- Ricardo Darre says company doesn’t need to be in everything
- New policy disclosed after posting $51 million in losses
YPF SA, Argentina’s biggest company, plans to divest non-core assets in a bid to focus in projects that pay back quickly.
"We need to concentrate on core activity," Chief Executive Officer Ricardo Darre, who arrived to the company from Total SA four weeks ago, said Friday to investors. "We are probably not the best to do everything. We need to concentrate in what we are good."
The new CEO said the company must be very careful in its use of capital and divest assets that aren’t core. "We have to stay away from prospects like offshore or heavy oil in Mendoza," he said.
In his first earnings call with investors after being appointed CEO, Darre discussed a surprise net loss of 753 million pesos ($50.7 million) the company posted Thursday after the market closed. The loss compares with a gain of 2.3 billion pesos a year earlier.
The unexpected loss in the second quarter was mainly due to a slump in Argentina’s peso that eroded margins from refining crude priced in U.S. dollars into gasoline that the government keeps artificially cheap.
"YPF earnings were hit by significant FX devaluation," Daniel Gonzalez, the company’s chief financial officer, said on the call.
Argentina’s policies to regulate the fuel market in a bid to keep inflation in check, coupled with a slump in the value of the peso over the past year, means that increases in gasoline prices haven’t offset a squeeze in the company’s margins. The company has been allowed to increased pump prices by 43 percent in a year, not enough to recoup the losses. YPF revenue in dollar terms fell 17 percent in the quarter, the CFO said.
Some of the losses were triggered by the Argentine government, which this year paid natural gas drillers subsidies based on last year’s value of the dollar when the company was expecting to collect this year’s value of the currency, the CFO said. The company cut capital expenditures by 38 percent in dollars, mainly in drilling.
YPF’s sales rose 32 percent to 52.8 billion pesos. Crude oil output fell 2.8 percent while natural gas production decreased 0.4 percent in the quarter, the company said.
YPF’s American depositary receipts fell 3.5 percent to $18.52 at 12:15 p.m. in New York. The ADRs, equivalent to one ordinary share, have gained 18 percent this year.