Consolidated financial performance of PKN ORLEN in Q2 2010
Q2 of 2010 marked improved macroeconomic conditions in the fuel industry. In total the refining margin and Ural/Brent differential went up by 1.0 USD/bbl compared to Q2 of 2009. Model petrochemical margin reached 721 EUR/bbl. In the same period crude oil prices rose by 2 USD/bbl reaching 78 USD/bbl. Major markets in which PKN ORLEN operates recorded higher GDP which translated into higher diesel fuel utilization. However, gasoline utilization was considerably lower.
Given such macroeconomic conditions PKN ORLEN’s operating result in Q2 according to LIFO, that is, excluding the effect of inventory valuation, reached PLN 0.7bn being the best result recorded since early 2009. Operating profit reached PLN 1.1bn, i.e. it was PLN 0.5bn higher than in the corresponding period last year. Compared to Q2 of 2009, PKN ORLEN’s debt was PLN 3.5bn lower and amounted to PLN 9.8bn.
- We owe such excellent operating result to the consistent performance of streamlining plans and improved macroeconomic conditions. Despite the steady growth of the refining margin and differential we had to face the weaker złoty and the decreased demand for gasoline. Despite disadvantageous revaluation of our f/x liabilities we managed to reduce our debt by another PLN 0.5bn. With the higher utilization of production capacity and the continued improvement of sales efficiency once again we generated higher volumes - says Jacek Krawiec, President of the Management Board of PKN ORLEN SA.
- Thanks to such results we are strengthened in our conviction that the strategy adopted by PKN ORLEN, which allowed us to efficiently operate in the more difficult period at the turn of 2009 and 2010 also proved successful in the slightly better economic conditions and sets a proper direction for development in the coming years - adds Jacek Krawiec.
Boosted sales, improved utilization of production capacity
Despite limited growth in demand for fuels and lower fuel margins resulting from higher fuel prices, PKN Orlen boosted its sales by 5%, including by 8% in the refining segment and by 5% in the retail sales sector. The best retail sales results were recorded in the Polish and German markets, whereas sales volumes in the Czech Republic and Lithuania dropped. In the petrochemical segment we maintained good sales volumes for olefins and polyolefins. However, sales of fertilizers and PVC were lower due to the decreased demand for these products. Also the repair of the olefin installation in Płock and the Anwil installation breakdown affected the performance of that segment.
Sales revenues in Q2 of 2010 went up by 26% totaling more than PLN 21bn compared to the corresponding period last year.
In the second quarter of 2010 PKN ORLEN increased its production capacity utilization, especially at its refineries in the Czech Republic and Lithuania – crude oil throughput was increased by 5% compared to the corresponding period last year. Also the product yield structure was improved vis-à-vis Q2 of 2009.
Decreased debt
ORLEN continued efforts aimed at the further reduction of its debt and financial leverage. Despite the adverse effect of weakened złoty and credit revaluation, the company managed to decrease its debt by PLN 0.5bn totaling PLN 9.8bn which resulted in decreasing the financial leverage below 45%. Liquidity is additionally secured with unused credit lines worth over EUR 1bn and the fact that nearly 70% of debt will be repaid after 2012. In the period in question PKN ORLEN generated more than PLN 2.5bn worth of cash as part of its operating activities. The company continued its key investment projects, however, streamlining projects allowed to reduce investment outlays vis-à-vis last year.
Activities aimed at improving goodwill
PKN ORLEN is engaged in a number of activities aimed at the continuation of the improvement of goodwill of the organization. The company continues its exploration and mining projects, including, among other things, searching for shale gas in the Lublin region and deposits on the Baltic shelf. Also, works conducted together with PGNiG on the Sieraków bed are progressing. Preparations for launching a tender procedure for exploratory drilling are currently under way. The first hole will be drilled in the autumn of 2010. The company continues to work on a project related to the construction of a power plant in Włocławek. PKN ORLEN continues to take efforts to further reduce its debt. The project of reselling the second tranche of obligatory reserve stock and the sale of shares of Polkomtel is advanced.
