Predicted accounting one-off which impacts significantly financial data for 2023 presented in financial statements for 2023

ORLEN S.A. (“Company”) informs that it conducted tests for impairment of ORLEN Group's assets in the Petrochemical segment.

 

As a result of these activities, the Company predicts the recognition of impairments of fixed assets and fixed assets under construction of the Petrochemical segment with a total value of PLN (10,2) billion in the consolidated financial statement for 2023.

 

At the same time in the separate financial statement for 2023, the Company predicts to include the recognition of impairments of fixed assets and fixed assets under construction with a total value of PLN (10,2) billion.

 

The above accounting one-off has a significant negative impact on the Company’s EBITDA and ORLEN’s Group EBITDA for 2023. 

 

The impairment of the above-mentioned assets results mainly from the continuing difficult economic conditions in the petrochemical products market, primarily the pressure on sales margins. Recently, a deepened negative impact of geo-political factors on the efficiency of the petrochemical business has been observed. It is currently expected that the reduced margins of the petrochemical segment may persist in the long term. This has a significant negative impact on both the efficiency of current petrochemical assets and assets under construction, including the Olefins III Complex.

 

Significant for the estimated impairments are the high costs of investment in Olefins III caused primarily by the war in Ukraine and related sanctions and thus the high costs of materials, disrupted supply chains and limited availability of execution resources. The estimated capital expenditures allocated to Olefins III project amounts to, in accordance with the former announcement, ca. PLN 25 billion. At the same time, together with Olefins III project, ORLEN realizes activities connected with modernization and development of the infrastructure at the Production Plant in Płock for the future investments, as well as other development projects connected with Olefins III, the total value of which is estimated for PLN 10 billion, of which nearly PLN 8 billion refers to Petrochemical segment and was included in the test for impairment.

 

The construction of the Olefins III Complex is one of the key elements of the implementation of the transformation of the Company's existing refining and petrochemical assets in Plock and Gdansk. It will enable the integration of petrochemical processes within the ORLEN Group and unlock operational synergies. The investment will support the continued development of the ORLEN Group through organic and inorganic activities. The Company expects that the implementation of these activities would strengthen the Company's position as one of the leading players in the transformation of refining and petrochemical assets in Europe. Additionally, following the corporate decisions made in 2023 regarding the Olefins III project, ORLEN established the Petrochemical Segment Value Creation Program, the main goal of which is to develop a concept of sustainable improvement of the segment's competitiveness and margins.

 

 

The abovementioned one-offs are currently being audited by the auditor and may be subject to change.

 

At the same time, the Company informs that analyzes of the value of other assets of the ORLEN Group are underway. In case any impairments or updating reversals, which impact significantly the financial data for 2023, become probable, the Company will publish regulatory announcement with that information.

 

ORLEN S.A. will publish its separate and consolidated financial statements for year 2023 on 25 April 2024.