29th Aug 2019 17:50
PRESS RELEASE
29 August 2019
Second quarter / first half 2019 financial results |
Operating performance helps to mitigate weakest refining environment in five years and leads to strong cashflow and improved balance sheet
HELLENIC PETROLEUM Group announced its 2Q/1H19 financial results in accordance with IFRS. 2Q19 Adjusted EBITDA came in at €130m and 2Q19 Adjusted Net Income amounted to €33m, recording another quarter of positive performance. Despite a weak refining environment, results were positive on account of continued strong refining performance, the highest Petchems contribution on record, as well as continuous reduction in financing cost. International refining macro environment deteriorated to its lowest level in the last five years, as evidenced by record low benchmark refining margins and problems with Russian crude supplies into Europe due to the Druzhba incident. In this environment, the flexibility of the Group's refineries to process a wide range of crude grades, enabled uninterrupted supply and optimized operation, as well as capturing opportunities in lighter crudes pricing. Production remained at high levels (3.7m MT) and sales at 4.1m MT, flat y-o-y, with 57% of total sales directed to exports markets underlying the strength of Greek refineries in the region.
Contribution by Fuels Marketing and Petrochemicals was also increased, with Petchems recording an historical record Adjusted EBITDA of €28m. Furthermore, Marketing companies' performance improved and interest costs reduction continued, as refinancing plans were implemented and balance sheet remains very strong.
IFRS Reported Net Income amounted at €75m, affected by inventory gains of €59m, while it should be noted that the results include for the first time the impact of new IFRS 16 on operating leases of retail fuel stations and other equipment.
With regard to the upcoming changes to bunkering fuel specifications, (IMO 2020), one of the most significant challenges for the global refining industry in recent years, the Group is on track with its plans to be able to deliver very low sulphur fuel oil by the beginning of 2020. An extensive test of new crude grades mix was conducted recently at Aspropyrgos refinery, yielding positive results, in terms of both quality and specs of the new 0.5% fuel oil, as well as the operation of the refinery's conversion units. We expect that HELPE refining system will be ready on time to cover the Greek bunkering market with the new type of fuel, as well as maintaining its ability to serve customers who opt for the scrubber solution and require high Sulphur fuels.
Complex refining margins at the lowest levels in five years
International crude oil prices increased from $64/bbl on average in 1Q19 to $69/bbl in 2Q19, with volatility during the period, reflecting global macroeconomic and geopolitical developments.
In the European oil market, the contamination of significant quantities of Russian crude oil in the Druzhba pipeline, which supplies Central and Eastern European countries, disrupted the supply of Russian crude in the wider region, for most in 2Q19. As a result, the availability and pricing of Urals, as well as other high sulphur grades, which were called to substitute Urals deliveries shortfall, presented significant challenges during this quarter. This, combined with weaker cracks for most products, led complex refinery margins to multi-year lows. FCC margins were 40% lower to $3.2/bbl. Naphtha cracks drop to the lowest level in the past seven years led Hydrocracking margins to $1.3/bbl, while Aspropyrgos and Thessaloniki refineries benefitted from the reforming spread, highlighting HELPE's refinery system ability to capture opportunities from changing market conditions. With the restoration of the Russian crude oil supply infrastructure in eastern Europe, the market appears to gradually recover, with margins normalising as early as the end of 2Q19.
The Euro/USD exchange rate averaged at €1.12, with the dollar strengthening further to a two-year high, with a positive impact for European refining sector.
Increasing demand for domestic fuels market
Domestic fuel demand in 2Q19 amounted to 1.6m MT (+4%), mainly due to increased heating gasoil consumption, while auto-fuels demand was flat. Aviation and bunkering fuels rose 9% to 1.2m MT, mainly on account of increased international marine consumption, with all markets improving.
Strong balance sheet, considering options for improving capital structure
Net Debt at €1.4bn, c.€500m lower y-o-y and Gearing at 37%, an additional drop vs 1Q19, further strengthened the Group's balance sheet.
It is noted that the Group fully repaid its €325m 5.25% Eurobond issued in 2014, out of own cash balances, which will lead to additional drop in finance costs.
