NZR
27/02/2013 14:57
FLLYR
REL: 1457 HRS The New Zealand Refining Company Limited
FLLYR: NZR: Refining NZ Full Year Results Announcement
The New Zealand Refining Company Limited
Results for announcement to the market
Reporting Period 12 months to 31 December 2012
Previous Reporting Period 12 months to 31 December 2011
The Director's of the New Zealand Refining Company Limited today announced
the Company's financial results for the year to 31 December 2012, 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 2012.
Consolidated Results
1. Results $NZ 000
Revenue from ordinary activities
Current year $278,513
Down 4%
Previous corresponding year $291,076
Profit from ordinary activities after tax attributable to security holder.
Current year $32,624
Down 5%
Previous corresponding year $34,449
Net profit attributable to security holders.
Current year $32,624
Down 5%
Previous corresponding year $34,449
2.Final Dividend
Amount per security NZ 5 cents per share
Imputed amount per security NZ 1.9 cents per share
(Fully imputed)
Record Date 21 March 2013
Dividend Payment Date 28 March 2013
There is no dividend reinvestment plan in place.
3. Net Tangible Assets Per Security
As at 31 December 2012 $2.05
As at 31 December 2011 $2.03
2012 Full Year Results Announcement
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Commentary
Record processing in challenging business conditions has seen Refining NZ
improve on a disappointing first half to report an after tax Profit of $32.7
million for the year ended 31 December 2012. Earnings before Interest, Tax,
Depreciation and Amortisation (EBITDA) were $113.5 million, down 14 percent
on the previous year's result (2011: $132.2 million).
Chairman of the Northland based refiner, David Jackson described the result
as better than had been expected, given the continuing relative strength of
the NZD/USD exchange rate, volatile refiners' margins and increasing
competition in the global refining sector.
Key Performance Highlights
Mr Jackson said the Company's performance in 2012 was underpinned by a
combination of strong operational performances across the business:
o The commitment of our people to safe working through the Health and Safety
action plan, saw the refinery achieve 2.7 million hours without a lost time
incident;
o Good performance of the refinery's key processing units contributed to
record throughput (42. 1 million barrels) which allowed the Company to
capitalise on improving margins;
o The Gross Refiners' Margin (GRM) which had been weak in the first half of
the year, steadily improved particularly in the last quarter, to average
USD5.77 for the year;
o Transport fuels outturn target was exceeded by providing customers an
additional half million barrels of fuel over plan. A total of 33.6 million
barrels for the year represented a record for the refinery;
o An improved energy performance through optimal performance on processing
units and a good mix of crude feedstock;
o Changes to our depreciation policy reduced the Company's annual
depreciation charge by $16.7 million.
In 2012 the Company continued to generate strong free cash flows of $55
million which has been invested in Te Mahi Hou, shareholder dividends and
ensuring the integrity of the Company's assets.
Said Mr Jackson, "Investing cash in asset inspection, maintenance and
refurbishment secures the integrity of our processing assets so the refinery
can continue to run safely and reliably. Importantly, this investment means
we can remain competitive with Asia Pacific refiners by ensuring our
customers can depend on us to meet their needs for quality fuel products."
The Company's year end borrowings stand at $62 million (2011: $25.6 million)
with substantial room in our facilities to meet future capital commitments.
Safety
"Our safety performance was recognised with the Safeguard New Zealand 2012
Health & Safety Award for the Best Initiative to Encourage Engagement in
Health & Safety. This recognised the Company's achievements in engaging our
workforce, their families and the wider community in our Safety Warrior
campaigns.
"Despite our achievements, we had three recordable cases during the year.
This meant our Total Recordable Case Frequency rate did not meet target
(2012: <1.5 TRCF) and we fell short of our aspiration of world class health
and safety performance. These injuries were avoidable, and as part of our
Health and Safety Plan we are striving to ensure such incidents are not
repeated.
"The safety of our people and processes is critical and will receive
continued focus in 2013 as we undertake two planned shutdowns and
construction on Te Mahi Hou gathers pace."
Environmental performance
Refining NZ had four environmental non-compliances all classified as minor.
However, a discharge from the storm water basin during severe flooding in
February saw the Company issued with an abatement notice by the Northland
Regional Council.
"This was disappointing and we are reviewing our storm water network and
creating an emergency overflow spillway to ensure this doesn't reoccur. On
the upside our average daily sulphur dioxide emissions for the year, a key
metric for the Company's environmental performance, were well within the
limits of our consent."
Business Environment
Global demand for oil distillation is substantially driven by China and India
and their lower than forecast growth combined with reduced demand in the US
and Europe has put further pressure on the refining sector. Permanent
refinery closures shrank capacity by around a million barrels a day, but
capacity growth through to 2017 in the Asia Pacific region, Europe and the US
is expected to exceed oil demand growth.
Said Mr Jackson, "Demand growth will need to gather pace before we see a
sustained and positive impact on refiners' margins. In the Asia Pacific
region competition from refinery additions will require us to lift our
performance if we are to achieve our aspiration to remain competitive for our
customers.
