PKN ORLEN first quarter 2008 results
Significantly improved financial results compared to Q1 2007: EBITDA up almost PLN 160m, operating profit up PLN 190m and net profit attributable to shareholders of the holding company up PLN 577m. Operating cash flow is also up while financial leverage is down.
In Q1 2008, the company consistently realized and implemented projects to increase sales by benefiting from the growing demand for diesel and fertilizer. One of the key corporate developments in this period was the restoration of production capacity at AB Mazeikiu Nafta which, having rebuilt the vacuum distillation unit, in March exceeded the 2005 oil processing and production levels as well as white product volumes.
Adjusting to market requirements, PKN ORLEN launched an additional diesel installation, improving medium distillate yield by 2.5 p.p. (to almost 51%) within the product range. In the retail segment, PKN ORLEN continued the restructuring processes and maintained the dual-brand strategy, as well as consistent product and service category management, with Premium stations launching the new STOP Cafe offering. The result of these initiatives was a 25% increase in non-fuel margins.
Compared to the same period last year, PKN ORLEN'S Q1 2008 financial results were impacted by higher crude oil prices (67%), stronger appreciation of the zloty, a similar Ural/Brent differential, but with steeply falling refining margins, slightly reduced chemical margins, lower polyolefin margins and slightly higher olefin margins.
Compared to Q1 last year, Q1 2008 brought increased volumes in all areas of production. Crude processing was up 13%, refining production up 13%, petrochemicals up 38% and chemicals up 12%.
Significantly better results compared to the same quarter last year were generated by the sales segment. Wholesale refining product volumes were up 22% (887 000 tons) with retail up 9% (approx. 94 000 tons). Improvements were reported also in petrochemical sales (2%), with a slight (-1%) decrease in chemicals, although maximization of fertilizer sales resulted in a 5% increase.
Between January and March 2008, the ORLEN Group generated a significantly higher EBITDA of PLN 1 152m which represents an increase of approximately 16% compared to Q1 2007. Compared to Q4 2007, EBITDA was up 58%. In Q1 2008, the PKN ORLEN Group generated PLN 17 938m in revenue, representing an almost 34% improvement over last year.
Higher efficiencies, mainly due to improvements in Mazeikiu Nafta, enabled the company to generate an EBIT of PLN 565m, up PLN 190m (51%) over Q1 2007. Net profit attributable to shareholders of the holding company in the period in question was almost thirteen times higher than last year and amounted to PLN 626m.
The operating result of the refining segment in Q1 2008 was up PLN 175m, to PLN 240 m. This was impacted by reserve valuation and improved results in Mazeikiu Nafta.
Very good operating results were also generated in the retail segment, up PLN 35m (over 50%) compared to Q1 2007 to PLN 103m. The largest contributing factors were growing retail sales volumes and improvements in non-fuel efficiencies.
In the first three months of 2008 the petrochemical segment generated an efficiency increase of PLN 110m. However, the impact of external macroeconomic factors (-245 m PLN), in particular of currency rates fluctuations vs. the dollar, contributed to a PLN 138m decrease in EBIT (37%) compared to Q1 2007 (down to PLN 232m).
The market environment positively impacted the results of the chemical segment, resulting in an EBIT increase of PLN 9m. The segment owes this improvement mainly to growing fertilizer sales volumes and higher margins on those products.
