Hengyuan reports RM48.7m net profit in 2QFY20 on recognition of deferred tax assets on tax

KUALA LUMPUR (Aug 18): Hengyuan Refining Company Bhd today reported a net profit of RM48.67 million for the second quarter ended June 30, 2020 (2QFY20), thanks to the recognition of deferred tax assets on tax losses previously not recognised.

The group had registered a net loss of RM124.12 million for the immediate preceding quarter (1QFY20), which was impacted by low refining margins following a sudden drop in global oil prices, while demand was impacted by the pandemic outbreak.

For 2QFY19, Hengyuan had posted a net profit of RM3.28 million.

In a stock exchange filing, the group said its revenue for 2QFY20 fell 52% to RM1.21 billion from RM2.55 billion in 1QFY20, due to lower market oil product prices. Sales volume in 2QFY20 was lower at 8.1 million barrels, versus 9.9 million barrels in 1QFY20.

The group revenue was down 63.3% compared with RM3.31 billion reported for 2QFY19.

Hengyuan attributed the lower revenue to the drop in local demand for oil products, following the implementation of the Movement Control Order since mid-March.

Crude prices fell from US$67 to US$19 per barrel this year, before recovering to the US$40 level in June. As at the time of writing, Brent crude oil prices stood at US$45.20.

For the cumulative six months ended June 30, 2020, Hengyuan’s net loss stood at RM75.45 million, compared with a net profit of RM24.85 million for the same period last year. Half-year revenue declined 40% to RM3.76 billion from RM6.27 billion.

On prospects, Hengyuan said the global oil market largely depends on the recovery of global economies with the gradual easing of lockdowns, amid an anticipation of a second wave of the Covid-19 pandemic and rising geopolitical risks.

“Operational efficiency, safety performance, product quality, hydrocarbon hedging and financial risk management continue to remain key areas of focus in optimising the company’s performance,” it added.

Shares of Hengyuan closed three sen or 1.01% higher at RM3.01 today, valuing the group at RM903 million. Over the past year, the counter has fallen by 39.4%.