Hengyuan posts second quarterly loss amid lower motor gas cracks, lower sales volume due to plant maintenance

KUALA LUMPUR (Feb 28): Hengyuan Refining Co Bhd posted a net loss of RM232.1 million in the fourth quarter ended Dec 31, 2022 (4QFY2022) against a net profit of RM179.78 million a year earlier, as earnings were affected by a softening of motor gas (mogas) cracks and lower sales volume due to scheduled plant maintenance.

This is the group’s second straight quarterly loss after booking a higher net loss of RM640.48 million in 3QFY2022.

Conditions in 4QFY2022 were less harsh than in 3QFY2022 despite continued pressures on mogas cracks and high crude premium costs, the group said in a bourse filing.

Quarterly revenue was 5.11% higher at RM4.26 billion from RM4.06 billion in 4QFY2021, supported by higher product prices despite lower volumes sold.

Hengyuan said the product prices averaged US$110 per barrel during the quarter compared with US$92 a year ago, while the lower sales volume achieved was due to scheduled plant maintenance.

For the full year, the group posted a net loss of RM157.64 million versus a net profit of RM82.67 million in FY2001, as adverse mogas cracks and stockholding losses in the second half of the year weighed on earnings.

“Operating performance in FY2022 was further reduced by the impact of foreign exchange losses and higher finance costs compared with FY2021 due to the strengthening of the US dollar against the ringgit while the higher finance cost was affected by the rise in interest rates,” the group said.

This was despite revenue rising 76.1% to RM21.14 billion from RM12 billion in FY2021, underpinned by higher sales and higher product prices, which grew 58% to US$125 per barrel from US$79 per barrel.

Going forward, Hengyuan said the global oil market continues to be volatile with challenges from both supply and demand side.

“Ongoing geopolitical risks continue to bring tension and uncertainty to the global oil markets.

“While the easing of China’s Covid-19 restrictions is expected to boost global oil demand, any slowdown in the global economic outlook may neutralize any envisaged positive effects,” it added.

Hence, the group said it is actively monitoring the current market conditions and will continue its efforts to focus on operational efficiency, product quality, hydrocarbon hedging and financial risk management to optimize its performance.

Shares of Hengyuan closed six sen or 1.73% higher at RM3.41, giving the group a market capitalisation of RM1.02 billion.