shareholders and customers while further
cementing Refining NZ's strategic importance to the New Zealand economy.
"Under the NZ Stock Exchange rules a shareholder vote is required where the
value of the investment is greater than half the Company's market
capitalisation, based on the average market value of the Company over 20
working days preceding the Board meeting. On 21 February the total value of
the Growth Project, after allowing for the definition costs (FEED),
construction and capitalised interest costs is approximately NZD 425 million
and is therefore greater than half the Company's average market
capitalisation of NZD 785 million."
Refining NZ shareholders will be asked to vote on the proposal at the
Company's Annual Meeting on 27 April, 2012.
Review of processing arrangements
Mr Jackson confirmed that the processing arrangements with customers will be
reviewed by the Independent Directors later in the year.
"Last year the Board agreed that the Independent Directors would play a more
significant and defined role in the review of the processing arrangements
conducted by management. The Independent Directors are to review the status
of the processing arrangements with management annually, taking into
consideration the need to trigger an external assessment."
Final Dividend
"Taking account of the strong cash generating ability and the reduction in
borrowings the Directors resolved to pay a final dividend of 9 cents per
share with full imputation credits attached. An interim dividend of 3 cents
per share was paid in September, 2011 resulting in a total dividend payment
of 12 cents for the year."
In resolving this dividend the Directors noted that should the Growth project
be supported by Shareholders at the Annual Meeting, the majority of the
investment spend will not be realised until 2013 meaning that the Company is
well placed to fund a higher dividend payment to shareholders.
Future Outlook
Mr Jackson noted that the refining sector remains volatile and despite
margins picking up at the end of December and through January, it was too
early to tell whether these will be sustained through 2012.
"The Directors consider the fundamentals of the business to be sound and
capable of weathering volatility: - the business is strongly cash generative;
well structured with a strong balance sheet. Having clear direction, a robust
strategy and Business Plan executed by talented individuals means we continue
to make headway even in the most challenging business environment. This
continuity of purpose has enabled us to be in a position for further growth.
"The Board advised that Chief Executive, Ken Rivers would be returning to the
UK. The Board has commenced the process to appoint a replacement over the
next six months.
"Thank you to my fellow Directors for their respective contributions during
the year. I also wish to extend thanks to Ken and his Leadership team for
their work, in particular, the preparation of the Growth Project investment
proposal and for ensuring the Directors were kept apprised of the details, as
the proposal came together," Mr Jackson said.
A full set of Financial Statements of the New Zealand Refining Company Group
for the year ended 31 December 2011 are attached.
For more information please contact:
Greg McNeill
Communications and External Affairs Manager
Refining NZ
T: 09 4328 311; M: 021873623; E: [email protected]
End CA:00219809 For:NZR Type:FLLYR Time:2012-02-21 16:24:06
