PKN ORLEN financial data for the 3rd quarter 2021 under segments

With the excellent performance of the petrochemical, refining and power generation segments in the third quarter of 2021, the ORLEN Group delivered LIFO EBITDA of PLN 4.3 billion, up by an impressive PLN 2.3bn (y/y). ORLEN’s strong and stable market position is also evidenced by the net profit, which came in at PLN 2.9 billion, i.e. PLN 2.3 billion more than in the corresponding period of the previous year. The retail segment in Poland currently accounts for just 15% of the Group’s EBITDA. Sales on foreign markets continue as the main source of this robust performance, accounting for approximately 60% of the revenue. In the third quarter of 2021, the ORLEN Group implemented key development projects with a capex of PLN 2.5 billion. In accordance with the ORLEN2030 Strategy, it continued acquisition processes which, once finalised, will lead to the creation of a strong carbon neutral multi-utility group by 2050.

“The performance we delivered in the third quarter of this year was due mainly to proper management of the company. Our business diversification efforts were of key importance. Significant growth was reported across all of our business segments, except for retail, which was affected by increased costs of operations, including higher prices of oil and the U.S. dollar exchange rate. The third quarter net profit of PLN 2.9 billion shows that the development direction we have chosen is correct. We are building a multi-utility group with diversified sources of revenue and profits. This gives us the ability to flexibly respond to market challenges, and guarantees financial stability and thus implementation of further key projects. With this goal in mind, we are also pursuing completion of the processes to acquire the LOTOS Group and PGNiG. Our financial position remains strong and we have solid foundations for further growth and strategic projects, which are essential to the Group’s future, especially in terms of further consolidation of our presence on foreign markets,” said Daniel Obajtek, President of the PKN ORLEN Management Board.

In the third quarter of 2021, the ORLEN Group reported:

• LIFO EBITDA of PLN 4.3 billion, up by PLN 2.3 billion (y/y)
• net profit of PLN 2.9 billion, up by PLN 2.3 billion (y/y)
• sales of 10.7 million tonnes, up by 2% (y/y)
• revenue of PLN 36.5 billion, up by 52% (y/y)

The petrochemicals segment once again confirmed its very strong position, having generated LIFO EBITDA of PLN 1,013 million in the third quarter, more than 100% higher year on year. This excellent result in the petrochemicals was supported by positive macroeconomic impacts (y/y), resulting from increased margins on olefins, polyolefins, PTA and PVC, depreciation of the złoty against the euro, as well as the measurement and settlement of CO2 futures within a separate trading portfolio, amounting to PLN 135 million (y/y). The robust performance of the petrochemical business was achieved despite maintenance shutdowns of the Olefins, Basell Orlen Polyolefins and Metathesis units in Płock, the PTA unit in Włocławek and the Olefins and PE3 units in the Czech Republic. The shutdowns had an effect on sales of petrochemicals, which came in at 1.3 million tonnes, down 2% year on year. Lower sales were reported in Poland (down by 7%) and in Lithuania (down by 5%), while in the Czech Republic sales moved up by 9% as a result of a year-on-year improvement of the operational parameters of the PE3 unit and greater availability of the product. 

 The refining segment’s LIFO EBITDA reached PLN 1,165 million in the third quarter of 2021, having increased by PLN 1.5 billion year on year. In the third quarter, crude oil throughput grew by 1% (y/y), to 8.3 million tonnes, translating into 94% capacity utilisation at the ORLEN Group, with full capacity utilisation in Poland. The period saw a 5% growth in sales, with sales of gasoline, diesel oil, JET fuel and heavy fuel oil rising by 11%, 4%, 41% and 6%, respectively, while sales of LPG went down by 6%. The segment’s results were driven by a positive macro impact (y/y), resulting from higher Brent/Urals differential, improved margins on light and middle distillates, the weakening of the złoty against the U.S. dollar, and the effect of measurement and settlement of CO2 futures within a separate trading portfolio of PLN 159 million (y/y). These effects were offset by a negative impact of declining margins on heavy fractions, higher cost of internal consumption following an increase in oil prices, and cash flow hedging transactions, driven by oil and product price hikes. 

The power generation segment delivered EBITDA of PLN 1,042 million, including PLN 717 million generated by the Energa Group. The profit was attributable to a positive macro impact (y/y) at the Energa Group. Total energy output of the ORLEN Group in the period was 3 TWh of electricity and 9 TWh of heat, of which approximately 60% was generated in renewable and gas-powered energy sources. The 6% (y/y) growth in electricity generation was attributable primarily to higher output of the Ostrołęka power plant and the Włocławek hydroelectric power plant, and an over 0.1 GWe (y/y) increase in the wind power capacity. Electricity distribution (the business carried out solely by Energa Operator) also increased, by 3% (y/y), one contributing factor being the recovering economic activity. The installed capacity of the ORLEN Group is currently 3.4 GWe and 6.1 GWt. In the third quarter of 2021, further progress was made on strategic projects to develop zero-carbon power generation sources, including offshore wind assets in the Baltic Sea. 

