KUALA LUMPUR (Feb 17): Shell Refining Co (Federation of Malaya) Bhd announced that its net loss for the financial year ended Dec 31, 2014 (FY14) has ballooned to RM1.19 billion or a loss per share of RM3.96 from RM155.98 million or 51.99 sen per share a year ago.
The group blamed the deteriorating performance to an impairment loss of RM461 million, operational losses of RM102.6 million, as well as stockholding losses of RM625.1 million due to falling oil prices last year (from an average dated Brent marker of US$107 per barrel in January to US$55 per barrel in December).
Revenue in FY14 slipped 3% to RM14.26 billion from RM14.7 billion a year ago, due to lower product prices, its filing to Bursa Malaysia yesterday showed.
It also noted that its refinery processed 37.9 million barrels of crude oil in FY14, which is higher by 1% as compared to FY13.
Last year, Shell Refining registered a net loss of RM916.91 million or RM3.06 per share in the fourth quarter ended Dec 31, 2014 (4QFY14), compared to a net loss of RM35.92 million in 4QFY13; revenue for 4QFY14 also slumped 22% to RM2.93 billion from RM3.75 billion previously, due to decreasing product prices since July 2014.
In comparison, the group posted a net loss of RM44.08 million or 14.69 sen per share in 1QFY14, followed by RM28.01 million or 9.34 sen per share in 2QFY14 and RM199.76 million or 66.59 sen per share in 3QFY14.
In total, Shell Refining - which has been bleeding losses for four years now - has chalked a cumulative net loss of RM1.56 billion since FY11.
In a separate announcement, Shell Refining said it has recorded an impairment loss of RM461 million, representing a write-down of plant, property and equipment to the recoverable amount.
The group said the amount was assessed following a review on the recoverable amount of plant, property and equipment, which was done according to the Malaysian Financial Reporting Standard 136.
"During the year, with the declining trend in refining margins and the announcement by the relevant regulatory bodies of its intention to implement the Euro 4m and 5 compliant fuel by 2018 and 2020 respectively, a review of the outlook of margins was performed.
"The recoverable amount of the refinery, being defined as a cash-generating unit, was determined at RM1.054 billion based on its value-in-use and an impairment loss of RM461 million was recognised in the profit or loss as disclosed in statement of comprehensive income," Shell Refining said.
Going forward, Shell Refining expects the refinery margins to be weak.
"Operational and product quality will continue to remain the refinery's key focus area to maximize margin opportunities," the group added.
It is worth noting that the group had on January 9 this year announced that it has completed a 'structured review' of the company's financial health. It also blamed its current poor margin due to overcapacity in the global refining industry as the main culprit.
Shell Refining (fundamental: 0.35; valuation: 0.6) had also said that it might consider long term options that include potential sale of assets or conversion of operations to a storage terminal to sustain its operation.
Last year, the stock fell 28.53% from RM6.45 on March 4 to RM4.61 on Dec 30. It rebounded some 14.53% at the start of the year to close at RM5.28 today, down 17 sen, giving it a market capitalisation of RM1.58 billion.
(Note: The Edge Research's fundamental score reflects a company's profitability and balance sheet strength, calculated based on historical numbers. The valuation score determines if a stock is attractively valued or not, also based on historical numbers. A score of 3 suggests strong fundamentals and attractive valuations.)