KUALA LUMPUR (May 21): Hengyuan Refining Co Bhd saw its net profit fell 68.94% to RM86.81 million in the first quarter ended March 31, 2018 (1QFY18) from RM279.49 million a year ago as margins fell due to a lower crack spread for motor gas.

The decline in the crack spread, which measures the pricing difference between a barrel of crude oil and the petroleum products refined from it, occurred amidst increasing crude prices and high inventory in the region, the refiner noted.

As a result, its 1QFY18 earnings per share declined to 28.94 sen from 93.16 sen previously despite marginally lower manufacturing expenses, according to the group's filing with Bursa Malaysia today.

"There were also unplanned downtime events related to motor gas production units," Hengyuan said.

This was despite a 4.41% increase in quarterly revenue to RM3.06 billion in 1QFY18 from RM2.93 billion previously due to higher average product prices in the quarter, during which Brent crude oil average US$76 per barrel versus US$65 per barrel in the previous corresponding quarter.

"Sales volume in the current quarter was 10.2 million barrels, at par with 10.1 million barrels sold in the same quarter of 2017," Hengyuan said.

The company also recorded a foreign exchange gain as the ringgit continued to appreciate against the US dollar, although it experienced higher finance costs in the quarter due to a full amortisation of upfront fees on borrowings.

"Refining margins are expected to remain volatile in the near term based on published forward market prices and refining margins," Hengyuan said, adding that it would continue to remain focused on operational efficiency, safety performance, product quality, hydrocarbon hedging and financial risk management.

Shares in Hengyuan closed 11 sen or 1.31% lower at RM8.29 today, leaving the group with a market capitalisation of RM2.45 billion.