Nynas recorded a steep second quarter drop in operational cash flow for its naphthenics unit due to unfortunate results from oil and currency hedges.
The company’s naphthenics business unit, which supplies mostly naphthenic base oils, posted earnings before interest, taxes, depreciation and amortization of 49 million Swedish krona (U.S. $5.8 million) for the three months ended June 30, a drop of 73 percent from the same period of 2014.
EBITDA for the company’s other business unit, which supplies bitumen, fell 30 percent to 157 million krona.
“The lower result is explained by the negative impact of oil and currency hedging activities including unrealized mark-to-market impact,” President and CEO GertWindroth stated in the company’s interim report, referring to the combined results. Management did not discuss the hedging activities in detail in the report but said its overall operations would have had an operational profit of 503 million krona for the first six months of the year if not for the hedging activities, instead of the 274 million krona it actually reported.
Net sales for Nynas’ naphthenics business unit fell to 2.6 billion Swedish krona in the second quarter, down 20.3 percent from 3.3 billion krona in the year-earlier period.
In its interim report, the company said that while sales volumes in naphthenics continued to develop positively in the quarter, sales in Europe and the Americas were stagnant, with negative effects from Russia and Ukraine as well as the economic recession in Brazil.
“Net sales were negatively impacted as a consequence of lower oil prices while currency developments had a positive impact,” the company stated. “Margins still suffered from high raw material costs as most products sold in the first six months were manufactured with crude oil purchased at higher prices compared to today.”
Nynas AB as a whole posted net income of 47 million krona for the second quarter on net sales of 4.9 billion krona.
Nynas operates a plant in Nynashamn, Sweden, with 7,600 barrels per day naphthenic production capacity. The company’s Harburg, Germany, plant has 2,800 b/d naphthenic and 3,300 b/d API Group I capacity.
Neste Oil and Petroleos de Venezuela S.A. (PdVSA) are co-owners of Nynas. In addition to its 7,800 b/d naphthenic plant in Nynashamn, Sweden, Nynas has a long-term marketing agreement to sell naphthenic base oils produced at the RafineriaIslan plant operated by PdVSA in Emmastad, Netherlands Antilles. That plant has 3,700 b/d naphthenic capacity and 5,000 b/d Group I capacity.