The Group, as part of its financial plan for capital structure optimization and taking into account improved capital markets conditions and yields of its existing bonds, is considering a new bond issue in 2019, subject to market conditions.
Key strategic developments
In E&P, on 27 June 2019 the Lease Agreements for the two offshore areas of 'West Crete' and 'Southwest Crete' were signed (Total 40% - Operator, ExxonMobil 40%, HELLENIC PETROLEUM 20%) and are expected to be ratified by the Greek parliament, in order for the exploration works to commence. During 2Q19, planned environmental and exploration studies in other Western Greece concessions continued.
In addition, on 26 July 2019, ELPEDISON BV, in which HELLENIC PETROLEUM Group holds 50%, completed the acquisition of a 24.22% stake in ELPEDISON SA from the ELLAKTOR and ELVAL-HALCOR groups for a consideration of €20m in cash, with ELPEDISON BV now owning 100% of ELPEDISON SA's share capital.
Finally, on 07 August 7 2019, a new Board of Directors of HELLENIC PETROLEUM SA was put in place with Mr. Ioannis Papathanassiou elected as Non-Executive Chairman and Mr. Andreas Shiamishis as the Group CEO.
Key highlights and contribution for each of the main business units in 2Q19 were:
REFINING, SUPPLY & TRADING
- Refining, Supply & Trading 2Q19 Adjusted EBITDA at €69m (-50%), on account of significant benchmark margins drop.
- White products' yield remained at 84%.
- Sales remained at the same level as of 2Q18, leading to total 2Q19 sales of 4.1m MT (-1%).
PETROCHEMICALS
- PP sales growth led to a record high Adjusted EBITDA of €28m (+ 3%) in 2Q.
MARKETING
- 2Q19 Marketing Adjusted EBITDA at €36m (+44%), following IFRS 16 implementation, while comparable performance improving vs LY.
- In Domestic Marketing, sales volumes were flat vs 2Q18, with 2Q19 EBITDA at €21m (+81%).
- International Marketing volumes increased by 3%, with EBITDA at €15m (+12%).
ASSOCIATED COMPANIES
- 2Q19 DEPA Group contribution to consolidated Net Income was reduced (€0m vs €4. In 2Q18), following the de-consolidation of DESFA.
- Lower production due to Thisvi plant shut-down, as well as the absence of a Flexibility Compensation Mechanism, led Elpedison's 2Q EBITDA to negative levels (€-4m).
Key consolidated financial indicators (prepared in accordance with IFRS) for 2Q/1H19 are shown below:
€ million | 2Q18 | 2Q19 | % Δ | 1H18 | 1H19 | % Δ |
P&L figures |
|
|
|
|
|
|
Refining Sales Volumes ('000 ΜΤ) | 4,165 | 4,139 | -1% | 8,267 | 7,690 | -7% |
Sales | 2,499 | 2,465 | -1% | 4,667 | 4,457 | -5% |
EBITDA | 307 | 187 | -39% | 473 | 323 | -32% |
Adjusted EBITDA 1 | 187 | 130 | -31% | 336 | 252 | -25% |
Net Income | 151 | 75 | -50% | 225 | 121 | -46% |
Adjusted Net Income 1 | 66 | 33 | -50% | 128 | 70 | -45% |
Balance Sheet Items |
|
|
|
|
|
|
Capital Employed |
|
|
| 4,431 | 3,766 | -15% |
Net Debt |
|
|
| 1,916 | 1,398 | -27% |
Debt Gearing (ND/ND+E) |
|
|
| 43% | 37% | - |
Notes:
