Italian oil refiner Saras SpA's 2009-2011 business plan on June 24 is likely to drive investors' attention on organic growth, while no surprises are expected on the M&A front, which remains the main trigger for the stock, analysts said.

Saras could announce investments exceeding the 600 million euros planned in its previous three-year plan, mainly to further upgrade its diesel-focused Sarroch refinery in Sardinia, and improve the efficiency of the site, they said.

Upgrading projects will be aimed at increasing its capacity to transform fuel oil and other heavy derivatives into light ones in demand on the market, such as diesel, whose margins should remain strong, driven by robust demand from Asia.

"Saras has already done a good job, but can do more," a French analyst said. "With structural shortage of diesel in Asia and gasoline demand hit by the U.S. recession, it makes sense for Saras to further increase its diesel exposure".

More than half of the Sarroch refinery's production is middle distillates, mainly diesel, about 28 percent is gasoline and naphtha, and nearly 5 percent fuel oil. The refinery has a daily output of about 300,000 barrels.

A Milan analyst said he does not expect Saras to make any M&A announcements.

"No M&A at the moment. Saras has no acquisition in the pipeline," he said.

Saras has repeatedly said it is interested in acquisitions, but does not intend to overpay. The company started a share buyback in May of up to 10 percent of its capital, with the shares also to be used for external growth opportunities.

On prospects for diesel, the French analyst said margins will continue to be high, but they could fall "a bit" in the third quarter when Reliance Industries's 580,000 barrels-a-day refinery at Janmagar, India comes onstream.

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Related Project
Sarroch Refinery
Facility Type: Refinery Owner: Saras S.p.A.
Scope: Expansion Location: Cagliari Italy