Petrom Profit Drops 45%, Stays Above Analyst Estimates

Petrom (BSE:SNP), the largest company in Romania, concluded the first half of the year with a net profit of 923 million RON, down by 45% from the corresponding period of 2008, but well above the analysts" estimates, as the price of oil has doubled since the beginning of the year to over 70 USD/barrel lately. The average price of oil in the second quarter of the year was 52 USD/barrel, one third up from the 39 USD/barrel averaged in the first quarter. The large number of buy orders for SNP shares inflated the price by over 1% yesterday to 0.262 RON/share, in light of the recently announced H1 results.

The company has estimated a Y2009 net profit of 1.11 billion RON, up by 8.6% from last year. According to company representatives, Petrom"s results in the first half of the year reflect the lower price of oil and the lower volume of sales of oil and gas products. Petrom reported a 28% year-on-year decrease in turnover to 5.92 billion RON.

"Although the worsening economic context has significantly affected our results, we are currently benefiting from our robust financial status and competitive position on the market following the reorganization efforts and the investment programmes of the past few years, fully supported by our prompt response to the crisis," Petrom CEO Mariana Gheorghe said yesterday.

Hedging and favourable changes in the exchange rate played an important role in maintaining the company"s cash flow as over 60% of the financial profit was generated by risk insurance instruments. Petrom remains Romania"s largest taxpayer with 3.13 billion RON or 12% of the company"s overall revenue.

• Mariana Gheorghe: Fuel sales will decrease 10-15% in Q2

"Retail sales of fuel will decrease by 5% in the second half of the year," according to Petrom CEO Mariana Gheorghe. She believes that commercial sales of fuel could lose as much as 15%. Retail sales stagnated in the first half of the year, while commercial sales lost 10%. The overall demand for fuel could decrease by 20% this year, as the Government has estimated a 4-8% decline in the GDP.

• Sale of Arpechim"s petrochemical arm could be completed by year-end

The sale of the petrochemical division of Arpechim to Oltchim - Ramnicu Valcea could be completed by the end of the year. Petrom"s CEO yesterday said that the company was hoping to close the deal in the following months. "We are ready to close the deal with Oltchim and we are hoping to sign in the next few months, but it does not depend entirely on us, but also on them," she added. Oltchim is currently the only bidder for Arpechim, after having tried to buy it for the past two years. However, Oltchim does not momentarily have the funds to make payment.

Referring to Petrom"s investment strategy for this year, CEO Mariana Gheorghe said the company had allocated 2 billion RON for investments in H1, by 40% less than in the corresponding period of 2008. Petrom is the leading player on the Romanian oil market, having a share capital of 5,664.41 million RON, divided into shares with a face value of 0.1 RON. The company"s shares are listed on the Bucharest Stock Exchange (BSE) Tier 1 since 3 September 2001.

Petrom"s majority shareholder is OMV A.G. with 51.01%. The State Assets Recovery Authority (AVAS) has 20.64%, while Fondul Proprietatea holds 20.11%. The remaining 8.24% is free float on the BSE.