PKN ORLEN’s Q3 2019 Consolidated Financial Results

In the third quarter of 2019, PKN ORLEN earned LIFO-based EBITDA of PLN 3.2bn, an increase of nearly PLN 800m (over 30%) y/y, underpinned by record-high crude throughput and 3% growth in total sales volumes (y/y). The Retail segment’s LIFO-based EBITDA came in at an all-time high of PLN 925m, an increase of over PLN 200m on Q3 2018.

The period witnessed the launch of ORLEN Południe strategic propylene glycol unit project, as well as the purchase of a licence and front-end engineering design for a 2G bioethanol unit. In September 2019, ANWIL, an ORLEN Group company based in Włocławek, signed a contract for the construction of auxiliary infrastructure related to its fertilizer project. Clearance was also obtained by ORLEN from anti-trust authorities to acquire another seven service stations in Slovakia.

Key third-quarter 2019 highlights:

• PLN 3.2bn in LIFO-based EBITDA, representing a y/y increase of almost PLN 800m
• Record-breaking Retail performance - PLN 925m
• 3% y/y growth in overall sales volumes, to 11.4 million tonnes
• 5% y/y growth in retail volumes

In the third quarter of 2019, both the model downstream margin and oil prices went down by, respectively, USD 0.1/bbl (y/y) and USD 13/bbl (y/y), to USD 62/bbl. The average exchange rate of the złoty against the euro and the US dollar fell during the period. Gasoline consumption grew across all markets. Diesel oil consumption rose in Poland, the Czech Republic and Lithuania, and stayed broadly unchanged in Germany.

Our business decisions combined with their determined implementation have produced measurable effects. We have been consistently expanding the scale of our operations. The Group’s robust performance confirms that our decisions were soundly based. Over the period, we also significantly strengthened the ORLEN brand image and perception not only in Poland, but globally, which boosted our retail earnings to further highs. Our financial position remains strong and we have solid foundations for further growth and pursuit of strategic projects, which are essential to the Group’s future, especially in terms of further consolidation of our presence both at home and on foreign markets - said Daniel Obajtek, President of the PKN ORLEN Management Board.

The Downstream segment’s Q3 2019 LIFO-based EBITDA came in at PLN 2.4bn, an increase of PLN 640m y/y, supported by a 2% y/y rise in sales volumes, including 2% for diesel oil, 3% for LPG, 13% for olefins, 2% for polyolefins, and 44% for PTA. Key downstream projects carried out in the third quarter included the propylene glycol and 2G bioethanol units in Trzebinia, fertilizer capacity expansion in Włocławek, and polyethylene unit in Litvínov, the Czech Republic.

The Retail segment’s Q3 2019 LIFO-based EBITDA came in at PLN 925m, up PLN 202m (y/y). This solid performance was partly attributable to the growing sales volumes, which overall increased by 5% y/y, including 4% in Poland, 8% in the Czech Republic, 4% in Lithuania, and 6% in Germany. In Q3, ORLEN expanded its market shares in the Czech Republic, Germany and Lithuania by 0.9pp, 0.2pp and 0.1pp y/y, respectively. During the period, the Group also continued to work consistently towards developing its non-fuel offering, having opened 39 food and beverage outlets. At the end of the third quarter, there were 2,108 outlets in operation, including 1,681 Stop Cafes in Poland, 298 Stop Cafes in the Czech Republic, 23 Stop Cafes in Lithuania, and 106 Star Connect stores in Germany. In September, clearance was obtained by ORLEN from Slovak and Austrian anti-trust authorities for the acquisition of another seven service stations in Slovakia. A co-branding process was also launched to ensure uniformity of the ORLEN Group’s retail brands across Europe.

The Upstream business generated LIFO-based EBITDA of PLN 85m, a level similar to that recorded in the same period last year, with average daily production of 17,700 boe. In Poland, drilling work was completed on the Czarna Dolna-1 and Bystrowice OU-2 wells (where presence of gas was confirmed), while another borehole (Bystrowice OU-3) was spudded. In Canada, eight boreholes were spudded, fracturing operations were performed in three wells, while five wells were brought on stream in the Kakwa and Ferrier areas.

Net debt in the third quarter was reduced to PLN 2bn, mainly on positive cash flows from operating activities, of PLN 3.4bn. At the same time, financial leverage ratio was brought down to a safe 5.2%, far below the target level set in the strategy. In August, PKN ORLEN paid a record-high dividend of PLN 3.5 per share.