ORLEN's Increasing Value
In 2Q 2004, PKN ORLEN generated its highest ever quarterly net profit of PLN 668m (317.5 per cent higher than in 2Q 2003), calculated in accordance with International Financial Reporting Standards. PKN ORLEN’s cost cutting programme generated PLN 163m of operational cost savings in 2Q 2004, when combined with savings achieved in 1Q 2004 (PLN 143m), this is equivalent to 68 per cent of the total figure planned for the year. This performance shows that PKN ORLEN is on track to achieve its target of doubling shareholder value in 2006.
PKN ORLEN’s financial performance benefited positively from favorable market conditions and the focused implementation of its corporate strategy. The positive oil and petrochemical environment, combined with results of the cost cutting programme and the increased profitability of the business segments, were the main contributors to 2Q 2004’s good performance.
In 2Q 2004, PKN ORLEN’s cost cutting programme delivered PLN 163m of operational savings. This excellent result gives confidence that the aggregate savings of PLN 450m for 2004 are achievable. The key drivers behind the 2Q performance were cost reductions in the areas of production and technology (PLN 64m) and logistics (PLN 42m).
In refinery and wholesale, PKN ORLEN recorded a PLN 495m profit increase in 2Q 2004 compared with 2Q 2003. This result was due to increased sales volume and favorable refinery margins with simultaneous reduction of the main costs in these segments. The financial problems of Yukos, as well as the unstable situation in Iraq, pushed crude prices to record breaking levels worldwide. This helped to increase the refinery margin by 138.4 per cent to USD 5.84 per barrel, compared to the corresponding period in 2003.
Profit from retail operations in 2Q 2004 rose by PLN 14m compared to the same period of the previous year. The cost cutting programme also made its contribution to the final figure in this segment.
The petrochemical segment witnessed a profit increase of PLN 35m in 2Q 2004 over 2Q 2003. As with the other segments, the cost cutting initiatives made an important contribution. The 2Q 2004 figure also benefited from significant upgrade of the market environment for ORLEN Group companies such as Anwil.
PKN ORLEN continues to implement its strategy aimed at establishing a pan-Central European business. In May 2004, PKN ORLEN entered into an agreement with the Czech National Property Fund to purchase 63 per cent of Unipetrol. At the turn of the third and fourth quarter, PKN ORLEN, after permission has been granted by the European Commission, expects to formally finalize the acquisition of the Czech petrochemical holding. Currently, PKN ORLEN is preparing the integration of Unipetrol and leveraging the synergies of the combined company.
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