SPC Q2 revenue leaps 65%, but profit up marginally

Higher costs, weak US$ offset better refining margin; no divestment gain

By NISHA RAMCHANDANI

DESPITE revenue surging almost 65 per cent to $3.25 billion for the second quarter, Singapore Petroleum Company (SPC) recorded a marginal 0.6 per cent year-on-year rise in net profit to $180.26 million for the three months ended 30 June.

Earnings per share rose to 34.96 cents for the quarter from 34.79 cents for the year-ago comparative period.

For the first six months of this year, net profit fell to $278.75 million from $291.34 million in 1H07 while revenue grew 52.8 per cent from $3.9 billion to $5.96 billion.

An interim one-tier (tax exempt) dividend of 20 cents per share will be paid out on Aug 26.

In Q2, SPC completed its scheduled maintenance programme of the Catalytic Reformer (CRU) and the Hydrocracker 2 (HCU2) upgrading units which led to total crude and feedstock throughput being reduced by 9 per cent to 263,000 barrels per day. However, sales volume increased to 19.3 million barrels from 18.3 million in the corresponding quarter for 2007.

For the quarter, the group achieved an average refining margin of US$13 per barrel, compared with US$9 per barrel for 2Q07. This was offset by lower refinery product throughput, higher processing costs, higher hedging costs and the weaker US dollar, said SPC.

Another key factor is that there was no divestment income in Q2 2008, against $14.1 million in Q2 2007.

Downstream activities contributed $3.15 billion in Q2 turnover and a pre-tax profit of $164.2 million, while exploration and production (E&P) contributed $94.3 million in turnover and a pre-tax profit of $61.1 million.

While the group achieved a higher pre-tax profit of $225.3 million in Q2 2008, higher E&P taxes totalling $23 million increased the group's overall income tax expense to $45.1 million, 75.6 per cent higher than in Q2 2007.

For H1 2008, 'demand for refined products remained robust despite the increases in oil prices,' said SPC.

On prospects ahead, demand might be hit by the slowing global economy in the next 12 months and the reduction of government subsidies in several Asian countries, SPC said. 'The new Reliance Jamnagar refinery coming onstream would add to supply and affect refining margins,' it said.

'However sustainable demand from China, India, Russia and the Middle East will lend support to refining margins. We expact margins to remain healthy.'

The company expects to stay profitable for the rest of the year. SPC shares closed trading yesterday at $6.53, down 2 cents.

You can read SPC's news release here.