Full Year Announcement 2017

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EMAIL: announce@nzx.com
Notice of event affecting securities
The New Zealand Refining Company Limited
D.M. JensenDirectors Resolution
09 432 831127022018
Ordinary SharesNZNZRE0001S9
Enter N/A if not
applicable
In dollars and cents
$0.120
NZD$0.021176
$37,509,174
Date Payable
22 March 2018
$$0.008333$0.046667
$
15 March 201822 March 2018

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Full Year Announcement

2017

The New Zealand Refining Company Limited
Res ul ts for announcement to the market
Reporti ng Peri od 12 months to 31 December 2017
Previ ous Reporti ng Peri od 12 months to 31 December 2016

The Di rectors of the New Zeal and Refi ni ng Company Li mi ted today announced the Company's fi nanci al res ults
for the year to 31 December 2017, detai l s of whi ch are attached. Thi s report, i ncl udi ng the res ul ts for the
previ ous corres pondi ng year, i s cons i stent with the audi ted fi nanci al s tatements of the New Zeal and Refi ni ng
Company Li mi ted for the year ended 31 December 2017.

Consolidated Results
1. Results $NZ 000
Revenue from ordi nary acti viti es
Current year $411,706
1

Up 16%
Previ ous corres pondi ng year $354,156

Profi t from ordi nary acti viti es after tax attri butabl e to s ecuri ty hol der.
Current year $78,530
Up 66%
Previ ous corres pondi ng year $47,177

Net profi t attri butabl e to s ecuri ty hol ders .
Current year $78,530
Up 66%
Previ ous corres pondi ng year $47,177
2. Final Dividend
Amount per s ecuri ty: NZ 12 cents per s hare.
Imputed amount per s ecuri ty: NZ 12 cents per s hare (ful l y i mputed)
Record date: 15 March 2018
Di vi dend Payment Date: 22 March 2018

3. Net Tangible Assets per Security
As at 31 December 2017 $2.54
As at 31 December 2016 $2.43

1
Curre nt ye a r Reve nue from ordinary a ctivities re presents total i ncome of $414,620k l ess i nsurance recovery of $2,914k
(included in ‘other income’ as disclosed in note 2 of the financial statements).

COMMENTARY

Refi ni ng NZ has reported a Net Profi t after Tax (NPAT) of $78.5m (2016: $47.2m) for the year ended 31
December 2017.

Commenti ng, Chi ef Executi ve, Sj oerd Pos t put the s trong res ul t down to a combi nati on of pl ant rel i abi lity,
heal thy refi ni ng margi ns , strong cas h generati on from operati ons, and a cul ture of teamwork at the Refi nery.

“An outs tandi ng operati onal performance underpi nned by a worl d-cl as s unpl anned downti me of 0.60% (2016:
0.85%) al l owed the Company to capi tal ise on heal thy refi ni ng margi ns and to generate a s i gni ficant l i ft i n
operati ng revenue
2
to $411.7m, up 16% on the previ ous year (2016: $354.2m).”
“For much of the year refi ni ng margi ns remai ned i n a range of USD7 to USD11 per barrel, wi th onl y January
and December droppi ng to bel ow USD6 per barrel. GRM averaged USD 8.02 per barrel (2016: USD 6.47 per
barrel ) at the top of i ts hi s tori cal USD4-USD6 per barrel range, s upported by gl obal demand growth and the
conti nued executi on of our growth s trategy.”

Pos t pai d credi t to Refi nery s taff and contractors whom he s ai d had remai ned focus ed on the s afe and rel i abl e
runni ng of the Refi nery and the conti nued del i very of qual i ty fuel products, parti cul arly duri ng the ten-day
repai r of the Refi nery to Auckl and Pi pel i ne (RAP).

“The September rupture of the pi pel i ne was operati onal l y challengi ng for everyone i n the team, but thei r
ongoi ng dedi cati on to s uppl yi ng our cus tomers has ens ured that more product i s bei ng pumped to the Wi ri
fuel termi nal than before the i nci dent. The commi s s i oni ng of a s econd pump at the Kumeu Intermedi ate
Pumpi ng Stati on i n November and the l i ft i n the RAP’s operati ng pres s ure to 75 bar i n earl y December means
that 5 to 12% more fuel product (dependi ng on the product pumped) i s bei ng del i vered to Wi ri than before the
rupture.”

Pos t confi rmed that the RAP i s expected to return to ful l pres s ure i n Q2/Q3 2018, pendi ng approval of the
pi pel i ne certi fi er. He added that the Company wel comed the Northl and Regi onal Counci l fi ndi ng that the
refi nery had no caus ati ve rol e i n the rupture: “It i s pl eas i ng that after revi ewi ng the external expert reports
and havi ng wi tnes s ed fi rs t-hand our contai nment and recovery proces s es , the Counci l deci ded not to
pros ecute. Equal l y pl eas ing was thei r commendation for the refinery’s outs tandi ng res pons e to the incident,”
he s ai d.

