Titan Petrochemicals Group, which operates crude oil tankers and is expanding into storage facilities in the mainland, said underlying profit fell 22.47 per cent in the first half due to higher interest and fuel costs. The company yesterday unveiled a net profit of HK$65.39 million, down 74 per cent from HK$254.85 million in the same period last year, although that figure included a gain of HK$138 million from the sale of a ship. Titan also reversed a HK$25.2 million unrealised mark-to-market gain from its oil trading business that was recognised in the second half of last year. The company's profit was hurt badly by a 51 per cent year-on-year jump in finance costs to HK$181 million from HK$120 million as global interest rates climbed. Titan had HK$4.73 billion of debt as of June 30. The transport division, its biggest money earner, saw sales leap 46 per cent to HK$1.08 billion while operating profit surged 42 per cent to HK$279 million, excluding the vessel disposal gain. This was partly driven by added capacity in its tanker fleet and higher rates for tankers. The TD3 industry rate index rose to 95.6 in the first half from 89.4 in the year-earlier period on the back of surging demand for crude oil. Those gains came despite a 45 per cent jump in average fuel costs, chief executive Barry Cheung Chun-yuen said. Rising tanker rates and lower fuel costs should improve the company's margins in the second half, Mr Cheung said. Last month, the tanker rate index averaged 123.6 - almost 30 per cent up on July last year. 'We expect the second half ... to achieve significantly better results than last year,' he said. Mr Cheung expects China's oil imports will increase 10 to 15 per cent, more than double last year's pace. Meanwhile, the company's plans to develop mainland storage facilities are moving ahead. The 410,000 cubic metre first phase of Titan's fuel storage facilities in Nansha, Guangzhou, is due to be completed in October. It will be for internal use. A 1.09 million cubic metre phase two, expected to come on stream by the end of next year, will be leased to outside parties. A 90,000 cubic metre chemical storage facility in Meizhou Bay, Fujian province, is scheduled to begin operations by December. The company has said that it will add a 500,000 cubic metre second phase oil storage facility at Meizhou Bay. The 420,000 cubic metre phase one of its Yangshan port storage facility near Shanghai is set for completion in 2008. Shares in the company declined by 3.77 per cent to close at 51 HK cents yesterday after the announcement of the results.