1. Calculated as Reported adjusted for inventory effects and other non-operating items.
Further information:
V. Tsaitas, Investor Relations Officer
Tel.: +30-210-6302399
Email: [email protected]
Group Consolidated statement of financial position
|
| As at | |
| Note | 30 June 2019 | 31 December 2018 |
ASSETS |
|
|
|
Non-current assets |
|
|
|
Property, plant and equipment | 10 | 3.243.091 | 3.268.928 |
Right-of-use assets | 2,11 | 220.447 | - |
Intangible assets | 12 | 109.813 | 105.617 |
Investments in associates and joint ventures |
| 403.098 | 390.091 |
Deferred income tax assets |
| 61.382 | 64.109 |
Investment in equity instruments | 3 | 1.566 | 634 |
Loans, advances and long term assets | 2 | 54.250 | 73.922 |
|
| 4.093.647 | 3.903.301 |
Current assets |
|
|
|
Inventories | 13 | 1.025.159 | 993.031 |
Trade and other receivables | 2,14 | 852.226 | 822.805 |
Assets held for sale |
| 3.361 | 3.133 |
Derivative financial instruments | 3 | 2.107 | - |
Cash and cash equivalents | 15 | 1.319.688 | 1.275.159 |
|
| 3.202.541 | 3.094.128 |
Total assets |
| 7.296.188 | 6.997.429 |
|
|
|
|
EQUITY |
|
|
|
Share capital and share premium | 16 | 1.020.081 | 1.020.081 |
Reserves | 17 | 265.889 | 258.527 |
Retained Earnings |
| 1.020.202 | 1.052.164 |
Equity attributable to equity holders of the parent |
| 2.306.172 | 2.330.772 |
Non-controlling interests |
| 61.747 | 63.959 |
Total equity |
| 2.367.919 | 2.394.731 |
|
|
|
|
LIABILITIES |
|
|
|
Non-current liabilities |
|
|
|
Interest bearing loans & borrowings | 18 | 1.606.607 | 1.627.171 |
Lease liabilities | 2 | 154.464 | - |
Deferred income tax liabilities |
| 204.397 | 185.744 |
Retirement benefit obligations |
| 167.566 | 163.514 |
Provisions |
| 29.994 | 42.038 |
Other non-current liabilities |
| 28.911 | 28.852 |
|
| 2.191.939 | 2.047.319 |
Current liabilities |
|
|
|
Trade and other payables | 19 | 1.330.527 | 1.349.153 |
Derivative financial instruments |
| 7.034 | 16.387 |
Income tax payable |
| 106.591 | 80.171 |
Interest bearing loans & borrowings | 18 | 1.112.819 | 1.108.785 |
Lease liabilities | 2 | 28.313 | - |
Dividends payable |
| 151.046 | 883 |
|
| 2.736.330 | 2.555.379 |
Total liabilities |
| 4.928.269 | 4.602.698 |
Total equity and liabilities |
| 7.296.188 | 6.997.429 |
Group Consolidated statement of comprehensive income
|
| For the 6 month period ended | For the 3 month period ended | ||
| Note | 30 June 2019 | 30 June 2018 | 30 June 2019 | 30 June 2018 |
Revenue from contracts with customers | 4 | 4.456.629 | 4.666.909 | 2.465.413 | 2.498.523 |
Cost of sales |
| (4.037.224) | (4.071.307) | (2.232.323) | (2.126.620) |
Gross profit |
| 419.405 | 595.602 | 233.090 | 371.903 |
Selling and distribution expenses |
| (157.434) | (154.463) | (81.887) | (79.988) |
Administrative expenses |
| (65.660) | (66.393) | (31.696) | (34.264) |
Exploration and development expenses |
| (1.712) | (29) | (1.262) | 97 |
Other operating income | 5 | 20.492 | 13.083 | 14.812 | 7.750 |
Other operating expense | 5 | (7.412) | (8.435) | (4.648) | (5.124) |
Other operating income/(expenses) and other gains/(losses)-net | 5 | 13.080 | 4.646 | 10.164 | 2.623 |
|
|
|
|
|
|
Operating profit |
| 207.679 | 379.363 | 128.409 | 260.371 |
Finance income |
| 2.956 | 1.750 | 1.956 | 775 |
Finance expense |
| (66.444) | (77.766) | (33.149) | (38.258) |
Fiunance expense - lease finance cost |
