HELPE will not match ’05 profit

Last year’s record profits for Hellenic Petroleum (HELPE) were not entirely unexpected. Despite this, they were welcomed by the market, renewing investor interest in the company stock. This year, it will be difficult for HELPE to maintain last year’s profitability because, by consensus, we are moving to a so-called «contango» market, where crude oil long-term futures are lower than short-term ones. It will, therefore, be very difficult for the HELPE group to retain its refinery margins at the same high level. Tax hike Moreover, with the expected increase of the Special Consumption Tax before summer, which is estimated to increase retail prices by at least 6-7 percent, HELPE will be forced to cut its refinery margins in order to rein in prices. Of course, this policy will also be affected by the way other fuel trading companies will handle the situation: If the latter decide that the tax hike presents them with the opportunity to raise their prices beyond the tax’s estimated effect, HELPE is not going to shoot itself in the foot by excessively constricting its margins. It is not expected to become more expensive than its smaller rivals, since its policy is to add market share. This year may become a very significant one for HELPE in terms of changes and challenges. The catalyst would be an increase in the stake held by the Latsis Group, which currently owns 35 percent. If this happens, HELPE may move more aggressively in other markets, through acquisitions, and try, at last, to ensure itself of a production basis for crude oil and natural gas, instead of being merely a refiner. This is what the international markets expect, anyway, with experts calling HELPE a company with big prospects. Achieving its own production line would allow HELPE to become a second-tier international player and escape its regional confines. A less bold outlook If there are no changes in the balance of ownership, the company’s financial position will continue to evolve in a satisfactory way, but not with the enthusiasm that a bolder outlook would bring. In this case, there will be greater effort towards regional growth, especially in Serbia (due to privatize NIS) and Bulgaria. HELPE may also enter into partnerships, including stock swapping, with some Russian companies, especially in view of the finalization of the consortium that will build the long-delayed Bourgas-Alexandroupolis crude pipeline. [The pipeline, which would link the Bulgarian port of Bourgas with the northern Greek port of Alexandroupolis, had been proposed more than a decade ago, as a way to bypass the Bosporus Straits and cut Russia’s dependence on Turkey.] The group may use these partnerships to develop its business in the promising Russian market, in cooperation with local companies, especially in hydrocarbon research and development, following the precedents set by other western companies. (1) C.N. Stambolis contributed this article to the Greek edition of Kathimerini.