Hengyuan describes FY17 as a ‘monumental’ year
26 Apr 2018, 10:30 am
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This article first appeared in The Edge Financial Daily on April 26, 2018 - May 2, 2018

KUALA LUMPUR: Hengyuan Refining Co Bhd described its financial year 2017 (FY17) ended Dec 31, 2017, as a “monumental year” with output growing 5.87% to 39.7 million barrels from the year before, the refiner said in its 2017 annual report released yesterday.

“2017 was a monumental year for Hengyuan. It was a very positive year for us, with higher production numbers and improved plant reliability [achieved],” said its chairman Wang YouDe, a 55-year-old Chinese national who took the helm in December 2016 following the sale of Shell Overseas Holding Ltd’s 51% stake in Hengyuan (previously Shell Refining Co (Federation of Malaya) Bhd to Malaysia Hengyuan International Ltd.

According to the annual report, the refiner saw its kerosene or jet production supported by solid performance of Kerosene Treating unit in the first quarter, although in May it was impacted by several events, including the planned outage on Crude Distiller 1 and Kerosene Treating units.

Gas oil production too improved due to higher crude processing, positive regrade, and improvement of global oil cracks; while higher intake and better conversion at its Long Residue Catalytic Converter Unit (LRCCU) helped boost its liquefied petroleum gas and propylene production.

“Though refining margins were volatile during the year, gradual recovery of crude and product prices resulted in a full year average Current Cost of Stock (CCS) of US$7.17 per barrel, while First In First Out (FIFO) margin was US$8.39 per barrel (2016: CCS US$4.06, FIFO US$5.46),” the report read.

It attributed the higher CCS margin to higher product cracks (the pricing difference between product and crude) with rising crude premiums and higher refined product prices year-to-year compared with 2016 as well as better plant reliability in 2017.

The group capitalised on high refining margins when global product prices were affected by the shutdown of refineries and offshore refineries in the Netherlands and the US, due to fire and hurricane incidents.

Hengyuan’s oil refinery complex, located in Port Dickson, Negeri Sembilan, is licensed for a production capacity of 156,000 barrels per day.

In FY17, the group’s operational availability returned to its 2013 level, at 97.4%, after ranging between 82% and 95% for the past three years; while its average plant utilisation rate stood at 86.82%.

All in all, the group turned in an almost threefold increase in net profit to RM930 million in FY17, from RM335 million previously, while revenue grew 38.47% to RM11.58 billion from RM8.37 billion.

Sales volume rose 5.2% to 41.1 million barrels in FY17 from 39.05 million the year before.

Hengyuan highlighted that the group paid a single-tier interim dividend of two sen per share, amounting to RM6 million — its first in five years.

During the year, Hengyuan’s share price spiked eight times, rising from RM2.03 to RM16.26 as at end-2017. However, the stock has fallen 53.3% year to date to yesterday’s close of RM7.59, giving it a market capitalisation of RM2.28 billion.

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