Italian oil refiner ERG SpA swung to a third-quarter net loss below forecasts and warned that refining margins in the final quarter remained very weak.

Chief Executive Alessandro Garrone said it was too early to say if ERG, Italy's second-biggest refiner by market share, would confirm its dividend policy for 2009.

Garrone said last month he hoped to be able to confirm last year's ordinary dividend of 0.40 euro per share.

At the moment we're not seeing good margins in refining, and October and November were very, very weak, he told analysts in a conference call.

Garrone said ERG had enough space in its refining and downstream activities to cut capital spending next year. The company had earmarked 375 million euros in capital spending in 2010, with a focus on renewable energy.

Renewables is a growing business in Italy and abroad, Garrone said. He added that ERG could grow in renewables through acquisitions or joint ventures.

ERG, controlled by the Garrone family, posted a 14 million euro net loss in the third quarter, after a profit of 40 million a year ago.

DEMAND DRIES UP

The global economic downturn has sapped demand for oil products and hit the earnings of many refiners. Several of them, including Finnish refiner Neste Oil, Austria's OMV and Italy's Saras, have said the near term looks challenging.

A Thomson Reuters I/B/E/S consensus of seven analysts had estimated a third-quarter net loss for ERG of 12.33 million euros.

ERG had no maintenance plans for its main Isab refinery on Sicily next year and there are no plans for major spending on new plant there, Garrone said.

ERG has scheduled a full shutdown for its Rome plant in the second quarter of 2010 and a slowdown at its Sarpom refinery in the fourth quarter.

Russia's Lukoil has 49 percent of the Isab plant and ERG holds a put option on the rest. Garrone told analysts he was confident the refining business was worth more than the floor value of the put option with Lukoil.

ERG said in its results statement that faint signs of economic recovery indicated gradual improvement in results in the course of 2010.

The group's damaged ISAB Energy plant, which hurt power generation results, will be fully operational again by June 2010, Garrone said in the results statement.

The shares were down 2.4 percent at 10.17 euros at 1512 GMT. The DJ Stoxx oil and gas index .SXEP was largely flat.

(Reporting by Stephen Jewkes, editing by Will Waterman and David Cowell)

($1 = 0.6722 euro)

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