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Slovnaft reports lower '96 results than forecast

Rising world crude oil prices and a plant closure for general maintenance, as expected, bit hard into Slovak refiner Slovnaft's bottom line in 1996, company officials said. Slovnaft, the country's sole crude oil refiner, said its 1996 net profit was 1.29 billion Sk, down some 30 percent from its 1995 result of 1.83 billion Sk.
Presenting the results at a general shareholders' meeting on April 24, Slovnaft Director Slavomír Hatina said the figures were still positive despite the drop in profits, given average world crude oil prices were about 50 percent higher than the previous year.
"A constant rise in world oil prices was a reasonable problem [during 1996], and resulted in rising costs for crude oil by more than four billion crowns, or 23 percent more than 1995," Hatina said. "On the other hand, we did not calculate this increase completely into the prices of our products, mainly motor fuels."

Rising world crude oil prices and a plant closure for general maintenance, as expected, bit hard into Slovak refiner Slovnaft's bottom line in 1996, company officials said. Slovnaft, the country's sole crude oil refiner, said its 1996 net profit was 1.29 billion Sk, down some 30 percent from its 1995 result of 1.83 billion Sk.

Presenting the results at a general shareholders' meeting on April 24, Slovnaft Director Slavomír Hatina said the figures were still positive despite the drop in profits, given average world crude oil prices were about 50 percent higher than the previous year.

"A constant rise in world oil prices was a reasonable problem [during 1996], and resulted in rising costs for crude oil by more than four billion crowns, or 23 percent more than 1995," Hatina said. "On the other hand, we did not calculate this increase completely into the prices of our products, mainly motor fuels."

(Five days later, the refiner made public its results for the first quarter of 1997, with officials saying the company posted a pre-tax profit of 790.3 million Sk for the quarter, compared to a loss of 132.7 million Sk for the same period in 1996. Slovnaft spokeman Ľubomír Žitňan told Reuters that the firm's turnover for the first three months of the year was 12.6 billion Sk. Comparative turnover figures were not immediately available.)

Hatina said that planned general maintenance, which shut down some 70 percent of the firm's refining capacity from early March until the end of April, also hurt profitability.

Oil prices are still regulated by the state, and any changes must be approved by the finance ministry. The government, at Slovnaft's request, hiked motor fuel prices five times in 1996, but consumers still pay well below levels found in western Europe.

Hatina said he also was encouraged by a 7.2 percent rise in sales compared to 1995, which showed the company's flexible performance on the markets, including a revival in business contacts with all the states of the former Yugoslavia. Slovnaft exports about 50 percent of its production and motor fuels account for about 63 percent of its overall refining capacity. It has an 80 percent share of the local petrol market.

Slovakia imports all its crude oil from Russia, through the Družba (Friendship) pipeline running via Ukraine. Slovnaft said it processed about 5.18 million tons of crude oil in 1996 (roughly 100,000 barrels per day), only slightly higher than the previous year but in line with forecasts. Despite the fall in net profits, Slovnaft will pay a dividend of 25.5 percent of its net result, up from 18.9 percent in 1995, though the final payout is roughly equal for both years.

In releasing Slovnaft's first quarter 1997 results, Žitňan said that the firm refined some 1.26 million tons of crude oil, up slightly from 1.19 million in the first quarter of 1996. First quarter sales totalled 9.6 billion Sk after 6.15 billion Sk for the same period last year, he added.

Slovnaft's main shareholders are Slovintegra a.s. with 39.00 percent, the state through its privatization agency the National Property Fund (FNM) at 19.15 percent, the Bank of New York, on behalf of the European Bank for Reconstruction and Development (EBRD), with 10.53 percent, and Benzinol a.s. 5.84 percent. In mid-April, the EBRD and the FNM reached an agreement under which the FNM will buy back the bank's stake in Slovnaft.

The EBRD took the stake in Slovnaft in 1995 when it bought half the refiner's $113 million issue of global depository receipts, which flopped on international markets. When it bought the stake, the EBRD effectively paid the 1,000 Sk face value per share. But shortly afterwards the FNM sold the 39 percent stake in the refiner to a select group of managers called Slovintegra at an implied price of just 156 Sk per share.

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