N.Z. Refining Profit Falls 30%; Div. Up

Press, Volume CVIII, Issue 31784, 14 September 1968, Page 18

N.Z. Refining Profit Falls 30%; Div. Up

New Zealand Refining Company, Ltd, Whangarei, has increased its dividend from 9 per cent to 10 per cent for the year to June 30 in spite of a 30 per cent fall in group profit, directors say in a preliminary report.

Because of complications arising from the decision of the Minister of Industries and Commerce (Mr Marshall) to review and fix the refiner’s margin, they cannot assess what financial effect these are likely to have on future operating results of the company.

The profit for the latest year fell 5905.609 to $2,109,057, although the volume of crude oil and feedstocks processed in the latest year slightly exceeded that of previous years. The cost of distributing finished products from Marsden Point to New Zealand ports was sl.2m higher because of the world-wide effects of the Arab-Israeli War; the closure of the Suez Canal; and the consequent world shortage of tanker tonnage. Devaluation Loss Had the agreed formula for calculating the refining fee—of which the Government was well aware and which was in force to December 31, 1967 —continued, the company would have been entitled as part of its refiner’s margin, to sl.7m as a result of devaluation. Because of the official

policy that there should be no advantage to companies, such as the refining company, resulting from devaluation, the formula has had to be varied to eliminate this sum from the fee. Directors have strongly protested against the unilateral decision of the Minister officially to fix the refining fee, says the report. Up to the present, in broad terms, the basis of calculating the refining fee has been the difference between the value of products manufactured and the value of the crude and feedstocks required to manufacture those products. The Government has been aware of this basis, they say. The refining company has been advised that the date from which any revised fee will operate will be discussed by officials of the Department of Industries and Commerce and the company’s management. Until and pending comple-

tion of negotiations, directors cannot assess what financial effects these are likely to have on future operating results of the company. The 10 per cent dividend will require sl.2m and will be covered 1.8 times by the latest profit. The earning rate on average shareholders’ funds is down from 19.5 to 12.3 per cent.