The company posted a net loss of RM640.5m for 3Q22, attributed to adverse refining margin
PORT Dickson-based Hengyuan Refinery Co Bhd’s (HRC) share price took a plunge in the morning after it announced a massive quarterly loss.
On Nov 30, the stock nose-dived to RM3.57 from the earlier day close of RM4.55. In the intraday trading, the stock price fell more than 24% to RM3.45. It has yet to recover, with RM3.57 now its 52-week low. The stock recovered marginally the next day, but it is way off its 52-week high of RM7.40.
The company, which refines and manufactures petroleum products, posted a net loss of RM640.48 million for the third quarter ended Sept 30, 2022 (3Q22), attributed to adverse refining margin. It was more than 118 times the RM54.04 million net loss in the same quarter the year before, according to its exchange filing.
The company said the loss was attributable to an adverse refining margin compared to a more favourable refining margin during 3Q21.
“Adverse refining margin was mainly affected by a sharp reduction in cracks especially for Mogas (motor gasoline), coupled with higher crude premium incurred as well as higher stockholding losses due to significant drop in product prices during the quarter. These factors led to a net loss for 3Q22,” it said in the filing.
For the quarter under review, Hengyuan Refinery returned revenue of RM5.03 billion, up 55% from the year, supported by a 51% surge in the market product prices at an average price of US$124 (RM559.05) per barrel compared to US$82 per barrel in the corresponding period in 2021.
Sales volume in 3Q22 was comparable to 3Q21. Sales volume in 3Q22 was affected by production downtime, while sales volume in 3Q21 was a result of low activities during Movement Control Order (MCO) period, it said.
For the nine months, the group posted net profit of RM74.46 million compared to a net loss of RM97.11 million in the same period in 2021.
It said the 2022 year-to-date (YTD) net profitability was squeezed by both higher foreign exchange (forex) losses and higher finance costs compared to the same period in 2021. Higher forex losses arose from the strengthening of US dollar against the ringgit by 11%, while finance cost almost doubled due to aggressive interest rate hikes, it added.
Revenue for the cumulative period increased to RM16.88 billion from RM7.95 billion driven by higher product prices and sales volume.
Hengyuan Refinery, formerly known as Shell Refining Co (Federation of Malaya) Bhd, had two months ago announced that it was establishing an unrated medium-term notes programme of up to RM5 billion in nominal value and has secured multi-currency revolving credit facilities of up to US$235 million and
RM250 million, it said in a statement. The establishment of the unrated programme will be issued in tranches, over a tenure of 30 years via bought deal or private placement with AmInvestment Bank Bhd and Maybank Investment Bhd as the joint principal advisors, joint lead arrangers and joint lead managers, and Malaysian Trustees Bhd as the trustee. The multi-currency revolving credit facilities were offered by AmBank (M) Bhd, China Construction Bank Corp Labuan
Branch and Malayan Banking Bhd. Funds attained through the MTN Programme and RC Facilities will be utilised towards refinancing existing loans, funding the medium-term growth and working capital of Hengyuan Refinery that will enable the company to proceed with its planned upgrade and maintenance projects for the refinery, it said.
In the same statement, chairman Wang You De said that the financing programme was an important decision-making to Hengyuan Refinery’s ongoing efforts to maintain sustainability and help Hengyuan Refinery reach its next level of growth. — TMR
- This article first appeared in The Malaysian Reserve weekly print edition