| (4.705) | - | (2.432) | - |
|
|
|
|
|
|
Currency exchange gain/(loss) | 6 | 743 | 4.528 | (512) | 6.646 |
Share of profit/(loss) of investments in associates and joint ventures | 7 | 14.445 | 15.083 | (3.646) | 1.188 |
Profit before income tax |
| 154.674 | 322.958 | 90.626 | 230.722 |
Income tax expense | 8 | (33.313) | (97.785) | (15.881) | (79.769) |
Profit for the period |
| 121.361 | 225.173 | 74.745 | 150.953 |
Profit attributable to: |
|
|
|
|
|
Equity holders of the parent |
| 121.321 | 223.613 | 74.205 | 149.341 |
Non-controlling interests |
| 40 | 1.560 | 540 | 1.612 |
|
| 121.361 | 225.173 | 74.745 | 150.953 |
Other comprehensive income: |
|
|
|
|
|
Other comprehensive income that will not be reclassified to profit or loss (net of tax): |
|
|
|
|
|
Actuarial losses on defined benefit pension plans | 17 | (56) | - | - | - |
Share of other comprehensive income of associates | 17 | (41) | - | (41) | - |
Changes in the fair value of equity instruments | 17 | 700 | (442) | 704 | (324) |
Net other comprehensive income that will not be reclassified to profit or loss (net of tax): |
| 603 | (442) | 663 | (324) |
Other comprehensive income that may be reclassified subsequently to profit or loss (net of tax): |
|
|
|
|
|
Recycling of (gains)/losses on hedges through comprehensive income | 17 | 1.501 | (14.920) | - | - |
Fair value gains/(losses) on cash flow hedges | 17 | 5.186 | 16.256 | (1.202) | (548) |
Currency translation differences and other movements | 17 | 66 | (357) | 36 | (232) |
Net other comprehensive income that may be reclassified subsequently to profit or loss (net of tax): |
| 6.753 | 979 | (1.166) | (780) |
Other comprehensive income for the period, net of tax |
| 7.356 | 537 | (503) | (1.104) |
Total comprehensive income for the period |
| 128.717 | 225.710 | 74.242 | 149.849 |
Total comprehensive income/(loss) attributable to: |
|
|
|
|
|
Equity holders of the parent |
| 128.683 | 224.152 | 73.695 | 148.299 |
Non-controlling interests |
| 34 | 1.558 | 547 | 1.551 |
|
| 128.717 | 225.710 | 74.242 | 149.849 |
Basic and diluted earnings per share(expressed in Euro per share) | 9 | 0,40 | 0,73 | 0,24 | 0,49 |
Group Consolidated statement of cash flows
|
| For the 6 month period ended | |
| Note | 30 June 2019 | 30 June 2018 |
Cash flows from operating activities |
|
|
|
Cash generated from operations | 20 | 228.949 | 31.448 |
Income tax (paid)/received |
| (3.052) | 2.572 |
Net cash generated from / (used in) operating activities |
| 225.897 | 34.020 |
|
|
|
|
Cash flows from investing activities |
|
|
|
Purchase of property, plant and equipment & intangible assets | 10,12 | (78.262) | (60.531) |
Proceeds from disposal of property, plant and equipment & intangible assets |
| 363 | 40 |
Participation in share capital increase of associates |
| (342) | - |
Purchase of subsidiary, net of cash acquired | 25 | (5.341) | (1.298) |
Settlement of consideration of acquisition of further equity interest in subsidiary | - | (16.000) | |
Grants received |
| 199 | 80 |
Interest received |
| 2.956 | 1.750 |
Prepayments for right-of-use assets |
| (463) | - |
Dividends received |
| 1.347 | - |
Proceeds from disposal of investments in equity instruments |
| 21 | 266 |
Net cash used in investing activities |
| (79.522) | (75.693) |
|
|
|
|
Cash flows from financing activities |
|
|
|
Interest paid |
| (63.127) | (69.941) |