PERFORMANCE HIGHLIGHTS
 Operati ng revenue of $411.7m (2016: $354.2m), and s trong cos t control del i vered an NPAT of $78.5m
(2016: $47.2m)
 GRM averaged USD 8.02 per barrel (2016: USD 6.47 per barrel ).
 The Company retai ned i ts upl i ft over the Si ngapore Compl ex Margi n, averagi ng USD 4.27 per barrel
(2016: USD 3.22), hel ped by a fal l i n crude frei ght cos ts , and i ncreas ed natural gas us age.
 Strong annual crude i ntake of 41.7m barrel s (2016: 42.7m barrel s ) achi eved des pi te the pi pel i ne
rupture i n September.
 Worl d-cl ass unpl anned downti me at 0.60% (2016: 0.85%) allowed the refi nery to capi tal ise on the
heal thy margi n envi ronment.
 Strong cas h generati on from operati ons res ul ted i n a free cas h-fl ow of $103m (2016: $47m).






2
Ope ra ting re ve nue has the same definition as Re venue from ordinary a ctivi ties.

DIVIDEND
The Board has today approved a s i mpl i fied di vi dend pol i cy where the Company wi l l pay 80% of Free Cas h Fl ow
(FCF)
3
, as ordinary dividends subject to the Company’s medium-term as s et i nves tment programme, 20%
targeted geari ng l evel and future outl ook.
Appl yi ng the new pol i cy and taki ng i nto account the i mpact of the pl anned s hutdown i n 2018, the Company’s
Di rectors have res ol ved to pay a ful l y i mputed fi nal di vi dend of 12 cents per s hare to be pai d on 22 March
2018, wi th a record date of 15 March 2018. Wi th an i nteri m di vi dend of s i x cents pai d i n September, the total
di vi dend payment for the year i s 18 cents .
OUTLOOK

Said Post: “Despite the most trying circumstances we have achi eved a s trong res ul t for the year through our
conti nued operati onal rel i abi lity, abi lity to capi tal ise on heal thy margi ns , qual i ty fuel producti on and a wel l-
devel oped cul ture of team work amongs t our s taff and contractors . Conti nui ng to pl ay to thes e core s trengths
s et us up for the s ucces s ful compl eti on of our maj or acti vi ty for 2018: - the pl anned mai ntenance s hutdown
s tarti ng i n Q2.”

ENDS
Further i nformati on:
Greg McNei l l
Communi cati ons and External Affai rs Manager
T: 094325115; M: 021 873623; E: greg.mcnei l l @refi ni ngnz.com

3
Fre e Ca sh Flow i s the Net Ca sh from Operating Acti vities l ess normalised s tay-in-business ca pital (initially calculated a t
$80-$90m)

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Independent auditor’s report
To the shareholders of The New Zealand Refining Company Limited
The consolidated financial statements comprise:
the consolidated balance sheet as at 31 December 2017;
the consolidated income statement for the year then ended;
the consolidated statement of comprehensive income for the year then ended;
the consolidated statement of changes in equity for the year then ended;
the consolidated statement of cash flows for the year then ended; and
the notes to the consolidated financial statements, which include significant accounting policies.
Our opinion
In our opinion, the consolidated financial statements of The New Zealand Refining Company Limited
(the Company), including its subsidiary (the Group), present fairly, in all material respects, the
financial position of the Group as at 31 December 2017, its financial performance and its cash flows for
the year then ended in accordance with New Zealand Equivalents to International Financial Reporting
Standards (NZ IFRS) and International Financial Reporting Standards (IFRS).
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (New Zealand) (ISAs
NZ) and International Standards on Auditing (ISAs). Our responsibilities under those standards are
further described in the Auditor’s responsibilities for the audit of the consolidated financial
statementssection of our report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our opinion.
We are independent of the Group in accordance with Professional and Ethical Standard 1 (Revised)
Code of Ethics for Assurance Practitioners (PES 1) issued by the New Zealand Auditing and Assurance
Standards Board and the International Ethics Standards Board for Accountants’ Code of Ethics for
Professional Accountants (IESBA Code), and we have fulfilled our other ethical responsibilities in
accordance with these requirements.
Our firm carries out other services for the Group in the areas of AGM scrutineering, compliance
reporting on processing fees, remuneration benchmarking advice and treasury advice. The provision
of these other services has not impaired our independence as auditor of the Group.
PricewaterhouseCoopers, 188 Quay Street, Private Bag 92162, Auckland 1142, New Zealand
T: +64 9 355 8000, F: +64 9 355 8001, pwc.co.nz

