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International Internet Magazine. Baltic States news & analytics Friday, 29.03.2024, 02:52

PKN ORLEN's retail sales hit record in Q1

BC, Vilnius, 24.04.2014.Print version
Despite the challenging market conditions in the first quarter 2014, with a low refining margin and shrinking Brent/Ural differential, Polish PKN ORLEN's operating metrics remained close to those from January-March 2013. The ORLEN Group's retail sales came in at a record high, and the petrochemical segment made a significant contribution to PKN ORLEN's performance in the downstream, reports LETA.

For the first time in its history, the Company produced hydrocarbons from its own deposits, at 330 thousand boe during the first quarter of the year, the company said in a statement.

 

In line with its dividend policy, set out in the strategy, PKN ORLEN's Management Board has recommended allocating almost all of the 2013 net profit to a PLN 616 million dividend. Also in the first quarter of 2014, the PKN ORLEN Supervisory Board decided to re-appoint the incumbent Management Board for another three-year term, which will commence after the general meeting scheduled for May 15, 2014.

 

For the first quarter of 2014, PKN ORLEN reports: the increase of LIFO-based EBIDTA by over PLN 40 million, year on year.

 

Year-on-year increase in the retail and petrochemical sales volumes by six% and four%, respectively. Financial leverage stood at 24.8%.

 

The company's performance in the first quarter of 2014 was significantly impacted by a USD 3.1/bbl decrease in the refining margin and the Brent/Ural differential, as well as the strengthening of the Polish currency against the US dollar and its depreciation against the euro. The average crude oil price fell USD 5/bbl on Q1 2013.

 

LIFO-based EBIDTA increased by PLN 43 million, to PLN 953 million, mainly on the back of a six% and four%, year-on-year, increase in retail and petrochemical sales volumes, respectively. This helped to reduce the negative effect of the refinery's weaker performance on the Group's results, which was a consequence of the challenging macroeconomic conditions and lower sales on ORLEN Lietuva's home markets.

 

"Despite the market environment for the oil industry being more challenging than a year ago, over the last three months we generated LIFO-based EBITDA of almost PLN 1bn. This was possible due to the excellent performance of our retail and petrochemical businesses. What's more, we can already see the first effects of our Canadian acquisition ? last quarter, our upstream segment reported first-ever profits. Unfortunately, the persistently difficult economic conditions continue to affect the refining segment, which negatively impacted our financial performance," concluded Jacek Krawiec, PKN ORLEN's CEO. "Over the last several months we have been facing a particularly testing challenge in Lithuania where, in adverse market conditions and poor macroeconomic climate, we are striving to reduce costs; however, the potential for any meaningful internal restructuring efforts has been exhausted. For this reason, a few days ago we presented the situation to Lithuania's Prime Minister, emphasising that from our perspective it is necessary that the Lithuanian government immediately implements concrete solutions to help reduce ORLEN Lietuva's logistic costs. Our arguments were received with understanding and now we are looking forward to government proposals on how to deal with this issue in the short term," added Mr Krawiec.

 

The first quarter of 2014 brought a record EBITDA of PLN 234 million in the retail segment of up PLN 111 million, year on year, which was attributable to a six% increase in total sales volumes (year-on-year). PKN ORLEN also recorded improved margins on fuel and non-fuel sales, and increased its shares in all markets. The petrochemical segment's LIFO-based EBITDA for the first 2014 was PLN 547 million, while its total sales volume grew by four%, year on year. On the Polish market, there was a year-on-year increase in the sales of fertilizers (13%) and PTA (six%), while polyolefin sales grew by 18% in the Czech Republic. While supported by the weakening of the Polish zloty against the euro, the segment's financial result was adversely affected by lower trade margins.

 

In the first quarter of 2014, the refining segment continued to be adversely affected by macroeconomic factors and posted a LIFO-based EBITDA of PLN 274 million. Sales volumes increased by 20%, year-on-year, in the Czech Republic and remained relatively flat in Poland, but the gains were offset by depressed sales on ORLEN Lietuva's markets. The persisting difficult conditions on the Lithuanian market and the resulting need for cost optimization forced the refinery to reduce the volume of crude processing by 41%. The segment's performance in January-March of 2014 was also affected by a lower refining margin and shrinking Brent/Ural differential.

 

"Despite severe macroeconomic pressures, PKN ORLEN keeps delivering stable financial results and maintains a safe financial position. We are determined to deliver on the commitments we have made to our shareholders in the corporate strategy, including the commitments regarding our dividend policy. The recommended dividend is adequate given our financial performance in 2013 and it takes into account our investment priorities, without compromising the Company's financial position," commented Sławomir Jędrzejczyk, Vice-President of the Management Board and the company's CFO.

 

January-March, 2014, also saw ongoing work on the company's power generation projects. Construction of the CCGT unit in Włocławek is progressing on schedule. This flagship project envisaged in PKN ORLEN's strategy for the power segment will not only facilitate entry into the power market, but will also secure cost-efficient supplies of heat and electricity for the entire ORLEN Group. A concept for a similar project in Plock is currently being analyzed. A final decision on whether to go ahead with this project will be made based on the findings of the economic feasibility study.






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