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

McCully visits Iraq ahead of NZ deployment

24 Mar 2015 News
  Foreign Minister Murray McCully travelled to Baghdad yesterday for talks with Iraq’s Prime Minister Mr Haider al-Abadi... more

Trade Minister welcomes signing of NZ-Korea FTA

23 Mar 2015 News
New Zealand Government Trade Minister welcomes signing of NZ-Korea FTA Trade Minister Tim Groser today signed the New Zealand Korea... more

Business

NZ-Korea FTA signed amid spying, lost sovereignty claims

23 Mar 2015 Business News By Pattick Smellie
  NZ-Korea FTA signed amid spying, lost sovereignty claims March 23 (BusinessDesk) - A long-awaited free trade agreement... more

2degrees acquires Snap ISP for complete business offering

23 Mar 2015 Business News By Pattick Smellie
2degrees acquires Snap ISP for complete business offering March 23 (BusinessDesk) - 2Degrees, New Zealand's third-largest mobile... more

Living

2degrees lights up Auckland Harbour Bridge in World First

13 Mar 2015 Lifestyle
Fusing light, music, mobile and one of Auckland’s most recognisable landmarks together – 2degrees launched another Kiwi... more

Third Thursday Set to Groove

9 Mar 2015 Lifestyle
The sounds of legendary jazz musician Charles Mingus is set to raise the beat of Wellington’s waterfront on 19 March, when the... more

Property

NZ house prices rise 3.6% in February

12 Mar 2015 Property By Tina Morrison
  NZ house prices rise 3.6% in February, led by a 14% jump in Auckland prices March 12 (BusinessDesk) - New Zealand residential... more

Revealed: Auckland's cheapest suburbs

9 Mar 2015 Property
Many home buyers face long commute to Auckland jobs as they move to Wellsford, Pokeno and Hamilton. Only six areas of Auckland still... more

Migration

PM plays down claim war criminals are living in NZ

2 Mar 2015 Migration
Prime Minister John Key says he is not aware of any suspected war criminals from the former Yugoslavia in New Zealand. The claim that... more

NZ migration rose to record in 2014

30 Jan 2015 Migration By Tina Morrison
  NZ migration surged to record in 2014, helped by robust economy Jan. 30 (BusinessDesk) - New Zealand migration surged to a... more

Travel

Foss welcomes agreement for rental vehicle code

17 Mar 2015 Travel & Tourism
Associate Transport Minister Craig Foss is welcoming a move by the rental vehicle industry to establish a Code of Best Practice to... more

Productive discussions on Queenstown’s tourism workforce

6 Mar 2015 Travel & Tourism
Sustainable workforce solutions were at the centre of discussions between Government Ministers and tourism industry representatives... more

Sport

ICC World Cup 2015: Semi Final New Zealand beats South Africa by four wickets

24 Mar 2015 Cricket
New Zealand beats South Africa by four wickets. In... more

ICC Cricket World Cup Fever takes hold in New Zealand

24 Mar 2015 Cricket
Ahead of the first semi-final in the land of rugby, all talk is about cover drives and yorkers more

Columns

Gordon Campbell on Pacific spying

24 Mar 2015 Column By Gordon Campbell
  Gordon Campbell on Pacific spying, Obama as Spock and Kendrick Lamar So New Zealand has using the GCSB to spy on its friends ... more

STEPHEN FLEMING: SPIN AND THE FIFTH BOWLER JUST GIVE NEW ZEALAND THE EDGE

23 Mar 2015 Column
Both teams are playing with confidence and one look at the talent on show on either side means it has the potential to be a classic,... more

Kiwi Success

Tower names Seniors Money's Brett Wilson as CFO

18 Mar 2015 Appointments
  Tower names Seniors Money's Brett Wilson as CFO, replacing Boggs March 18 (BusinessDesk) - Tower, the listed general insurer,... more

Kiwi start-up Glassjar launches payments app in the US

6 Mar 2015 People
Glassjar, the kiwi software start-up whose app provides people an easy way of sharing bills, has launched in the United States. The... more

Recruitment

RESEND: 63% of Warehouse permanent staff now on career wage

20 Mar 2015 Recruitment By Fiona Rotherham
  RESEND: Warehouse says 63% of permanent staff now on 'career retailer wage' (Fixes fourth paragraph to show Warehouse is... more

Woodhouse welcomes skilled migrants

12 Mar 2015 Recruitment
Immigration Minister Michael Woodhouse welcomes new figures out today showing an increasing number of skilled migrants coming to ... more