Mol Posts Quarterly Loss as Oil and Forint Tumble

By Balazs Penz and Nicholas Comfort

Feb. 27 (Bloomberg) -- Mol Nyrt., Hungary’s largest oil refiner, reported a second consecutive quarterly loss after falling crude prices lowered the value of its inventories and a weaker forint increased financing costs.

The net loss was 33.3 billion forint ($140.7 million), or 370 forint a share, compared with net income of 98 billion forint, or 1,256 forint a share, a year earlier, Mol said in a statement. That’s less than the 41.8 billion-forint median estimate of seven analysts in a Bloomberg survey.

The Budapest-based company was hurt by crude oil prices, which plunged 56 percent in the quarter, cutting the value of inventories. The forint lost 10 percent against the dollar and 9 percent against the euro in the fourth quarter, raising the company’s foreign-currency debt.

“The inventory loss was much bigger than expected,” Anish Kapadia, an analyst at UBS AG in London, wrote in a note today. Excluding writedowns on stockpiles, Mol’s “strong underlying” earnings beat the bank’s estimates.

Mol fell as much as 295 forint, or 3.1 percent, to 9,175 forint in Budapest trading. It was at 9,200 forint at 1:30 p.m. local time, valuing the company at 1.01 trillion forint.

‘Stable Performance’

Sales in the quarter rose 8 percent to 852 billion forint, Mol said. Earnings before interest and tax, or operating profit, fell 93 percent to 6.4 billion forint including oil’s drop and gained 72 percent to 93.7 billion forint without it, Mol said.

“Mol produced a stable performance in a tough environment,” co-Chief Executive Officer Gyorgy Mosonyi said at a press conference today. “A complicated and difficult year is behind us and the next one won’t be better.”

The Hungarian refiner may reduce its operating expenses this year from the 2008 level, Chief Financial Officer Jozsef Molnar said at the press conference in Budapest today. Mol’s financial situation is “stable” and it will seek to fund all capital expenditure in 2009 from its income, he added.

European refiners are slashing output by bringing planned maintenance at their plants forward as a recession in the euro area cuts demand for fuels and chemicals alike. Petroplus Holdings AG, Europe’s largest independent refiner by capacity, said last month it would run its units 24 percent below capacity this year on falling demand.

Mol will improve refinery efficiency, Mosonyi said. That includes an upgrade of its plant in Mantua, Italy, where an unscheduled stoppage curbed earnings last year, Molnar said.

Crack Spreads

Crack spreads, the margin on refining crude oil into fuels, should average $100 a ton for diesel and $80 a ton for gasoline in 2009, the executives said. In the last three months of 2008, those measures narrowed by $20 and $82 a ton respectively from the third quarter, according to the statement issued yesterday.

Other spending plans include adding natural gas pipelines toward Romania and Croatia as well as developing fields to tap supplies of the fuel, the CFO said.

Higher prices for the heating fuel at Mol’s exploration and production unit more than compensated for oil’s slide in the quarter, wrote Kapadia of UBS, who is “neutral” on the stock.

Mol’s performance compares with a 208 million-euro ($265 million) loss at OMV AG, the Austrian refiner that gave up a yearlong 2.8 trillion-forint hostile bid for the Hungarian company in August. PKN Orlen SA, Poland’s largest refiner, yesterday reported a 659 million zloty ($178 million) loss for 2008, the first full-year loss in its history.

Recession

Eastern Europe has been battered by a global financial crisis that curbed demand for the region’s exports while shutting off investment and credit. Hungary slipped into its second recession in two years and the central bank expects the economy to shrink 3.5 percent in 2009.

“As of the second half of 2008, Mol faces a tough economic environment, at home and abroad,” Chairman and Chief Executive Officer Zsolt Hernadi said in the earnings statement. “Our management team is implementing a range of cost-reduction measures to extend our efficiency leadership and give the group greater strength to weather the storm.”

The company has already decided to cut capital spending by 30 percent this year to 220 billion forint to save on costs. Mol has access to 1.5 billion euros of “financial headroom” in loans and cash, it said.

To contact the reporters on this story: Balazs Penz in Budapest at bpenz@bloomberg.net, Nicholas Comfort in Frankfurt at ncomfort1@bloomberg.net