KUALA LUMPUR (Feb 26): Hengyuan Refining Company Bhd's net loss for its fourth quarter of financial year 2023 (4QFY2023) widened due to lower cracks for gasoil and Jet A1 — a type of jet fuel — coupled with hedging loss. Cracking, in petroleum refining, refers to the process by which heavy hydrocarbon molecules are broken up into lighter ones under heat and pressure.

The group's net loss for 4QFY2023 widened by 18% to RM274.65 million from RM232.10 million in the corresponding period of the prior year. This comes despite revenue rising 17.7% to RM5.02 billion from RM4.26 billion, its bourse filing on Monday showed.

According to the company, the increase in revenue was attributable to higher sales volume, thanks to improved plant efficiency following the completion of a major turnaround exercise (MTA) in August 2023.

“Nevertheless, the MTA exercise had affected the full-year plant production resulting in lower sales volume in FY2023 by 14% as compared to FY2022. Furthermore, the average product market prices also dropped by 13% as compared to FY2022,” Hengyuan said.

Consequently, its full FY2023 revenue fell by 27.2% to RM15.4 billion from RM21.14 billion in FY2022, while its net loss tripled to RM488.57 million from RM157.64 million, marking its worst financial year since FY2015. The company did not recommend any dividend for FY2023.

Looking ahead, the group expects crude oil supply and demand to continue to be challenged by geopolitical risk and a global economic slowdown that could lead to unpredictable crack margins.

“The company is actively monitoring the current market conditions and is committed in its efforts to focus on operational efficiency, product quality, hydrocarbon hedging and financial risk management to optimise its performance,” it said.

At Monday’s close, its share price fell by one sen or 0.32% to RM3.13, valuing the group at RM939 million.