New Cost Optimization Program
PKN ORLEN launches the “OPTIMA” program, which aims to save a minimum of PLN 600 million in operational costs and to reduce investment costs by a further PLN 600 million by 2009. OPTIMA will apply to both the core operations of PKN ORLEN and the Capital Group.
Igor Chalupec, President and CEO said: “Increasing cost and investment efficiency is one of the key elements of ORLEN’s strategy. Our plans are based on the best practices in the industry”
Until 2005 the Company will continue to implement the cost reduction program (KPRKO), initiated in 2003. The Company is on target to achieve the main goal of the program – fixed operational costs reduction amounting to PLN 800 million by the end of 2005.
The new program substantially widens a range of present savings initiatives. Apart from plans for the improvement of production and logistic efficiency, OPTIMA additionally focuses on cost efficiency in all business functions of the Company’s subsidiaries. Selected support functions of the Group’s key partnerships will be centralized through the creation of service centres.
Nearly half of the expected PLN 600 million savings will come from new areas, which until now were not included in the KPRKO program. About PLN 135 million of the savings will be generated in such subsidiaries as: Anwil, Rafineria Trzebinia, Rafineria Nafty Jedlicze, ORLEN Oil, ORLEN Asfalt and IKS Solino. At the same time, the level of savings will be increased through the implementation of OPTIMA to UNIPETROL. In production and logistics the expected reduction will reach PLN 125 million.
Savings of approximately PLN 100 million are expected from the rationalization and centralization of purchases by PKN ORLEN and the Capital Group. Increased efficiency in support functions such as accountancy, key personnel, administration and IT are expected to generate an additional PLN 60 million in savings.
Changes planned in the retail segment will substantially contribute to the overall cost reduction. PKN ORLEN aims to save about PLN 190 million as a result of a retail sales restructuring program, including reducing operating costs at fuel stations.
The program aims to reduce operational costs by PLN 250 million in the next year and a further PLN 420 million in the following year. Savings of PLN 540 million are planned by 2008 and a minimum of PLN 600 million by 2009.
PKN ORLEN plans to make additional savings on investments, amounting to PLN 600 million by 2009. These plans are based on the full achievement of all investment projects by the Capital Group. The cost savings will be implemented in outlay optimization, centralization of purchases and investment services, planning rationalization together with implementation and verification of investment projects.
Areas which may bring additional CAPEX savings between 2006 and 2009 are production, wholesale and logistics (PLN 310 million) and the Company’s subsidiaries (PLN 290 million).
Jan Maciejewicz, Vice President, Chief Cost and IT Manager said: - We estimate that in 2009 the total cost reduction, due to KPRKO realization and implementation of OPTIMA program, shall be a minimum of PLN 1.4 billion.
