Tupras - 2Q09 earnings preview

Tupras is scheduled to report its 2Q09 results on 14 August 2009. We expect the company to post a net profit of US$ 155m for the period, up from a US$ 21.0m loss in 1Q09 but down from US$ 552.1m profit in 2Q08. Whilst both operating and bottom line are forecast to improve on one-off gains, clean EBIT is expected as the second lowest since Tupras privatization. Quarterly EBIT adjusted to one-offs is forecast at US$ 56.6m for 2Q09 versus US$ 400.6m reported in 2Q08 and US$ 48.0m in 1Q09. Although no consensus estimate available yet, we foresee a neutral to moderately negative market reaction.

Downstream — Increasing fuel imports from Middle Eastern and Asian refineries and a diminishing light-heavy gap have put massive pressure on refining margins in the Mediterranean in 2Q09. Due to a significant downturn in middle distillate cracks the Urals-Med margin plunged 58.8% q/q in 2Q09, close to five-year lows. On top of this, a further contraction in the light-heavy gap (Brent-Dubai dropped by 57% q/q while Brent-Urals dipped 24%) is projected to cut deep into Tupras’ downstream profits. As a result we forecast Tupras’ effective refining margin (excluding inventory revaluation) to average at US$ 1.6/bbl (-12.7% q/q, -83.8% y/y) slightly below US$ 1.7/bbl recorded by OMV. Production volumes should substantially increase q/q as Tupras has successfully finished the maintenance works in Izmit and Izmir refineries in the beginning of April. On the back of demand weakness in the region, however, utilization rate of Tupras’ refineries is expected at 70% only, well below the historical average of 84%. As a combined result of the rising crude oil prices (+32.4% q/q) but a very low level of fuel stocks at Tupras, inventory revaluation is expected to add only US$ 63m to the headline EBIT. Retail is forecast to arrive at US$ 25m (+132% q/q) operating profit as the second quarter tends to be seasonally the strongest. In sum, we envisage Tupras to post an operating result of US$ 145m in 2Q09, up 146.0% q/q but down 74.9% y/y.

FX gains – Unlike the previous quarter, we expect Tupras to book FX gains on its TRY denominated debt and trade receivables as the Turkish lira appreciated 7.3% q/q against the US dollar in 1Q09. In short, we forecast Tupras’ financial result to arrive at US$ 50m in 1Q09 versus a loss of US$ 75.2 in 1Q09.

Tupras is going to hold a conference call on its 2Q09 results on August 14.

Tupras: IFRS consolidated quarterly P&L
US$ m, unless stated otherwise	2Q 2008A	1Q 2009A	2Q 2009F	q/q	y/y
Total revenues	7,265.7	2,124.6	3,590.5	69.0%	-50.6%
Raw material costs	-6,550.9	-1,981.8	-3,349.3	69.0%	-48.9%
Gross profit	714.8	142.8	241.3	69.0%	-66.2%
SG&A costs	-138.1	-53.9	-65.6	21.7%	-52.5%
EBITDA	607.9	88.8	175.6	97.7%	-71.1%
Depreciation and amortization	-31.2	-30.0	-31.0	3.2%	-0.8%
EBIT	576.7	58.8	144.6	146.0%	-74.9%
Refining	536.2	48.0	119.6	149.2%	-77.7%
Marketing	46.7	10.8	25.0	131.7%	-46.5%
Other	-6.3	0.0	0.0	n/a	n/a
Financials	117.0	-75.2	50.0	n/a	-57.3%
Pre-tax profit	693.7	-16.4	194.6	n/a	-71.9%
Income tax	-140.3	-5.6	-38.9	599.1%	-72.2%
Minority interests	-1.3	0.9	-0.8	n/a	-44.4%
Net income	552.1	-21.0	155.0	n/a	-71.9%
EPS (US$)	2.205	-0.084	0.619	n/a	-71.9%
EBIT margin (%)	7.9%	2.8%	4.0%	1bp	-4bp
Effective tax rate (%)	20.2	-34.0	20.0	5,399bp	-22bp
Source: Tupras, KBC Securities