Just got wind from Maki that SPC have just released their second quarter results. so how did they fair?

• Revenue Growth was 64%
• However, net profit grow by only 0.5%
• Compare to previous year cash position was drastically reduced to 290 mil from 475 mil
• However, what has increased are derivative instruments from 7 mil to 64 mil
• Increase in operations have caused inventories, receivables and payable to increase drastically.
• There is still zero long term borrowings but tax deferred liabilities were reduced from 172 mil to 161 mil
• Net operating profit after tax comes up to 190 mil vs 132 mil in the previous year. The big difference here has to be due to the gain in derivatives vs loss in derivatives in the previous year.
• capital expenditure comes up to 30 mil thus giving them a free cashflow of 160 mil
• However, div paid out was 206 mil and there are debt reduction of 116 mil. This could explain why cash holdings were reduced as previously mentioned.

Personally, i am neutral on paying out more than their quarter year freecashflow. lets just say that SPC does not pay out div quarterly so i think its still within safe limits. Reducing debts on the other hand mostly will do them good.

I am happy holding on to this company which have a good moat and a good dividend yield. The dividend declared is 20 cts which works out to a 4.5% yield on my purchase price and based on my current price of 6.60 thats a 3% yield.

First Half Review:

In the first half of 2008, the Group achieved revenues of $6.0 billion and a PATMI of $278.6 million.

Demand for refined products remained relatively robust despite the record increase in prices.  Growth in crude supply to meet demand on the other hand appeared to be constrained by OPEC and non-OPEC producers capability.  Continued geopolitical tensions in the Middle East, particularly over Iran’s nuclear programme and the weakening US$, contributed to the rising oil prices.  The WTI (West Texas Intermediate) benchmark crude traded above US$140 per barrel in June 2008.

Notwithstanding the scheduled maintenance programme at SRC during the period, the Group continued to
optimise its refining capacity and increased the crude trading volume and E&P  production.  Sales volume of  38.6 million barrels achieved for the first half year was  comparable to the corresponding half year volume of 38.8 million barrels in 2007.  Reflecting the rising oil prices, an average realisation of US$110.56 per barrel was achieved in 1H 2008, an improvement of 68.2% over the US$65.72 per barrel realisation in 1H 2007.  Sales turnover of $5,957.4 million for the first half year was 52.8% higher than the corresponding period in 2007.

The Group achieved an average refining margin of about US$10.00 per barrel for the first half year, compared to the average refining margin of US$7.00 per barrel for the corresponding half year in 2007.  The higher refining margin was moderated by the lower refining throughput, higher crude processing costs, hedging costs and the weaker US$.  However, increased E&P production bolstered the Group’s gross profit.  Gross profit of  $435.4 million for 1H 2008 was an increase of 16.4% compared to the corresponding period in 2007.

With the current inflationary trend, the Group is well aware of the need  to manage its overall expenses.  The increase in expenses for the first half year was mainly due to the growth in the E&P business segment as well as generally higher costs such as utilities, rentals and manpower.  Finance expenses were also higher in 1H 2008 compared to the same period in 2007 due to an enlarged assets base and the higher working capital needed to fund this.