"The ongoing strength of the New Zealand dollar against its US counterpart
has continued to significantly impact our processing revenue. In 2012 the
average exchange rate for the year was USD 0.81 (2011: USD 0.79). We do not
expect the New Zealand dollar to weaken appreciably against the US dollar in
the short term.
"Refiners' margins were weak in the early part of 2012 but steadily improved,
showing a marked uplift in the last quarter. The average GRM achieved for the
year at USD 5.77, was down on the previous year (2011: USD 6.11). We do not
expect the uplift towards the end of 2012 to be sustained and consider it
likely that margin volatility will continue through 2013."
Reliability and Plant performance
"The reliable performance of our refinery is critical to our ability to
compete with imported product from around the world and in 2012 we achieved
record performances in key areas.
"A key measure of the Company's reliability is the annual rate of unplanned
downtime. In 2012 the rate achieved was 0.59 percent, better than the
targeted 1.00 percent for the year and an improvement on the previous year of
1.37 percent. Crude throughput and blendstock (42.1 million barrels), was up
two percent on the previous year (2011: 41.2 million barrels). Throughput on
the refinery's Crude Distillation Unit (CDU1) grew 16 percent in 2012 which
was ahead of the 15 percent capacity growth business case for the 2009 Point
Forward investment.
"These good performances contributed to a record distillate outturn of 33.6
million barrels, up four percent on the previous year (2011: 32.3 million
barrels).
"Energy performance, measured via the Global Solomon Associates Energy
Intensity Index (EII), improved on the back of the excellent performance of
key processing units and an optimum crude mix. Our aim is to continually
improve the energy performance and when normalized for the two shutdowns, the
2012 result represents a very good energy performance," said Mr Jackson.
Plant integrity maintenance
In February 2012 the Company carried out a seven day shutdown on the
hydrocracker unit for emerging maintenance and in April 2012 a 17 day
shutdown sustained the processing performance on the Platformer and Crude
Distiller units. Both shutdowns were executed safely, with no personal or
process safety incidents, within budget and to the timeframe agreed with the
Company's customers.
The New Venture - Te Mahi Hou
Mr Jackson confirmed that the $365 million Continuous Catalyst Regeneration
Platformer (CCR) Project approved in April 2012, and officially named The New
Venture - Te Mahi Hou - is progressing safely and to plan.
"To date $70 million has been spent on Te Mahi Hou, including the front end
engineering and design costs. Detailed engineering is progressing, orders
for long lead and key equipment have been placed and modifications made to
existing equipment ahead of CCR site preparation towards the middle of 2013.
"Te Mahi Hou will provide a significant step towards achieving the Company's
aims and upon commissioning will strengthen Refining NZ's competitive
position for our customers and deliver improved returns to shareholders."
Processing arrangements
In April the Independent Directors recommended that the processing
arrangements with Refining NZ customers be reviewed by independent oil
industry experts, Purvin & Gertz. Their report concluded that the current
processing fee arrangements, between Refining NZ and the customers are
generally reasonable to all parties, relative to the risks borne by Refining
NZ and customers.
Shareholder returns
"Taking into account the Company's strong balance sheet, the forecast
expenditure on Te Mahi Hou and the challenging business environment, the
Directors resolved to pay a final dividend of 5 cents per share with full
imputation credits attached. An interim dividend of two cents was paid on 20
September, 2012 resulting in a total dividend payment of 7 cents for the
year."
NZX 50 listing
While Refining NZ retains a market capitalisation in line with the top fifty
listed companies in the country, in December a new liquidity test adopted by
the New Zealand Stock Exchange saw the Company drop out of the NZX 50. Under
the absolute liquidity rules the Exchange requires a company to trade at
least 2.5 percent of its six monthly average market capitalisation over a six
month period with Refining NZ falling short of this target at around 2.2
percent.
Board and Management changes
"During the year Director Mike McGuinness of BP Oil New Zealand resigned and
was replaced by Matthew Elliott. Glenn Henson of Mobil Oil New Zealand also
resigned and was replaced by Andrew Warrell. Thank you to Mike and Glenn for
their valuable contribution to the Company during their time as Board
Directors.
"Chief Executive Officer, Ken Rivers was farewelled in December 2012. He has
been replaced by Sjoerd Post, who joined Refining NZ in January 2013 from
Shell International Petroleum Company Ltd where, prior to his resignation, he
was Executive Vice President, Downstream Strategy and Portfolio activities."
Future Outlook
Mr Jackson confirmed that the Company would review the business strategy
established five years ago: "Since it was adopted we have seen significant
structural changes in global refining, increased competition from refiners in
the Asia Pacific region and a customer change in New Zealand. The management
team has taken this into account and consider it appropriate to conduct a
full strategic review in 2013."
"Looking ahead, we expect business conditions to remain difficult in 2013
with volatility in refiners' margins and the exchange rate strength likely to
continue. However, the Directors consider the Company is well placed to
withstand this through strong revenue generation, supported by improved
safety and operational performances that ensure Refining NZ continues to
provide its customers with high quality transport fuels," said Mr Jackson.
ENDS
For further information contact:
Greg McNeill
Communications and External Affairs Manager
Refining NZ
T: 09 432 82311
M: 021 873 623
E: [email protected]
End CA:00233518 For:NZR Type:FLLYR Time:2013-02-27 14:57:55
