Prague-listed petrochemicals group Unipetrol, the largest refiner in the Czech Republic, announced first quarter 2011 results Friday showing net profit up 50 percent year on year at Kč 464 million, in line with market expectations.
“The headline profitability looks decent, but the entire operating profit was generated by inventory holding gains of Kč 581 million,” the Wood & Co. brokerage said in a market comment. “If the crude oil price had not increased by 22 percent quarter on quarter, Unipetrol would have reported an operating loss of Kč 10 million.”
Q1 2011 revenue rose 28 percent on the year to Kč 23.1 billion while earnings before interest and taxes (EBIT) gained 10 percent to Kč 571 million. Unipetrol’s revenue growth was impacted by an unplanned February shutdown of its Litvinov hydrocracker. The refining segment reported Kč 89 million in EBIT. ‘Excluding the Kč 396 million in inventory holding gains, the underlying Kč 307 million loss is a weak result.’
“Excluding the Kč 396 million in inventory holding gains, the underlying Kč 307 million loss is a weak result, but we expected an even slightly higher loss of Kč 363 million,” Wood & Co. said. “The Refining segment would remain below the breakeven point even if we excluded the one-off loss incurred because of the [Litvinov] unplanned hydrocracker shutdown.”
On the positive side, Unipetrol’s petrochemical segment generated its strongest quarterly profit since the beginning of the financial crisis and thus managed to translate a strong model margin into its results (€ 626/tonne, up 17 percent compared to Q4 2010), according to the brokerage.
“The retail segment performance is a negative surprise for us, at Kč 72 million in EBIT, 12 percent below our already quite conservative assumption of Kč 82 million,” Wood & Co. said. “The bulk of the 45 percent y/y slump in the EBIT is attributable to the margin contraction. Diesel sales volumes increased y/y but gasoline remained on the decline due to price differentials in neighboring countries.”
Unipetrol is controlled by Poland’s PKN Orlen, which owns a 63-percent stake in the Czech company. It is the majority shareholder (51.22 percent) in the top Czech oil refiner Česká rafinérská, a joint venture with Italy’s Eni (32.445 percent) and a subsidiary of Royal Dutch Shell (16.335 percent). Eni is negotiating the sale of its stake to Russia’s Gazprom.