Brightoil slumps 11pc after loss warning
Oil trader also faces creditors' demand for loan repayment after breach of covenant terms
Brightoil Petroleum, which once attributed its previously above-industry profit margin to its "buy low, sell high" trading strategy, plunged 11.2 per cent yesterday after it warned it expected to post an interim loss and had broken a loan covenant.
The Shenzhen-based vessel-fuel supplier and oil trader said it would likely post a "material" loss for the six months to December, compared with a net profit of HK$965.23 million a year earlier.
It cited depressed market conditions in the shipping industry and falling profit margins from vessel refuelling, after accounting for losses related to derivative financial products.
The company also said it had breached a loan condition that its operating profit-interest-expense ratio must be kept at a certain level. Its creditors may demand it repay the loans as a result. It borrowed heavily to finance construction of oil storage and logistics facilities, which required about US$2.5 billion.
Brightoil, controlled by mainlander businessman Sit Kwong-lam, previously reported profit margins that analysts said were unusually high.
Its 9 per cent net profit margin for the second half of 2009, excluding hedging gains and non-recurring items, was seven times the 1.3 per cent earned in 2009 by industry leader China Marine Bunker (PetroChina), a joint venture between PetroChina and Cosco Group. Sit had attributed that to its superior trading strategies.
In July 2010, the company raised HK$1.02 billion by selling 300 million new shares at HK$3.45 each. The stock ended at HK$1.50 yesterday.
Its gross margin fell to 6.3 per cent in the second half of 2010 from 11.3 per cent a year earlier due to "aggressive expansion outside the mainland and the addition of low-margin oil products trading to its operation".