Profit of Mazeikiu Nafta controlling company PKN Orlen hurt by oil price in Q1
![](/img/en_news_image.jpg)
Poland's refinary PKN Orlen SA said the first-quarter earnings in 2009 will be hurt by a decline in the value of oil inventories and narrower margins on petrochemical products. A decline in the value of oil stored in Orlen's tanks cut earnings by as much as 300 million zloty (88 million dollars) in the first quarter, compared with a 326 million-zloty gain in the comparable period of 2008, the Plock, Poland-based company said in a regulatory statement yesterday.
Orlen did not say whether earnings before interest and taxes will be positive. In the fourth quarter of 2008, the company had a 3.05 billion-zloty net loss and reported the first annual loss in its history, as a record decline in the price of crude oil cut the value of its reserves and the cost of debt rose, informs LETA/Bloomberg.
"The trading statement implies weaker operating performance quarter on quarter and year-on-year," Olena Kyrylenko, an analyst at KBC Securities, said by phone from Budapest.
Orlen fell as much as 3.6% to 24 zloty in Warsaw trading, the lowest since April 1, and was down 1.8% at 11:05 a.m. The benchmark WIG20 Index rose 1.4%.
Profit from production of polyolefins and olefins declined, and volumes of petrochemical product sales dropped 2% to 1.26 million tons.
"The bottom line will definitely be in minus again due to financial costs, and there is a big chance that operating profit could be negative too," Kyrylenko added.
Analysts – including Monika Kalwasinska at PKO Bank Polski SA – say Polish rules on strategic oil reserves "distort" earnings at Orlen and No. 2 producer Grupa Lotos.
Orlen's shares had a record gain, and Lotos climbed 15%, on March 25 when Parkiet newspaper first reported a government plan to change the rules and take the stored crude off the companies' books.
Earnings in the three months ending on March 31 will also be lowered by 150 million zloty for "revaluation of provisions for costs and risks, including revaluation of foreign currency," the statement said. The Polish currency lost 16% against the dollar in the three months ended March 31.
Orlen's Prague-based unit Unipetrol AS, the biggest Czech oil company, probably had a first-quarter loss before interest and taxes, it said in an e-mailed statement.
Orlen's announcement "confirmed our view of weakening margins, especially for petrochemicals, which could hit Unipetrol even more," Tamas Pletser, an analyst at ING Groep NV, wrote in a note yesterday, on April 22.
Production in the refineries Orlen owns in Poland, the Czech Republic and Lithuania rose 5% to 6.85 million tons from a year ago and fell 3% from the previous quarter.
Orlen is scheduled to report full first-quarter earnings on May 14.