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KUALA LUMPUR (Nov 26): Hengyuan Refining Company Bhd’s third quarter net profit tripled to RM154.91 million or 51.64 sen per share, from RM48.67 million or 16.22 sen per share in the preceding quarter, on higher average prices of oil products.

“The positive combination of stockholding gains and support from oil margin swaps for the current period resulted in a comparatively higher gross margin and net profit against the previous quarter,” the group added in a filing with Bursa Malaysia.

Revenue for the third quarter ended Sept 30, 2020 increased 30.84% quarter-on-quarter to RM1.59 billion, from RM1.21billion.

Hengyuan’s third quarter net profit is all the more impressive, when compared with the quarterly net loss of RM11.43 million reported a year earlier.

Revenue, meanwhile, was just half of the RM3.23 billion reported for the year-ago third quarter.

For the cumulative nine-month period ended Sept 30, Hengyuan’s net profit jumped by a whopping 492.24% to RM79.46 million, from RM13.42 million for the same period last year. Revenue, however, was down 43.62% to RM5.35 billion from RM9.49 billion.

The group said the lower quarterly and nine-month revenue was due to a decline of  35% and 33% respectively, in the price of oil products.

The sales volume of 7.7 million barrels in the third quarter and 25.4 barrels in the nine months was lower than the 10.7 million barrels and 31.5 million barrels in the comparative periods, due to a drop in local demand for oil products, following the implementation of the Movement Control Order since mid-March.

The group, however, recorded stockholding gains as it realised sales of inventories that were accumulated during the second quarter when crude prices were low, which helped to lift its profitability.

“The positive effects of margin and commodity hedges further helped uplift the gross oil margins, which the company has put in place as part of its risk management measures, it added.

The group also said a net forex gain of RM36.5 million was recognised in the third quarter, as the ringgit strengthened from RM4.28 to RM4.15 against the US dollar.

“Tax effects for the current quarter and cumulative period includes the utilisation of reinvestment allowance and recognition of deferred tax asset on tax losses previously not recognised,” it added.

On prospects, Hengyuan said the global oil market largely depends on the recovery of global economies, as lockdowns have been renewed across many countries globally.

“While the challenges around the oil industry remain unabated, the company will continue to focus on operational efficiency, safety performance, product quality, hydrocarbon hedging and financial risk management in optimising the company’s performance,” it added.

Shares of Hengyuan closed one sen or 0.29% lower at RM3.47 today, valuing the group at RM1.04 billion. Year-to-date, the counter has fallen by 18% from RM4.21 on Jan 2.