LukOil Romania's profit tumbles on halved oil prices

LukOil Romania, the subsidiary of Russian-based oil company reported total loss of $22 million, following 100% decline in oil prices and unfavorable exchange rates. Total sales reported for January-September stood at $932 million, twice below year-ago level.

For the nine months through September last year, LukOil Romania reported revenues of $1.7 billion, spurred by the advance of oil price to $150 in June, only to crash to $30 and recoup to $80 to where it stands today.

“The global economic crisis has left an imprint on the nine-month financial results of LukOil Romania that recorded 10% lower sales”, said Constantin Tampiza (photo), managing director of LukOil Romania. The retail segment fell 5%, the equivalent of 570,000 tons of oil sold in the filling stations. As for the corporate segment, Tampiza told Wall-Street there had been cases when corporate clients migrated to the retail segment, but no accurate data were available for the moment.

“The worst performing period was the first quarter, compared to 73,000 tons sold in third quarter”, Tampiza added. The good performance reflects the aggressive expansion of our filling station chain, instead of an increase in demand. Year to date, LukOil leased independent filling stations, and today operates 18 units across the country.

Tampiza said he feared a sharper devaluation of the local currency against euro and US dollar. “I expect EUR/RON at 4.5 at the beginning of 2010, and I also fear a marked appreciation of the US dollar, as our balances are expressed in US currency”, LukOil Romania’s managing director stressed. “Even NBR governor’s power of keeping the leu at a reasonable level against other currencies is limited”, Tampiza continued.

Even though the economic crisis has severely affected the company’s revenues, no layoff or pay cut measures have been taken so far “nor will be in the near future”. Cost-containment measures were focused on reducing administrative and overhead expenses as well as the ad expenditures. LukOil’s marketing spending stood at €2.5 million, according to Tampiza.

LukOil’s turnover was $2.1billlion in 2008, and EBITDA stood at $81.6 million. LukOil is the third largest oil company in Romania by the number of filling stations, after Petrom (550) and Rompetrol (450).

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