Mol Net Income Surges as Downstream Unit Books Record Profit

  • Petrochemical margin helps lift downstream Clean-CCS Ebitda
  • Company on track to achieve full-year target, CEO Hernadi says

Mol Nyrt. more than doubled its net income in the first quarter as a record result from refining and petrochemical operations outweighed a decline from exploration and production.

Hungary’s largest oil company booked a net income of 77.2 billion forint ($281 million) in the three months ending March, 165 percent higher than in the same period a year earlier. Earnings before interest, tax, depreciation and amortization on a clean-CCS basis, the most closely watched gauge that strips out the impact of volatile oil prices on reserve valuation, fell 8 percent to 144 billion forint, above the 137 billion-forint median estimate of eight economists in a Bloomberg survey.

A record downstream profit for the second quarter running and widening petrochemical margins showed Mol’s ability to cushion the blow from Brent oil falling to the lowest in more than a decade in January. The company has said it is scaling down investments into production capacity to focus on assets that are still profitable in the lower oil price environment. The group remains on track to keep clean-CCS Ebitda above $2 billion this year, Chief Executive Officer Zsolt Hernadi said.

"The company is one step closer to achieving its target for this year," said David Sandor, the head of research at KBC Groep NV’s Hungarian brokerage unit. "The earnings results are better than market expectations and we can also be satisfied with the underlying operations at the company."

Shares Rise

Ebitda for the company’s downstream operations rose 22 percent from a year earlier to 93 billion forint, when adjusted for stock revaluations, while upstream slumped 30 percent to 42 billion forint, according to results published on the Budapest Stock Exchange website.

The shares rose 0.9 percent to 16,345 forint by 11:17 a.m. in Budapest, ending a 2.8 percent three-day slump. Mol was the only stock that rose in the benchmark BUX index. About 25,000 shares were traded, or 19 percent of the three-month full-day average.

KBC recommends purchasing the refiner’s stock, targeting 17,400 forint. Seven analysts recommend holding Mol’s shares, while four have a buy rating and two say sell, according to data compiled by Bloomberg. The refiner has rallied more than 50 percent from a five-year low in January 2015.

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