Good operating results in the face of continued macroeconomic challenges
For Q3 2010, PKN ORLEN reported its best operating profit since the beginning of 2009 (LIFO method). PKN ORLEN has also recorded the highest aggregate sales volumes in over a year and a half; and, increased the utilisation of its production capacities at all of the Group's refineries. Consequently, PKN ORLEN posted robust net earnings and improved the financial ratios.
In Q3 2010, the macroeconomic indicators in the fuel sector were markedly higher than in Q3 2009. The model refining margin and Ural/Bent differential increased by USD 0.4/bbl, while the model petrochemical margin was up by EUR 152/t, to EUR 753/t. Crude oil prices increased by USD 9 USD/bbl over the same period.
In such macroeconomic environment, on the back of higher sales across all segments and the optimised operating costs, PKN ORLEN achieved its highest operating profit (LIFO method) since the beginning of 2009, totalling PLN 0.7bn. Stabilisation of the crude prices reduced the difference between operating profit and the LIFO result to PLN 50m.
Net profit was PLN 1.3bn, up by over PLN 300m year on year. Implementation of optimisation processes, particularly in the area of working capital, helped PKN ORLEN to reduce debt by a total of PLN 3.8bn year on year, and to maintain the debt at a safe level below PLN 10bn.
- We are very satisfied with the performance, particularly with the steady increase in sales and operating profit. Through the consistent pursuit of our strategy, we were able to successfully face the macroeconomic challenges which proved tougher than in the previous quarter. It was also a period marked with investments in technology and efforts designed to enhance the utilisation of our production capacities. These successfully executed tasks will bring tangible results in the long run - said Jacek Krawiec, CEO and President of the Management Board of PKN ORLEN S.A..
Stronger sales, improved capacity utilisation
In Q3 2010, PKN ORLEN operated at full production capacities at the Płock plant and improved utilisation of the capacities in the Czech Republic (by 7pp, to 86%) and in Lithuania (by 9pp, to 99%). The ORLEN Group increased the volume of crude oil processed by 1% year on year.
Sales volumes increased, year on year, by 6% in the retail segment, 3% in the refining segment and 8% in the petrochemical segment, which enabled PKN ORLEN to record its highest aggregate sales volume since the beginning of 2009 (9.2m t). The strongest retail sales performance was seen on the Polish and German markets, while sales volumes in Lithuania and the Czech Republic declined. On the other hand, it was on in latter two markets that PKN ORLEN recorded increased sales volumes for refinery products. In the petrochemical segment, sales increased on larger volumes of olefins, polyolefins and fertilisers sold. Sales of plastics continued to be affected by the failure of production units at Anwil.
On the back of improved macroeconomic conditions and increased sales volumes, in Q3 2010 sales revenue expanded by 18% year on year, to over PLN 22bn.
Reduced debt
PKN ORLEN continued to implement measures designed to reduce its working capital. The measures implemented in 2009 generated additional inflow of PLN 2.2bn as at the end of Q3 2010.
In Q3 2010, the Company maintained its debt below PLN 10bn. Strong appreciation of the Polish złoty against foreign currencies translated into favourable revaluation of the credit facilities, which helped to reduce debt by PLN 1bn. The financial leverage approached the 30-40% range assumed in the Company's strategy and was 42.2%. Available credit lines amount to over EUR 1bn.
PKN ORLEN continued the implementation of its key projects, with expenditure reduced by PLN 133m over Q3 2009. In Q3, PKN ORLEN generated net cash provided by operating activities of PLN 0.4bn, and posted an increase in investing cash flows resulting from the payment of deferred 2009 liabilities of PLN 0.6bn.
Steps taken to increase the Company value
PKN ORLEN consistently strives for increasing its value by implementing optimisation and development-oriented projects. As a result, operating profit earned by the Lithuanian assets has improved by USD 50m in 2010 (LIFO method), while the Czech Unipetrol posted a robust improvement of EBIT by nearly CZK 2.7bn.
PKN ORLEN also continued efforts designed to dispose of its equity interests in Anwil and Polkomtel and to sell another tranche of its mandatory fuel reserves. This transaction is planned to be executed in Q4 2010.
Concurrently, projects are under way to prepare hydrocarbon production from fields located in Poland and on the Latvian shelf. For 2011, drilling of first prospecting wells into reserves of shale gas in the Lublin area has been scheduled.
Also, another stage of the Włocławek power plant project began – the process of selecting the gas turbine vendor started. Key technology-related investment tasks are also being finalised. Next week, the new Diesel Oil Hydrodesulphurisation Unit VII will be launched, thus increasing the supply of high quality diesel oil. The PX/PTA complex, which is being constructed in Płock and Włocławek, is already at the stage of technological start-up.
