Unipetrol Earnings May Suffer as Fire Hits Key Ethylene Unit

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Unipetrol AS shares tumbled the most in four years after a fire shut down the Czech refiner’s most profitable unit, an ethylene facility in Litvinov.

The company has halted the petrochemicals plant at the site and the adjacent refinery is operating at “a minimum level,” Unipetrol spokesman Mikulas Duda said by phone on Thursday. Unipetrol’s only other refinery is located at Kralupy nad Vltavou, just north of Prague.

The fire is now “under control,” Duda said. “We have evacuated all staff and so far we’re not aware of any injuries.”

A prolonged outage of the so-called steam cracker in the northern Czech city may impact Unipetrol’s earnings, according to Miroslav Frayer, an equity analyst at Komercni Banka AS in Prague. The refiner previously said that shutdowns of the same ethylene unit in June and July, each lasting about one week, would reduce the earnings before interest, taxes depreciation and amortization by a combined 270 million koruna ($11 million).

“Given the steam cracker is Unipetrol’s most profitable unit, this is certainly negative news,” Frayer said by e-mail. “If the shutdown and repairs take more time, which is likely, this would certainly translate into a lower Ebitda.”

Shares fell as much as 8.6 percent, the most since August 2011, in Prague trading before ending the day down 5 percent at 179.45 koruna. The price is still up 38 percent this year, valuing the company at 33 billion koruna.

1,000 Evacuated

The fire started after an explosion triggered by a failure of the facility’s cooling system, the Litvinov city hall said on its website Thursday. While no harmful fumes have been detected in the city, the city hall recommended residents keep windows shut and stay inside. About 1,000 people have been evacuated from the area, CTK news service reported.

The impact of the ethylene unit outage on earnings may be mitigated by better-than-expected earnings the company reported in the first half of the year, according to Komercni’s Frayer.

The maximum annual production capacity of the refinery in Litvinov is 5.4 million tons of oil, according to Duda.

Unipetrol’s majority shareholder is Poland’s PKN Orlen SA.

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