Bloomberg News

NIS Refiner Net Income Falls 15% on Weaker Serbian Dinar

April 27, 2012

Naftna Industrija Srbije AD (NIIS), the Serbian oil and company controlled by Russia’s OAO Gazprom Neft (GAZP), said first-quarter profit dropped 15 percent as the dinar weakened against the euro.

Net income fell to 8.4 billion dinars ($100 million) in the three months through March, Chief Financial Officer Alexey Urusov Alexey Urusov said in Belgrade today. Earnings before interest, taxes, depreciation and amortization almost doubled to 15.5 billion dinars. Sales rose 24 percent to 45.6 billion dinars even as the Serbian fuel market shrank 7 percent when heavy snow impeded traffic in January and February.

“We did not increase our retail prices as much as the cost of imported crude went up” in the period, Urusov said. NIS, the biggest company on the Belgrade Stock Exchange, imports most of the crude it processes at its two refineries, in Pancevo and in Novi Sad.

Oil and gas output rose 15 percent to 413,000 tons of oil equivalent, he said. The company tripled investments in the period to 7.7 billion dinars, while debt fell to $444 million at the end of March from $446 million at the end of December.

“The growth of Ebitda is very positive,” said Ivan Dzakovic, head of research and analysis at Sinteza Invest Group, a Belgrade-based brokerage. “With the price-to-Ebitda ratio now at 1.92, NIS is very cheap.”

Dinar Effect

A year earlier, net earnings of 9.8 billion dinars included a positive currency effect of 4.6 billion dinars, whereas the negative effect in the latest quarter was around 4 billion dinars.

Operating cash flow deteriorated 95 percent as the company faced delays in payments from clients such as Srbijagas, Serbia’s national, state-run gas company and Elektroprivreda Srbije, the power producer.

Srbijagas owed 8 billion dinars to NIS at the end of March, or 3 billion dinars more than at the end of 2011, while the EPS’s debt rose by 2 billion dinars, Urusov said without providing the total owed by the latter.

“The final result could be worse in the end if NIS eventually has to write off some of the claims,” Dzakovic said.

NIS share traded at 655 dinars today, 0.76 percent down from yesterday’s close.

Urusov reiterated that a 550 million euro upgrade of the main, Pancevo refinery will be completed in the third quarter, with fuel production expected in November. The other refinery, in Novi Sad, is used mostly for making base oils and lubricants.

NIS, which operates gas and oil fields in Serbia and Angola, signed an agreement last year with Austria’s Rohoel Aufsuchungs AG for joint exploration in neighboring Hungary.

To contact the reporters on this story: Misha Savic in Belgrade at msavic2@bloomberg.net; Ladka Bauerova at lbauerova@bloomberg.net

To contact the editor responsible for this story: James M. Gomez at jagomez@bloomberg.net


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