Turkey’s refinery reaches record high sales in 2016, posts lower-than-expected decline in net profit

ISTANBUL

Tüpraş said it reached full capacity production and record sales volume with residuum upgrade capacity contribution in 2016 on late Feb. 13. 

The company also posted a lower-than-expected net profit with the contribution of its high performance in the last quarter of 2016. 

“In 2016, Tüpraş operated its refineries with full capacity, and including semi-products, processed a total of 29.6 million tons which resulted in an increase of 11 percent [2.5 million tons] in domestic sales. With total sales reaching 30.3 million tons, Tüpraş succeeded to increase sales volume by 5 percent [1.5 million tons] compared to last year,” the company said in a statement. 

Despite the 5 percent increase in its sales volume, with yearly average oil prices at around 17 percent lower than last year’s, the total revenue was 6 percent lower when compared with last year, and realized as 34.9 billion Turkish Liras in 2016, it added. 

“Tüpraş reached an operating profit of 2,516 million liras by being able to reflect the recovery in the global oil markets into its financial and operational performance. Furthermore, by correct execution of risk prevention strategies, the fluctuations in exchange rate and crude oil prices in 2016 have been managed successfully and Profit Before Tax was realized as 1,944 million liras with a net profit of 1,813 million liras,” it said. 

The company’s net profit was 30 percent higher in 2015 compared to 2016. 

According to analysts, the company’s higher-than-expected fourth quarter performance played a key role in preventing further decrease in its net profit. 

“In the last quarter, high oil production rates and stock levels as well as Fed decisions and uncertainties in the U.S. presidential elections together with fluctuations in developing countries’ markets have caused crude oil price to decrease to $42 per barrel. OPEC countries’ agreement on a supply cut on Nov. 30, also backed by non-OPEC countries, caused a price hike in crude oil and the year was closed at $54.9 per barrel,” Tüpraş said. 

Low industrial demand coupled with mild winter conditions have reduced diesel cracks, while gasoline witnessed increased consumption due to low crude oil price environment, it added. 

“However, overall the high stocks resulting from the rise in refinery capacity utilizations squeezed profit margins. Normalization on the supply in the last quarter of 2016 via deferred maintenance works being realized in most of the European and Russian refineries affected the sector in a positive manner,” said the company, adding that however, the recent developments have not proven to be sufficient and average Mediterranean margin has slightly decreased compared with last year. 

Tüpraş had gone through a $213 million investment expenditure in refining in 2016, while total investment reached $291 million including its partner Ditaş’s new tanker purchases to increase its fleet capacity.