NZ Refining to review New Zealand's 'laziest balance sheet'   27 Apr 2012

Pattrick Smellie

New Zealand Refining’s board has promised to review its dividend policy, heading off a charge that investors bear the brunt of volatile earnings through gyrating payments and what one shareholder called “the laziest corporate balance sheet in New Zealand.”

The company that runs the nation’s only oil refinery needed small shareholder support in today’s crunch vote in Whangarei on a $365 million Continuous Catalyst Regeneration Platformer Project (CCR). The project required shareholder approval because of its size relative to NZ Refining’s market capitalisation of around $785 million.

Shareholders BP and Mobil, who hold 43 percent of the refinery’s shares, are understood to have opposed the CCR proposal, and the company mounted an unprecedented round of shareholder briefings to try to shore up a majority for the CCR.

If rejected, the refinery will still spend $105 million on a must-do upgrade to keep the refinery running past 2015.

The board’s most trenchant critic was former Contact Energy and Shell NZ director John Milne, who said it was “astonishing” that the company was in its 50th year of operation and “still has no dividend policy.” He criticised its policy of carrying almost no debt on its balance sheet.

Reduced dividends were identified as a major concern by other small shareholders, who depended on share income to meet living expenses.

However, chairman David Jackson appeared to expect the attack, announcing in his general remarks the board would later this year review the optimal gearing for the company, whose policy has been to completely repay debt raised for major projects at the expense of dividends.

While deleveraging had been prudent during the global financial crisis, the board and management would consider “whether this is appropriate for the long-term structure of the company.”

The review would be undertaken this year.

The touch and go vote occurred at 2pm, with a result to be announced to the NZX this afternoon. NZ Refining shares remain in trading halt in the meantime, having last traded at $2.75.

Craigs Investment Partners said in analysis this week the CCR option was the better of the two options, although it would prefer there was an option for delay, and warned there was no guarantee dividends would return to normal levels before 2020.

Milne said even though the company had substantial retained earnings, the board treated the payment of dividends as “purely discretionary.” Jackson, in turn, described NZ Refining as “highly cash-generative” despite the volatile impact of swings in global refining margins and the exchange rate on its profitability.

Milne also accused the board of failing to act transparently by refusing to reveal how many of the directors representing oil companies had opposed the CCR project, and to allow one of as many as four directors to explain to shareholders why they had objected.

Jackson would not allow such disclosures, saying communication should be directed through the chair and chief executive.

(BusinessDesk)

Add a comment

Bookmark and Share

News

Pharmac increases access to new treatments

5 Dec 2016 Health
Jonathan Coleman 5 December, 2016 Pharmac increases access to new treatments Health Minister Jonathan Coleman we... more

Prime Minister John Key announces resignation

5 Dec 2016 Ministerial Speeches
Rt Hon. John Key 5 December, 2016 Just a few days ago I marked the anniversary of my eighth year as Prime Minister and my... more

Business

Treasury forecasts solid growth, stable finances

8 Dec 2016 Business News
8 December, 2016 Treasury forecasts solid growth, stable finances Treasury’s latest forecasts show the Government... more

Key crowns APEC summit with China free-trade upgrade

21 Nov 2016 Business News By Pattrick Smellie
Article - BusinessDesk Monday 21 November 2016 08:50 AM Key crowns APEC summit with China free-trade upgrade By Pattrick Smellie in ... more

Living

3rd Position, Louis Vuitton America’s Cup World Series

21 Nov 2016 Lifestyle
Emirates Team New Zealand EMIRATES TEAM NEW ZEALAND CLOSES IN 3rd POSITION THE LOUIS VUITTON AMERICA’S CUP WORLD SERIES more

Arts Foundation Award recipients for 2016

14 Nov 2016 Lifestyle
The Arts Foundation Next generation of internationally acclaimed talent among the Arts Foundation Award recipients for 2016Under ... more

Property

NZ house prices gain 11% in October

14 Nov 2016 Property
Article - BusinessDesk Monday 14 November 2016 10:28 AM NZ house prices gain 11% in October, driven by sales of higher value homes By... more

RBNZ sees pressures building in Auckland construction sector

11 Nov 2016 Property By Paul McBeth
Article - BusinessDesk Thursday 10 November 2016 04:04 PM RBNZ sees pressures building in Auckland construction sector By Paul ... more

Migration

Good progress on investment attraction strategy

8 Dec 2016 Migration
Economic Development Minister Steven Joyce has welcomed news that New Zealand is attracting a higher level of quality international... more

Changes to Financial Markets Conduct Act impact UK pension transfers

1 Nov 2016 Migration
New Zealand Government Hon Paul GoldsmithMinister of Commerce and Consumer Affairs 1 November 2016 Changes to Financial Markets... more

Travel

Work on $700m Puhoi road underway

8 Dec 2016 Travel & Tourism
Hon. Simon Bridges 8 December, 2016 Prime Minister John Key and Transport Minister Simon Bridges have turned the sod on th... more

Air NZ teams up Ronan Keating, Julian Dennison for Christmas song

2 Dec 2016 Travel & Tourism
Air New Zealand has paired up with singer Ronan Keating and rising Kiwi actor Julian Dennison to rejig a Christmas classic. 'Summer... more

Sport

BLACKCAPS lose Chappell-Hadlee trophy

8 Dec 2016 Cricket
BLACKCAPS lose Chappell-Hadlee trophy Posted Tuesday, 6 December, 2016 

more

Columns

Gordon Campbell on the Gareth Morgan crusade

11 Nov 2016 Opinion
Column - Gordon Campbell   Gordon Campbell on the Gareth Morgan crusade First published on Werewolf more

Gordon Campbell on the US election outcome

10 Nov 2016 Opinion
Column - Gordon Campbell   Gordon Campbell on the US election outcome more

Kiwi Success

High Commissioner to India announced

8 Dec 2016 Appointments
Hon. Murray McCully 7 December, 2016 High Commissioner to India announced Foreign Minister Murray McCully today... more

Acting District Court Judge appointed

11 Nov 2016 Appointments
New Zealand Government Hon Christopher FinlaysonAttorney-General 11 November 2016 Acting District Court Judge appointed Wellington... more

Recruitment

NZ Government accepts recommendations on pay equity

8 Dec 2016 Recruitment
Hon. Paula Bennett,  Hon. Michael Woodhouse, Hon. Louise Upston 24 November, 2016 The Government will update the Equa... more

Fisher Funds hunts for new head to replace founder

2 Nov 2016 Recruitment
Article - BusinessDesk Tuesday 01 November 2016 04:42 PM Fisher Funds hunts for new head to replace founder Carmel Fisher By Paul ... more

s