ORLEN Group’s Q3 2024 performance on a par y/y despite significantly deteriorated macroeconomic climate
For the third quarter of 2024, the ORLEN Group has posted robust operating performance, with adjusted LIFO-based EBITDA at PLN 8.1 billion amid increased macroeconomic headwinds, including a 65% y/y decline in refining margin. The LIFO-based EBITDA adjusted for one-offs and regulatory impacts was on a par with last year’s level (of PLN 8.6 billion). However, the Group did recognise further impairment losses on its non-current assets, totalling about PLN 3.5 billion, due mainly to former management’s poor investment decisions. In the nine months to 30 September 2024, the Group allocated PLN 22.1 billion to investments supporting asset upgrades, the energy transition and bolstering Poland’s energy security.
“In the past quarter, we kicked off the largest investment programme ever to upgrade northern Poland’s power grid and made major progress in the onshore integration of our Baltic Power wind farm. At the same time, we continued a thorough review and impairment testing of our assets to ensure they accurately reflect the ORLEN Group’s true value. This process has uncovered multibillion losses due to poor quality management in previous years. Despite tough macro conditions, we delivered financial results that are on a par with last year’s,” says Ireneusz Fąfara, CEO and President of the ORLEN Management Board.
In the third quarter of 2024, the ORLEN Group generated:
- Revenue of PLN 67.9 billion
- LIFO-based EBITDA of PLN 8.8 billion
- Operating cash flows of PLN 8.6 billion
- Corporate costs brought down to PLN 394 million
The refining segment turned in LIFO-based EBITDA of PLN 520 million, reflecting the challenging macroeconomic environment in the third quarter of 2024, with the significant 65% y/y drop in refining margins and appreciation of the Polish currency against the US dollar as key factors impacting performance. The Group sustained high refining capacity utilisation at 94%, processing a total of 10.1 million tonnes of crude oil across its refineries in Poland, the Czech Republic, and Lithuania. In Poland, the fuel yield improved by 6% y/y, supported by the switch to a sweeter crude slate.
The petrochemicals segment’s LIFO-based EBITDA came in at PLN (-)118 million, as market pressures and macroeconomic challenges continued to weigh on the segment’s performance despite a slight 3% increase in sales volumes.
On the other hand, performance delivered by the energy segment confirmed the validity of the Group’s strategic bets in that area. The third quarter’s LIFO-based EBITDA posted by the segment reached PLN 949 million, driven primarily by improved margins on energy distribution and sales, along with reduced CO₂ emissions costs. The ORLEN Group’s installed capacity totalled 5.6 GWe, producing 3.4 TWh of electricity, up by 9% y/y, on the inclusion of new wind farms in 2024. Today, nearly 77% of the ORLEN Group’s electricity output is already generated from renewable sources and gas-fired units.
The retail segment’s LIFO-based EBITDA came in at PLN 1,077 million, driven by an 8% increase in sales volumes, growth in the number of service stations, and stabilising fuel margins y/y among other factors. 358 fuel stations have been added to ORLEN’s retail network over the year, bringing the total to 3,511 locations across seven European countries. ORLEN is also consistent in expanding its alternative fuel infrastructure, adding 131 new stations (y/y), to reach 832. Additionally, the number of non-fuel outlets has grown to 2.7 thousand.
The absence of the obligatory gas levy payment to the Price Difference Compensation Fund, combined with increased operational scale in Norway, led to the upstream segment’s LIFO-based EBITDA of PLN 3.3 billion. Having consolidated the assets of the newly acquired Norway-based company KUFPEC, the Group saw its hydrocarbon production expand by 22% y/y, to some 190 thousand boe/d.
In the third quarter of 2024, the gas segment recorded EBITDA of PLN 3.4 billion, a result delivered amid lower (y/y) sales margins and an adverse macro impact. On the other hand, higher gas sales and the absence of the obligatory contribution to the Price Difference Compensation Fund supported the segment’s results. Gas imports decreased over the period by 11% y/y, with LNG accounting for 51% of the delivered volume. At the end of September, the ORLEN Group’s gas storage inventory at home and abroad totalled 25.8 TWh, representing a 98% storage fill rate.
“Even in the adverse macro climate, we’ve not only demonstrated our ability to deliver solid results but also kept our finances stable and met our commitments to shareholders. In December, we will be paying out a dividend of PLN 4.8 billion for last year. At the same time, following a reassessment of our investment projects, we can now optimise the portfolio and more rationally direct our resources, with the capex budget reduced to some PLN 33 billion by the year’s end, about PLN 5 billion below the estimate we made early in 2024. We will prioritise our highest-potential projects, set to truly drive value for the Group,” says Magdalena Bartoś, Vice President of the ORLEN Management Board, Chief Financial Officer.
In the third quarter of 2024, the ORLEN Group generated PLN 8.6 billion in operating cash flows (a y/y increase of PLN 2.65 billion), reporting a net debt to EBITDA ratio as at 30 September of 0.04x. This means that the Group’s net debt is at the level of its full-year EBITDA, one of the lowest leverage ratios among all sector players, confirming the Group’s financial security with strong transformational potential. ORLEN’s highest ever credit ratings were reaffirmed at A3 by Moody’s Investors Service and BBB+ by Fitch Ratings.
Over the past quarter, the Group focused on major investments and growth projects. Building on its efforts, ORLEN will be moving forward with a strategic investment programme to develop power distribution networks across northern and central Poland, backed by PLN 3.5 billion in funding recently granted by the European Investment Bank. In the renewables space, ORLEN has finalised a major acquisition in the Polish RES market, boosting its renewable capacity by over 300 MW, and made substantial progress on the onshore integration of the Baltic Power wind farm. Sales of the HVO100 fuel have been launched at two service stations in Germany, with plans to introduce it to the Czech market in early 2025. In Poland, the Group is building a HVO100 production facility in Płock awaiting relevant regulations.
To reinforce energy security, gas production in Norway has been increased by over 45% (y/y). The Company has also received its 300th LNG delivery. Since the launch of the terminal in Świnoujście, nearly 24 million tonnes of liquefied natural gas have arrived in Poland via this route. ORLEN has also entered into a five-year exclusive agreement with Lithuania’s KN Energies, previously known as Klaipedos Nafta, granting it sole access to a small-scale LNG reloading wharf station in Klaipėda, which will bolster gas supply to north-eastern Poland and the broader Baltic region.
ORLEN remains strongly committed to social responsibility to effectively strengthen its stakeholder relations, having launched initiatives line ‘Sporting ORLEN’ and the ‘ORLEN. We’re together’ project dedicated to firefighters. Significant aid has also been directed to southern Poland’s flood victims.