Our audit approach
Overview
An audit is designed to obtain reasonable assurance whether the financial
statements are free from material misstatement.
Overall group materiality: $4.2 million, which represents 5% of a five-year
weighted average of profit before tax from 2013 to 2017.
We chose profit before tax as the benchmark because, in our view, it is the
benchmark against which the performance of the Group is most commonly
measured by users, and is a generally accepted benchmark. We applied a
weighted average approach due to the volatility of earnings over the past five
years, caused mainly by significant changes in US dollar denominated refiners’
margins and the NZ dollar/US dollar exchange rate.
We have determined that there is one key audit matter:
Recognition of processing fees
Materiality
The scope of our audit was influenced by our application of materiality.
Based on our professional judgement, we determined certain quantitative thresholds for materiality,
including the overall Group materiality for the consolidated financial statements as a whole as set out
above. These, together with qualitative considerations, helped us to determine the scope of our audit,
the nature, timing and extent of our audit procedures and to evaluate the effect of misstatements, both
individually and in aggregate on the consolidated financial statements as a whole.
Audit scope
We designed our audit by assessing the risks of material misstatement in the consolidated financial
statements and our application of materiality. As in all of our audits, we also addressed the risk of
management override of internal controls including among other matters, consideration of whether
there was evidence of bias that represented a risk of material misstatement due to fraud.
We tailored the scope of our audit in order to perform sufficient work to enable us to provide an
opinion on the consolidated financial statements as a whole, taking into account the structure of the
Group, the accounting processes and controls, and the industry in which the Group operates.
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Key audit matters
Key audit matters are those matters that, in our professional judgment, were of most significance in
our audit of the consolidated financial statements of the current year. These matters were addressed in
the context of our audit of the consolidated financial statements as a whole, and in forming our
opinion thereon, and we do not provide a separate opinion on these matters.
Key audit matter How our audit addressed the key audit matter
Recognition of processing fees
Processing fee revenue for 2017 was $327.4
million (2016: $276.6 million) of the total
operating revenue of $411.6 million.
Processing fees are the Group’s main source
of revenue and represent material related
party transactions with the Group’s
shareholding oil companies, who are also its
customers.
The processing fee calculation is complex
and includes many variables. The
calculation is based on an agreed formula
defined in the processing agreement with
each of the oil companies. Note 19(a)
discusses the method of calculation of the
refining margin, which is a key input into
the calculation of the processing fee.
Management reviews the processing fees
calculation on a monthly basis including
crude, product premia and freight costs.
Notes 2 and 3 of the consolidated financial
statements detail the accounting policies
and an analysis of processing fee revenue.
Our audit procedures described below included a
combination of controls and substantive testing over the
processing fees calculation and recognised revenue.
Controls testing included:
Testing access controls over restriction to the
processing fee calculation through inspection of
the access log and comparing it against the
approved user listing; and
Testing a sample of management’s monthly
review controls over the processing fee
calculation.
For substantive procedures:
On a sample basis, we agreed calculation inputs
for crude oil costs, product premia and freight to
source documentation;
We agreed the processing fee formula used to
recognise revenue to the processing fee
agreement and, on a sample basis, reperformed
the calculation of the refining margin for each of
the oil companies; and
We tested the payments received from the oil
companies during the year and agreed post year-
end cash receipts from each of the oil companies
to the outstanding receivables at year end.
From the procedures performed, we have no matters to
report.
Information other than the financial statements and auditor’s report
The Directors are responsible for the annual report. Our opinion on the consolidated financial
statements does not cover the other information included in the annual report and we do not express
any form of assurance conclusion on the other information.
In connection with our audit of the consolidated financial statements, our responsibility is to read the
other information and, in doing so, consider whether the other information is materially inconsistent
with the consolidated financial statements or our knowledge obtained in the audit, or otherwise
appears to be materially misstated.
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If, based on the work we have performed on the other information that we obtained prior to the date of
this auditor’s report, we conclude that there is a material misstatement of this other information, we
are required to report that fact. We have nothing to report in this regard, except that the other
information has not yet been approved by the Board Responsibilities of the Directors for the
consolidated financial statements
The Directors are responsible, on behalf of the Company, for the preparation and fair presentation of
the consolidated financial statements in accordance with NZ IFRS and IFRS, and for such internal
control as the Directors determine is necessary to enable the preparation of consolidated financial
statements that are free from material misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, the Directors are responsible for assessing the
Group’s ability to continue as a going concern, disclosing, as applicable, matters related to going
concern and using the going concern basis of accounting unless the Directors either intend to liquidate
the Group or to cease operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the consolidated financial statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial
statements, as a whole, are free from material misstatement, whether due to fraud or error, and to
issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance,
but is not a guarantee that an audit conducted in accordance with ISAs NZ and ISAs will always detect
a material misstatement when it exists. Misstatements can arise from fraud or error and are
considered material if, individually or in the aggregate, they could reasonably be expected to influence
the economic decisions of users taken on the basis of these consolidated financial statements.
A further description of our responsibilities for the audit of the consolidated financial statements is
located at the External Reporting Board’s website at:
https://www.xrb.govt.nz/standards-for-assurance-practitioners/auditors-responsibilities/audit-
report-1/
This description forms part of our auditor’s report.
Who we report to
This report is made solely to the Company’s shareholders, as a body. Our audit work has been
undertaken so that we might state those matters which we are required to state to them in an auditor’s
report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the Company and the Company’s shareholders, as a body, for our
audit work, for this report or for the opinions we have formed.
The engagement partner on the audit resulting in this independent auditor’s report is Pip Cameron.
For and on behalf of:
Chartered Accountants
Auckland
27 February 2018
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