INTERVIEW-Czech Unipetrol sees outage hurting 2007 profit

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Production halts required by plant upgrades will significantly impact profits at Czech oil processor Unipetrol this year, Chief Executive Francois Vleugels said on Wednesday.

Unipetrol, majority owned by Polish PKN Orlen , has said it would invest around 4 billion crowns ($182.9 mln), mainly into raising capacity at units Chemopetrol and Ceska Rafinerska this year.

The upgrades require a stoppage in the third quarter lasting a number of weeks, Vleguels told Reuters in an interview.

"Over the next year (2007) of course there will be a hit because of the major shutdowns that we have... Obviously for (2007) there will be a big impact on earnings," he said, but did not elaborate on the financial impact of the stoppages.

From a fundamental point of view, Unipetrol should perform well, he said.

"Margins in petrochemicals and retail are good, refining margins were poor in December but I think they are taking a rebound again," Vleugels said. "The projection is that fundamental earnings excluding the shutdowns are good the next year (2007)."

HIGHER OPERATING PROFIT

Unipetrol has put the profit impact from a two-week stoppage last year at petrochemicals unit Chemopetrol and at the 51 percent-owned Rafinerska at 400 million crowns. Apart from that, the company had two shorter stoppages in March and December.

Despite these, Unipetrol should report a slight rise in operating profit for 2006, Vleugels said. He had previously forecast flat operating income from 2005, when it was 5.27 billion crowns.

But due to one-off items, net profit may drop to less than half of the 3.46 billion for 2005, he indicated.

The main reason is a 1.7 billion crown charge related to the sale of rubber maker Kaucuk, announced on Tuesday.

"Excluding Kaucuk, (net income) will be a little bit below the previous year including the other write-offs," Vleugels said.

In 2006, the company has already accounted for a 372 million crown charge related to the sale of chemicals plant Spolana, and included a 17.6 million euro charge for a fine levied by the EU.

Apart from investments, Unipetrol is looking more intensively at acquisitions in its core business of refining, petrochemicals and petrol retail, Vleugels said.

This should be aided by a fall in debt to 20 percent related to equity this year from around 40 percent in mid-2006.

"What we want to do with the increased debt capacity that we have is to make acquisitions... Now we have the capacity to look for acquisitions," he said, adding that the optimum debt/equity ratio was around 30-40 percent.

Vleguels reiterated Unipetrol had strong interest in a 16.3 percent stake in Rafinerska being put up for sale by ConocoPhillips . Russia's LUKOIL is hoping to buy the stake but Unipetrol has the right of first refusal.

Vleugels also told Reuters he sees a chance for a larger acquisition of petrol stations, but gave no details.

Unipetrol will report 2006 results on March 1.

The stock traded 0.8 percent off at 236.5 crowns on Wednesday. It has recovered from mid-2006 lows but still stands 20 percent down from a year ago, underperforming the Prague market which has gained 9.7 percent.

((editing by Rory Channing; prague.newsroom@reuters.com; Reuters Messaging: jan.lopatka.reuters.com@reuters.net; +420-224 190 474))

($1=21.87 Czech Crown)

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Keywords: UNIPETROL/OUTLOOK

[PRAGUE/Reuters/Finance.cz]