Orlen and Lotos, Polish Oil Refiners, Boost Profit

By Katarzyna Klimasinska

Aug. 13 (Bloomberg) -- PKN Orlen SA and Grupa Lotos SA, Poland's only oil refiners, increased second-quarter profit more than analysts had estimated after margins on diesel rose.

Net income increased 47 percent to 1.67 billion zloty ($762 million) from 1.14 billion zloty a year earlier, the Plock-based company said today. Analysts expected profit of 1.34 billion zloty, according to the median estimate of eight brokerages surveyed by Bloomberg News by phone and e-mail. Lotos's profit rose 66 percent.

``Both companies improved their margins,'' Kamil Kliszcz, an analyst at BRE Bank SA in Warsaw, said by phone today.

Orlen, which sells fuel in Poland, the Czech Republic, Germany and Lithuania, said earnings from producing diesel rose 146 percent to $278.4 a ton in the quarter. The company also boosted production 22 percent as its Lithuanian unit, AB Mazeikiu Nafta, returned to full capacity for the first time since Orlen bought it in 2006.

Net income at Lotos advanced to 396.5 million zloty from 239.5 million zloty a year earlier, the Gdansk-based company said today in a statement. That exceeded the 288 million-zloty median estimate of seven analysts surveyed by Bloomberg News by phone and e-mail.

Both companies also benefited from the higher value of oil in their tanks, as U.S. oil futures traded 90 percent higher in the second quarter than a year earlier and climbed above $140 a barrel for the first time in June. Crude prices have since fallen more than 20 percent.

Orlen may book a loss on inventories revaluation in the third quarter, should oil prices continue to decline, Chief Financial Officer Slawomir Jedrzejczyk said at a press conference in Warsaw today.

Chief Executive Officer Wojciech Heydel said Orlen's margins on petrochemical products improved ``slightly'' in third quarter. Lotos CFO Mariusz Machajewski told reporters today his company's refining margins have dropped slightly since June.

To contact the reporter on this story: Katarzyna Klimasinska in Warsaw at kklimasinska@bloomberg.net