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Volatile conditions impact refinery

Volatile conditions in the second half of the year carved $100m off New Zealand’s only refining company’s full year profit.

The New Zealand Refining Company (NZR) posted a FY09 NPAT of $23.6m, compared to $124.9m in FY08. Chairman David Jackson said while the result was disappointing it was widely anticipated.

“At the time of the half year result, we announced that we expected to operate at a loss in the second half of the year and that market conditions in the refining sector were extremely difficult. The challenge of operating with perhaps the weakest refiners’ margins experienced in refining for some years is borne out by these results,” said Jackson.

He said conditions were dominated by the global financial crisis which saw demand for oil products falter just as new refinery capacity had come online, with the resulting oversupply depressing refiners’ margins further. “The situation was exacerbated by the strengthening NZD, or weakening USD, resulting in lower processing fee income.”

Jackson warned that despite a slight improvement in margins from late December 09 through to January 2010, the supply/demand fundamentals “have not changed sufficiently to expect a sustained recovery in refinery margins at this stage.”

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