Turkish Refiner Tupras Increases Capacity Utilization Rate to 78.7% in 2012, Continues to Cut Iranian Ties

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Researched by Industrial Info Resources (Sugar Land, Texas)--Turkey's sole oil refiner, Tupras (ISE:TUPRS) (Kocaeli,Turkey), increased its crude oil refinery capacity utilization by 4.3% to 78.7%. According to a company statement made to the Istanbul Stock Exchange, Tupras posted $537 million net income in 2012, down 11.1% from 2011. Tupras's net refining margin dropped to $1.72 per barrel, compared with $5.91 per barrel in the previous quarter and $4.42 per barrel in the same period of 2011. "Declining Ural-Brent crude spread and product ratios due to seasonality and increasing refinery outputs resulted in a drop in refinery margins," said Vedat Mizrahi, an analyst at Deutsche Bank in Istanbul. Tupras's domestic sales increased 4.5% to 19.5 million tonnes. Total sales surged 6.5% to 25.4 million tonnes, with exports of 5.9 million tonnes. The company posted $24 billion in revenues, up 16% from 2011, while earnings before interest, taxes, depreciation, and amortization (EBITDA) declined 33% to $1.33 billion in 2012.

Tupras started its residuum upgrade project (RUP) investments in 2011 and has spent $1.4 billion so far. "We think Tupras's stock price may remain relatively strong in the first quarter of this year," said Ilgin Erdogan, an analyst at Rennaissance Capital in Istanbul. "The five-year forward average yield of 8.8% also makes Tupras a good pick for the medium term, especially in the current low-interest-rate environment."

Tupras is owned by Turkey's biggest conglomerate, Koc Holding (ISE:KCHOL) (Istanbul, Turkey), which has interests in the energy, automotive and banking industries. In January, Turkish Energy Minister Taner Yildiz said that Tupras will extend purchases of crude oil from Iran when the company's contract expires in August, but won't increase imports. Turkey, which imported more than 60% of its oil from Iran before Iran was hit with new sanctions in 2011, cut its Iranian oil purchases by at least 20% last year to win its exemption from the sanctions.

In November, Koc Holding Chairman Mustafa Koc said that Tupras had agreed to reduce its crude imports from Iran by a further 20% over the 20% agreed to earlier in the year, and that it would replace the Iranian crude with increased imports from Iraq, Russia and the Gulf states, among others.

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