PKN ORLEN - Good third quarter results
Despite a macroeconomic downturn, PKN ORLEN reported very good results in Q3 2006, due mainly to excellent retail fuel sales supported by very good and strong results in other segments, including Unipetrol.
In Q3, 2006 PKN ORLEN generated PLN 14 879 m in revenue. The Group's reported EBITDA amounted to PLN 1 681 m, which represents a 3.6% increase compared to the same period in 2005.
Consolidated net profit grew 8.2% compared to Q2 2006, and by 4.3% compared to the same period in 2005, amounting to PLN 1 037 m. Net profit attributable to shareholders of the holding company improved significantly, growing 16.5% compared to Q2 2006, and by 4.2% compared to the same period in 2005, and amounted to PLN 1 026 m.
It is worth noting that these results were achieved despite a macroeconomic downturn in the refining sector. Refining margins dropped 35% compared to Q3 2005. The Ural-Brent differential was 14.7% lower than in the same period last year, and 23.7% less than in Q2 2006.
The key factors shaping the Corporation's good results in Q3 2006 included consistent sales support activities in the retail and petrochemical product departments, as well as improved Group company results from Unipetrol, Anwil and Orlen Deutschland.
All installations operated under full loads in Q3 to satisfy sharp demand growth. Both the Płock and UNIPETROL refineries fully utilized their processing capacities. It should be noted that the processing capacity utilization index in Q3 2006 amounted to as much as 102.1%
The corporation also consistently maintained price discipline. The OPTIMA programme realization increased 166% compared to Q2 2006. Savings reached PLN 117 m. The leader of the program was the refining segment with cost reductions of PLN 75 m.
The retail segment reported excellent results. Sales dynamics amounted to 274% for Q3 2006 compared to Q3 2005. An operating result of PLN 187 m from retail sales represents a more than threefold increase over Q3 2005. This result was contributed to by an increase in volume, which generated PLN 34 m in margins, as well as an upswing in unit margins, which contributed another PLN 34 m to the profit. Implementation of the retail network growth strategy resulted in over 814 m liters sold by the holding company - this represents a 15.7% increase compared to Q3 2005. In the Group as a whole, retail sales volumes amounted to 1 398 m liters - 13% more than last year. It should also be emphasized that the corporation's non-fuel operations grew dynamically and generated an additional PLN 14 m. Additionally ORLEN Deutschland generated 166,7% more net profit than in 2005, with a 3.1% increase in sales volume (from a smaller number of stations).
The petrochemical sector generated PLN 211 m, which is 50% more than in Q2 2005. This result is partially due to a 53% increase in product sales. This segment's result was also strongly impacted by the consolidation of the Czech-based Chemopetrol of the UNIPETROL Group, which contributed PLN 89 m of the petrochemical segment's result.
Refining generated the highest result of all segments - PLN 917 m. However, this result was lower than in 2005.
The 17.3% decrease was caused mainly by narrower refining margins and a less favorable Ural-Brent differential. With margins dropping 35% compared to Q2 2005 and by 30% compared to Q2 2006, the relatively small overall decrease was possible thanks to the corporation's focus on improving cost effectiveness and margins, as well as optimizing the production chain within the group and the product basket.
The chemical segment also improved its profitability considerably. Its operating result amounted to PLN 57 m, which represents a strong 67.6% improvement over Q2 2006. This result was helped by the OPTIMA programme, which generated segment effectiveness improvements of PLN 22 m.
