Hengyuan Refining Co Bhd is aiming to return to profitability in the financial year ending Dec 31, 2026 (FY2026), after recording losses for three consecutive years amid prolonged volatility in the global oil market.
The Port Dickson-based refiner said it has revamped its financial and risk management strategies and secured more stable crude oil feedstock supplies to support its turnaround. Chief financial officer Yeo Bee Hwan said these initiatives have strengthened the group’s foundation for a sustainable recovery.
The group’s rights issue exercise, completed in October 2025, raised RM234 million and significantly bolstered its balance sheet. The funds enabled Hengyuan to secure more reliable crude supply, providing greater flexibility to optimise refinery throughput and lower production costs, which in turn supports healthier margins.
Hengyuan began posting losses in FY2022 following heightened geopolitical tensions, particularly the prolonged Russia-Ukraine conflict. This led to sharp swings in global crude oil prices, which fluctuated between US$70 and US$112 per barrel within a year, severely disrupting supply-demand dynamics and refined product pricing.
The volatility also affected the group’s hedging positions, weighing on earnings and prompting the suspension of dividend payments. Since 2022, Hengyuan’s share price has fallen about 74%, hitting a record low of 73 sen in November last year.
In response, the company has recalibrated its hedging approach, shifting towards shorter-term contracts to better manage rapid movements in oil prices and protect margins.
Early signs of recovery have emerged. Revenue bottomed out in the January–March quarter, while Hengyuan recorded a net profit of RM21.04 million in the July–September quarter of FY2025 — its strongest quarterly performance since the second quarter of FY2022.
However, revenue for the third quarter declined to RM3.62 billion from RM4.12 billion a year earlier, reflecting ongoing market challenges. For the nine months ended Sept 30, 2025, the group still posted a net loss of RM332.65 million, largely due to losses incurred in the first half of the year.
Crude oil prices have since stabilised at around US$63–64 per barrel, providing a more predictable operating environment.
Hengyuan refines crude oil into gasoil (diesel), mogas (RON95 petrol) and jet fuel, supplying Malaysia’s transport and logistics sectors. Its key customers include Shell, Petroliam Nasional Bhd (Petronas), Petron and Five, with Shell accounting for about 60% of its refined product output.
The company has also benefited from Malaysia’s petrol subsidy programme, Budi95, which compensates refiners directly for the price difference on subsidised RON95 petrol, supporting higher fuel consumption.
Since 2017, Hengyuan has invested more than RM2.2 billion in refinery upgrades, largely funded through internal resources. The refinery has a production capacity of up to 156,000 barrels per day, with current utilisation at around 110,000 to 120,000 barrels per day, leaving room for further optimisation.
As at end-September 2025, Hengyuan had cash and bank balances of RM676.37 million against borrowings of RM1.47 billion, resulting in a net gearing ratio of 1.02 times.
Shares in Hengyuan closed at 85 sen, valuing the group at RM507 million. The stock has gained more than 9% since the start of the year, reflecting improving investor sentiment over its recovery prospects.