Dividends paid to shareholders of the Company |
| (122) | (214) |
Dividends paid to non-controlling interests |
| (2.246) | (2.061) |
Movement in restricted cash | 15 | - | 144.445 |
Acquisition of treasury shares | 17 | - | (511) |
Proceeds from borrowings |
| 10.000 | 407.810 |
Repayments of borrowings |
| (27.671) | (407.272) |
Payment of lease liabilities |
| (19.729) | - |
Net cash (used in) / generated from financing activities |
| (102.895) | 72.256 |
|
|
|
|
Net increase in cash and cash equivalents |
| 43.480 | 30.583 |
|
|
|
|
Cash and cash equivalents at the beginning of the period | 15 | 1.275.159 | 873.261 |
Exchange gain on cash and cash equivalents |
| 1.049 | 4.272 |
Net increase in cash and cash equivalents |
| 43.480 | 30.583 |
Cash and cash equivalents at end of the period | 15 | 1.319.688 | 908.116 |
Parent Company Statement of Financial Position
|
| As at | |
| Note | 30 June 2019 | 31 December 2018 |
ASSETS |
|
|
|
Non-current assets |
|
|
|
Property, plant and equipment | 9 | 2.666.689 | 2.684.237 |
Right of use assets | 2,10 | 23.165 | - |
Intangible assets | 11 | 5.637 | 4.799 |
Investments in subsidiaries, associates and joint ventures |
| 1.040.473 | 1.032.372 |
Investment in equity instruments | 3 | 1.203 | 318 |
Loans, advances and long-term assets |
| 19.974 | 8.887 |
|
| 3.757.141 | 3.730.613 |
|
|
|
|
Current assets |
|
|
|
Inventories | 12 | 905.543 | 893.859 |
Trade and other receivables | 13 | 718.215 | 681.555 |
Derivative financial instruments | 3 | 2.107 | - |
Cash and cash equivalents | 14 | 827.875 | 1.070.377 |
|
| 2.453.740 | 2.645.791 |
Total assets |
| 6.210.881 | 6.376.404 |
|
|
|
|
EQUITY |
|
|
|
Share capital and share premium | 15 | 1.020.081 | 1.020.081 |
Reserves | 16 | 269.601 | 262.263 |
Retained Earnings |
| 807.464 | 864.333 |
Total equity |
| 2.097.146 | 2.146.677 |
|
|
|
|
LIABILITIES |
|
|
|
Non-current liabilities |
|
|
|
Interest bearing loans and borrowings | 17 | 1.641.415 | 1.657.598 |
Lease liabilities | 2 | 16.761 | - |
Deferred income tax liabilities |
| 171.510 | 151.873 |
Retirement benefit obligations |
| 136.074 | 132.539 |
Provisions |
| 24.179 | 37.858 |
Other non-current liabilities |
| 14.497 | 14.810 |
|
| 2.004.436 | 1.994.678 |
Current liabilities |
|
|
|
Trade and other payables | 18 | 1.200.868 | 1.226.107 |
Derivative financial instruments | 3 | 7.034 | 16.387 |
Income tax payable |
| 100.971 | 76.322 |
Interest bearing loans and borrowings | 17 | 642.740 | 915.350 |
Lease liabilities | 2 | 6.640 | - |
Dividends payable |
| 151.046 | 883 |
|
| 2.109.299 | 2.235.049 |
Total liabilities |
| 4.113.735 | 4.229.727 |
Total equity and liabilities |
| 6.210.881 | 6.376.404 |
Parent Company Statement of Comprehensive Income
|
| For the 6 month period ended | For the 3 month period ended | ||
| Note | 30 June 2019 | 30 June 2018 | 30 June 2019 | 30 June 2018 |
|
|
|
|
|
|
Revenue from contracts with customers | 4 | 4.087.415 | 4.322.650 | 2.263.042 | 2.312.015 |
|
|
|
|
|
|
Cost of sales |
| (3.826.905) | (3.877.253) | (2.123.081) | (2.021.461) |
Gross profit |
| 260.510 | 445.397 | 139.961 | 290.554 |
|
|
|
|
|
|
Selling and distribution expenses |
| (49.637) | (48.132) | (25.343) | (25.894) |
|
|
|
|
|
|
Administrative expenses |
| (39.110) | (40.142) | (18.067) | (20.585) |
|
|
|
|
|
|
Exploration and development expenses |
| (52) | (162) | (23) | (141) |
|
