A drop in the price of crude oil and the appreciation of the Romanian currency against the dollar has resulted in Petrom's profit witnessing a decline of 34% in euros in the first half of the year.
Petrom, the largest Romanian company, posted a net profit worth 266 million euros (887 million RON) in the first six months of the year, down from the 404 million euros (1.4 billion RON) reported in the first half of last year. The company's turnover reached 1.6 billion euros (5.4 billion RON), down 9% in euros against the same period last year.
In the second quarter, Petrom posted a net profit worth 154 million euros and a turnover worth 818 million euros.
The results are generally considered to be lower than the financial analysts expected. Yesterday, Petrom's shares on the Stock Exchange dropped by 3.8%, with the company's value witnessing a decline of 350 million euros. Growths in shares were also influenced by the fall of the whole Stock Exchange, not just by the company's financial results.
"The first half of the year was full of challenges, but the results registered in first six months of the year are consistent with our expectations. The strong appreciation of the RON against the American dollar, and, to a certain extent, the lower crude oil prices, had a negative impact on both our profit and turnover," stated Mariana Gheorghe, CEO of the company, which is controlled by the Austrian group OMV.
In the first six months of the year, the RON appreciated 13% against the American dollar, from 2.88 RON to 2.51 RON/USD and prices of crude oil dropped by around 2 dollars per barrel.
Another factor that contributed to the decline in the company's financial results was a drop in the production of gas and crude oil, both domestically and globally. Lower volumes were sold because of a six-week shutdown at the Arpechim refinery due to an inspection.
"Results in the second quarter were up against the first quarter of the year, but down compared with the second quarter of 2006. Both for the first six months as a whole and exclusively for the second quarter, results are below our expectations," stated Adriana Marin, head of the research department at the brokerage company CA IB Securities.
Petrom's production derived from its exploration and production activity-the company's most significant business segment, is basically assessed depending on international crude oil quotes expressed in dollars. Therefore, crude oil extracted by Petrom was evaluated when the dollar was weaker. In its next stage, the extracted production is sold to the refining division.
The sales price is expressed in RON, by converting the dollars derived from production, into RON. The appreciation of the RON leads to a decline in RON revenues. If this conversion were not made, the RON's appreciation would no longer have a major impact on the company. In terms of marketing, the most efficient protection measure against the exchange rate is the reduction of exports, which in fact happened, as Petrom cut its exports by 54%.
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