Earlier this week, NZR booked a solid full-year result, with revenue up 16% to $411.7million and after-tax profit up 66% to $78.5million, on the back of average gross refining margins having lifted 24%.
However, there is a six-week main plant shutdown coming up, from mid-April until early June and brokers Forsyth Barr believe this will affect full-year 2018 earnings.
Forsyth Barr broker Suzanne Kinnaird said the forthcoming shutdown was comparable to that in 2014 and was expected to have a $30million effect on revenue.
A 10-day fuel pipeline disruption in September cost $8.3million in lost revenue.
``The only other surprise within the [half-year] result was the maintenance capex guidance of $80million-$90million, up about $15million-$25million ahead of the average level seen in recent periods,'' she said.
She believed NZR had taken a conservative approach to capital expenditure guidance and lifted Forsyth Barr's long-term capex assumption, up by about $13million per annum to $75million.
Given the material increase in maintenance capital expenditure, Forsyth Barr's discounted cash flow value declined by 50c per share, which flowed through to the broker's target price, which was cut by 35c to $2.55, while NZR's rating was downgraded from ``outperform'' to ``neutral''.
``NZR has indicated it will have a better understanding of the maintenance capex after the May maintenance outage and we will look to update our forecast at that point in time,'' Mrs Kinnaird said.
she said the brokerage had lowered its forecasts for NZR's full-year 2018 after-tax profit, cutting it by about $5million to $39million, which includes a higher foreign exchange rate between the New Zealand and US dollars and a rise in NZR's operating costs.
``While the medium-term outlook for fuel refining is generally positive, NZR is heading into a major maintenance period and there is uncertainty around future capex requirements,'' she said.
NZR said spending during the shutdown would be $85million.
Over a total period of 61 days, five different sections of the plant would be closed, until the last section reopened on June 18. Marsden Point will continue to produce fuel, but at less volume, which will be offset by fuel companies' importing more refined fuel during the shutdown.
