Hungary MOL chief says fuel price hike inevitable, buyback call was good

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Monday, May 25, 2009 09:09:00 AM

Hungarian fuels group MOL will be obliged to raise its prices to the extent of the VAT hike in July, otherwise it would be restricting competition, said Zsolt Hernádi, Chairman-CEO of the company.

He stressed this is a factor MOL has no influence on. He declined to comment speculation that the raise of the higher value-added tax rate to 25% from 20% in July would propel the price of gasoline to over HUF 300 a litre from around HUF 270 currently, MTI reported.

In Hernádi's view, it remains unpredictable how retail sales of fuels will turn out in Hungary, but for its part MOL does not expect a decline as drastic as in gross domestic product this year (by more than 6.0% yr/yr, according to the latest government forecast).

Hernádi stressed that even a massive drop in retail sales would not be dramatic for the company as its products sell well on global markets.

Regarding the company's treasury share buybacks he said they would have already received criticism from global stock markets if these had found fault with MOL's such actions. As MOL's financial performance is better than other oil companies in its league, the investors acknowledged that MOL is headed the right direction and its growth is sustainable, Hernádi added.

He reminded that MOL had announced treasury share repurchases before it started to buy back the shares, saying it would need such actions to reduce its then excessive stock of cash. This proved to be a much better solution than if MOL “had embarked on unfounded, overpriced asset acquisitions and investments", Hernádi said.

Another proof that the management made the right call is that whenever there are promising projects, such as the one in the Kurdistan Region of Iraq right now, MOL is able to tap its treasury share portfolio, he noted.

2009.05.17 12:06
Hungary´s MOL buys stake in Iraqi oil co, becomes partner of OMV

“We have not squandered our previously accumulated cash and so the company can now successfully mitigate the global negative impacts generated by the world economic recession. And (our) shareholders benefited from that."