The retail segment’s EBITDA in the third quarter of 2021 was PLN 948 million, down 8% (y/y). The figure reflects a decline in fuel margins in the Polish market. At the same time, the margins grew in the Czech and German markets and remained almost flat in Lithuania (y/y). The retail segment in Poland currently accounts for just 15% of the Group’s EBITDA. Retail sales volumes of ORLEN Group contracted by 1% (y/y). Diesel and LPG sales dropped by 2% and 5%, respectively, while petrol sales were higher by 1% (y/y). However, the Group reported an increase in non-fuel margins across all these markets. At the end of the third quarter of 2021, the ORLEN Group’s retail network comprised 2,852 service stations, a net year-on-year addition of 12. As many as 2,252 service stations (approximately 80% of the total) are already complete with the StopCafe/star Connect non-fuel format, including: 1,733 in Poland, 319 in the Czech Republic, 157 in Germany, 29 in Lithuania and 14 in Slovakia. This represents a year-on-year addition of 71 outlets: 29 in Poland, 9 in the Czech Republic, 26 in Germany, 1 in Lithuania, and 12 in Slovakia. PKN ORLEN was also rolling out alternative fuel infrastructure, increasing its availability by 239 points (y/y). As a result of these efforts, the number of alternative refuelling points available to customers is now 421, including: 375 EV charging stations, 2 hydrogen refuelling stations and 44 CNG stations. 

In the third quarter of 2021, the upstream segment achieved a record high EBITDA of PLN 130 million, which means an almost threefold growth year on year. This was due mainly to a positive macro impact (y/y) of rising prices of all hydrocarbons, i.e. crude oil, gas and gas condensate, with a comparable effect of hedging transactions. The average production volume in the period expanded by 0.2 thousand boe/d, to 17 thousand boe/d, including 1 thousand boe/d in Poland and 16 thousand boe/d in Canada. In Poland, field development work was under way on the Miocen and Edge assets as well as projects carried out jointly with PGNiG. Drilling of the Pruchnik-OU1 well (Miocen project) was commenced, and design and preparatory work for future wells (Płotki project) was continued. As part of seismic surveys, interpretation of the Koczała-Miastko 3D seismic data was completed (Edge project). In Canada, drilling of a new well commenced and preparations were underway to drill additional wells on the Kakwa project. On the Ferrier project, drilling and fracturing operations were completed on two new wells and production was started.

In the third quarter of 2021, the ORLEN Group generated an operating cash flow of PLN 4.3 billion and maintained its investment grade ratings: BBB- with a positive outlook from Fitch Ratings and Baa2 with a positive outlook from Moody's. PKN ORLEN spent PLN 2.5 billion on investments, which will support further value creation and growth of its competitiveness on international markets. Consistent implementation of the growth plans in all areas of activity made it possible, in accordance with the strategy, to pay dividend for 2020 at PLN 3.5 per share. At the same time, the Company reduced its net debt by PLN 0.5 billion (y/y), to PLN 11.4 billion.

Capital investments and acquisitions In the third quarter of 2021, PKN ORLEN was consistently building value and competitive advantage. Its capital investment projects were progressing as scheduled, including Europe’s largest unit for the production of environmentally friendly propylene glycol, with an annual capacity of 30 thousand tonnes, to be commissioned in November at the ORLEN Południe biorefinery in Trzebinia. Plans were also announced to begin construction of deep crude conversion units at the Mažeikiai refinery in Lithuania by the end of this year. The project is designed to increase the output of high-margin products by 12pp, which will add some PLN 300m to EBITDA annually. It is scheduled for completion near the end of 2024. In Płock, PKN ORLEN will begin construction of an HVO unit, making it possible to deploy an innovative technology to hydrotreat rapeseed oil, used cooking oil or their mixture on an industrial scale. The end product will be used as an additive to diesel oil or JET aviation fuel. The project, with an estimated value of approximately PLN 600m, is to be completed in mid-2024. In accordance with the ORLEN2030 strategy, the Group also pursued key power generation projects. The project with top priority here is the construction of an offshore wind farm in the Baltic. The third quarter of 2021 saw the start of the main phase of geotechnical surveys of the Baltic Sea bottom in the area of the planned wind farm and along the connection route. PKN also entered into a strategic partnership with GE Renewable Energy, one of the world’s leading manufacturers of offshore wind farm turbines. The agreement will strengthen PKN ORLEN’s competitive position in its efforts to win new wind farm licences for the Polish economic zone of the Baltic Sea.

PKN ORLEN also continued the acquisition processes intended to build a strong, integrated multi-utility group. On October 14th, the Extraordinary General Meeting of Grupa LOTOS issued a conditional approval for the sale of some of the company’s assets as part of implementation of the remedies, which will be an important step in the preparations for the merger. Intensive efforts are also under way to acquire the PGNiG Group, with an application for approval of this transaction pending before the Polish Competition and Consumer Protection Office.