|
|
|
|
|
Other operating income/(expenses) & other gains/(losses)-net | 5 | (485) | 1.044 | (3.336) | 425 |
|
|
|
|
|
|
Operating profit |
| 171.226 | 358.005 | 93.192 | 244.359 |
|
|
|
|
|
|
Finance income |
| 5.509 | 4.614 | 3.121 | 2.127 |
|
|
|
|
|
|
Finance expense |
| (60.605) | (71.584) | (30.038) | (35.165) |
|
|
|
|
|
|
Lease finance cost |
| (464) | - | (245) | - |
|
|
|
|
|
|
Dividend income |
| 7.917 | 35.083 | 7.917 | 35.083 |
|
|
|
|
|
|
Currency exchange gains/(losses) | 6 | 1.032 | 4.243 | (531) | 6.744 |
|
|
|
|
|
|
Profit before income tax |
| 124.615 | 330.361 | 73.416 | 253.148 |
|
|
|
|
|
|
Income tax expense | 7 | (28.666) | (96.634) | (13.522) | (79.236) |
|
|
|
|
|
|
Profit for the period |
| 95.949 | 233.727 | 59.894 | 173.912 |
Other comprehensive income/(loss): |
|
|
|
|
|
Other comprehensive income/(loss), that will not be reclassified to profit or loss (net of tax): |
|
|
|
|
|
Changes in the fair value of equity instruments | 16 | 651 | (468) | 668 | (345) |
|
| 651 | (468) | 668 | (345) |
Other comprehensive income/(loss), that may be reclassified subsequently to profit or loss (net of tax): |
|
|
|
|
|
Fair value gains / (losses) on cash flow hedges | 16 | 5.186 | 16.256 | (2.703) | 14.372 |
Recycling of losses / (gains) on hedges through comprehensive income | 16 | 1.501 | (14.920) | 1.501 | (14.920) |
|
| 6.687 | 1.336 | (1.202) | (548) |
Other Comprehensive income/(loss) for the period, net of tax |
| 7.338 | 868 | (534) | (893) |
Total comprehensive income for the period |
| 103.287 | 234.595 | 59.360 | 173.019 |
Basic and diluted earnings per share(expressed in Euro per share) | 8 | 0,31 | 0,76 | 0,20 | 0,57 |
Parent Company Statement of Cash flows
|
| For the 6 month period ended | |
| Note | 30 June 2019 | 30 June 2018 |
Cash flows from operating activities |
|
|
|
Cash generated from operations | 19 | 172.120 | 159.512 |
Income tax (paid)/received |
| (1.768) | 4.184 |
Net cash generated from/(used in) operations |
| 170.352 | 163.696 |
|
|
|
|
Cash flows from investing activities |
|
|
|
Purchase of property, plant and equipment & intangible assets | 9,11 | (55.856) | (41.992) |
Proceeds from disposal of property, plant and equipment & intangible assets |
| 1.074 | - |
Dividends received |
| 6.571 | - |
Interest received |
| 5.509 | 4.614 |
Settlement of consideration of acquisition of further equity interest in subsidiary |
| - | (16.000) |
Participation in share capital increase of subsidiaries & associates |
| (10.014) | (15.853) |
Net cash used in investing activities |
| (52.716) | (69.231) |
|
|
|
|
Cash flows from financing activities |
|
|
|
Interest paid |
| (66.132) | (65.164) |
Dividends paid |
| (122) | (214) |
Acquisition of treasury stock |
| - | (511) |
Proceeds from borrowings |
| 10.067 | 442.698 |
Repayments of borrowings |
| (302.423) | (406.866) |
Payment of lease liabilities |
| (3.527) | - |
Net cash (used in)/generated from financing activities |
| (362.137) | (30.057) |
|
|
|
|
Net (decrease)/increase in cash and cash equivalents |
| (244.501) | 64.408 |
|
|
|
|
Cash and cash equivalents at the beginning of the period | 14 | 1.070.377 | 667.599 |
Exchange losses on cash and cash equivalents |
| 1.999 | 4.243 |
Net (decrease)/increase in cash and cash equivalents |
| (244.501) | 64.408 |
Cash and cash equivalents at end of the period | 14 | 827.875 | 736.250 |