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AFX Europe (Focus): Japan refiner Showa Shell operating profit jumps in 2004 but net down 89 pct ( 17 Feb 05


Feb 17, 2005


TOKYO (AFX) - Showa Shell Sekiyu KK, one of Japan's largest oil importers and refiners, reported a 67 pct surge in operating profit for calendar 2004,owing mainly to inventory re-evaluation gains stemming from soaring crude oil prices.


But net profit tumbled 89 pct due to special charges, including big write-downs of asset values.


Showa Shell is a unit of the Royal Dutch/Shell Group. Shell Petroleum owned 43.2 pct of Showa Shell and Shell Japan Holdings BV held a 4.9 pct stake as of June 2004.


Showa Shell posted a net profit of 2.4 bln yen in 2004, down 89 pct from 21.0 bln in 2003 because of extraordinary charges.


The company booked 37.1 bln yen in one-time losses, including 33.7 bln yen in asset-impairment charges, or write-downs on the value of assets.


But operating profit surged 67 pct to 60.2 bln yen from 36.0 bln yen a year earlier, reflecting the surge in global oil prices.


Oil refiners, which use gross average methods, re-evaluate their inventories quarterly, and can generate profits on differences in oil prices when oil prices surge.


Revenue rose 6.4 pct to 1.84 bln yen.


For 2005, Showa Shell forecasts a net profit of 29 bln yen on a 7.6 pct rise in revenue to 1.98 trln yen.


In a research report issued last month, Nikko Citigroup oil analyst Yoshinori Moda projected steady growth.


"We expect steady profit growth going forward, backed by ongoing efforts to cut costs and improve efficiency, and increase the production weighting of high-margin distillate products," Moda wrote.


Showa Shell's results and 2005 earnings forecast were released after trading hours. Ahead of the announcement, its shares closed up 7 yen or 0.7 pct at 1,003, reflecting a strong advance by all Japanese refiners after crude oil prices rose to the 48 usd a barrel level in New York trading overnight.


The TOPIX index of all First Section issues on the Tokyo Stock Exchange closed up 0.3 pct.

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