Natural gas imports eat into Petrom's profit

SNP Petrom, the largest company on the Romanian market, anticipates to post poorer financial results this year than last year, particularly because of the expenses for import and storage of natural gases, says general manager Gheorghe Constantinescu.

The adjusted S&R budget for 2003 to be debated by SNP’s Board of Directors this month targets a 3,016bn ROL (81 million euros, if calculated at an average 37,000 ROL/EUR exchange rate) gross profit, 11% lower than last year’s 3,345bn ROL (over 100 million euros) profit in nominal terms. This year’s turnover will be somewhere in the neighbourhood of 72,476bn ROL (1.9bn euros), compared to the 72,772bn ROL (2.2bn euros) last year.

The new company management had initially set a gross profit target comparable to the one last year, yet certain factors upset Petrom’s plans, Constantinescu says. What were those factors?

“A series of causes outside the company such as the increase in the imported gas price or gas storage expenses. Oil product exports have done well this year, it is not about causes related to the company’s business, but to unfavourable circumstances as far as the natural gases are concerned,” Gheorghe Constantinescu told Ziarul Financiar. The price of the gas imported from Russia went up to $140/1,000 cubic metres in mid this year, 30-35% higher than early in the year on the average.

On the other hand, the company plans to stick to a “conservative budget” in 2004, as well, sources on the capital market say. The 2004 budget is built around the same guidelines as the 2003 budget. It targets 3,298bn ROL (78.1 million euro) gross profit and 80,404bn ROL (1.914bn euros) turnover.

The restructuring of the company is slow-moving, with the number of employees set to be cut from 60,000 at the end of 2002 to 58,437 at the end of 2003 and 57,754 at the end of 2004, the year currently set for transferring the company to private property.

Another item on the agenda of the General Meeting of Shareholders scheduled in two weeks from now is a 475bn ROL (some 11.8 million euro) capital increase, following the inclusion of some tracts of land for which the company got property deeds. If the shareholders vote in favour of the capital increase, SNP’s capital will go up to 38,200bn ROL (950 million euros).

The company is planning to put five ships up for sale next year, two of which are oil tankers held by Petromar Constanta division.

The shareholders will also be asked to approve Victoriabank Chisinau SA as shareholder of Petrom’s branch based in the Republic of Moldova, ICS Petrom Moldova, as the bank participated in the capital increase by 35% of that branch. The bank’s shareholders include investment fund Danube Fund established by Greek Alpha financial group along with the European Bank for Reconstruction and Development (EBRD), as well as Alpha Bank Romania.

Petrom is now going through a privatisation process, with eight non-binding bids submitted by regional players (MOL, OMV, PKN, Hellenic) and by Gazprom (Russia), Eni (Italy), Glencore (Switzerland), or Occidental (US) for it so far. adrian.mirsanu@zf.ro