ORLEN Spolka Akcyjna · GPW:PKN
ORLEN Spolka Akcyjna — PKN Orlen — Q4 2003 Earnings Presentation
30 slides from ORLEN Spolka Akcyjna's earnings presentation, February 2004
Slide 1: Results after 4Q2003
Results after 4Q2003 Record-breaking results achieved by PKN ORLEN February 2004 1
Slide 2: A milestone year for PKN ORLEN
A milestone year for PKN ORLEN z ROACE 8,6%* ≈ WACC 9,0% z Record-breaking net profit -> 1041 mln PLN z Savings of 144 mln PLN after 6 months of the cost cutting program implementation z Sale of 25 non-core companies z Headcount reduction of 2,700 people z Successful completion of strategic expansio
Slide 3: ROACE at relatively high level even after excluding one-offs
ROACE at relatively high level even after excluding one-offs ROACE ROACE ROACE Value streams change 2003 2006 target PKN ORLEN Group ⇑ 3.7pp 7.3% 8.8% Production, Wholesale and Logistic ⇑ 8.9pp 13.5% 9 12.3% Retail ⇑ 2.3pp 8.1% 14.3% Corporate centre na na na Strategic expansion costs na na na Subsi
Slide 4: Cost cutting: full implementation of the programme in 2003
Cost cutting Full implementation of the programme in 2003 ~800 Savings (sustainable) Investments and M&A (one-offs) 450-500 144 9 One-off spendings -M&A -33 -46 - -Implementation costs -16 -18 - -Capex -1 -40 -40 -50 -104 -40 % of target 55-60 100 18 completion 2003 y. 2004 y. 2005 y. Figures in PLN
Slide 5: Market environment in oil & gas sector
Market environment in oil & gas sector Favourable conditions utilized Crude oil price, Brent (USD/b) 2003 vs 2002 33 31 z Average increase in crude oil 29 prices (Brent) in Y’03 by 15.3% from USD 25.04 to USD 28.86 (y-o-y) USD/bbl 27 25 23 15,3% z Increase in Refinery Margin by 21 19 194.2% from 1.0
Slide 6: Market environment – Poland
Market environment – Poland Noticable recovery in the economy Real GDP growth 4.7E% 5% FY estimation: 3.0- 3.5% 4% z VisibleGDP growth confirms 3% economic recovery. Estimated 2% Y’03 GDP growth rate at 3,7%. 1% Unemployment rate still high 20% 0% (down by 0.1 pp y-o-y, up 0.5 pp q-o-q) 4Q03E 1Q02 2
Slide 7: Profit – restructuring results reflected in profitability
Profit – restructuring results reflected in profitability ⇑ z Surge in revenues due to consolidation IFRS, m PLN 2003 2002 change of German* activities as well as higher Revenues 24 412 16 902 44,4% prices of refinery products Cost of sales -19 986 -13 455 48,5% z Significantly lower growth of distr
Slide 8: Operating CF vs organic CAPEX
Operating CF vs organic CAPEX Operating CF Disinvestments PLN 1.7 bln Change of debt ⇑ 32% PLN 245m PLN 57m * ⇑ Dividend and M&A ⇓ interests PLN 325m 600 Production and PLN 175m 500 wholesale 400 Retail 300 Petrochemical 200 Others 100 0 Investments in the organic growth PLN 1.34bn** - ⇑ 38% * Other
Slide 9: Refining and wholesale: cost cutting and margin optimization
Cost cutting and further margin optimization main drivers of the efficiency increase Refining and wholesale z Substantial shift between gasoline/diesel&LPG IFRS, mln PLN 2003 2002 change z Results of our strategy of maximising the total Revenues 15 798 14 570 8,4% volume of margin and favourable fue
Slide 10: Retail: ORLEN network recognition and non-fuel sales
Significant improvement of ORLEN network recognition and development of non-fuel goods sales driving the success Retail z Decreased volumes of gasoline are IFRS, mln PLN 2003 2002 change compensated by increase in volume of diesel and strong increase of LPG* Revenues 11 092 4 124 169,0% Total costs
Slide 11: Robust profitability in petrochemicals
Robust profitability in petrochemicals Petrochemicals IFRS, mln PLN 2003 2002 change z Increase of sales volume in Revenues 4 545 4 166 9,1% monomers and fertilizers resulted Total cost of in total sales growth of 8.7% 4 127 3 966 4,1% segment Profit of the segment 418 200 109,0% z Operating profit
Slide 12: Completion of all announced strategic goals
Completion of all announced strategic goals … Promise 2003 Result Goal 2004 Efficient take-over of German Completion of full activities + SWAP agreements resulting in extra rebranding process + SWAP agreements for 9 Net profit over PLN 20 m 300 tt of fules in 2004 extra 400 tt of fuels Start-up of r
Slide 13: Supported by implementation of operational targets
… supported by implementation of operational targets. Promise 2003 Result Target 2004 Cost cutting PLN 100 m 2003, PLN 144 m 9 PLN 450 m PLN 800 m by 2005 sales ∆Total sales volume* -1% -0.6% 9 6% ∆ Retail sales** 5% 1.1% 2% VITAY – participants 4.3m 4.4m 9 5m Margin ∆ Gross retail margin 2% 15% 9 6
Slide 14: Supporting slides: VBM and cost cutting programme
Supporting slides VBM and cost cutting programme 14
Slide 15: SVA – retail
SVA – retail Change y-o-y Fuel margin Throughput per station ⇑ PLN 57m (⇑ 109 th. liter) Unit margin (⇑ PLN 0.01/litre) Av. shop area (⇑ 3.6m2) SVA Non fuel margin PLN 23m Sales per m2 (⇑ PLN 809) ⇑ PLN 25m ⇑ PLN 29m Unit margin (⇑ PLN 0,01) Operational costs Fixed costs (⇑ PLN 41m) ⇑ PLN 23m Variab
Slide 16: Production and logistics as pillars of cost cutting programme
Production and logistics as the pillars of the cost cutting programme in 2003 PLN 144m 24 33 36 16 Target 2003 95 84 Logistic Production & Savings M&A Implementation Savings at the Technology achieved in costs EBIT level in other 2003 r. segments Achievement of assumed target In million PLN 16
Slide 17: Implementation of support infrastructure
Implementation of support infrastructure 1* Implementation • Cost cutting team independently leads team/ procedure implementation from January 2004 2 • Realization in budget in 2004 Project Initiatives in infrastructure budget 3 • Monitoring of work progress automated Preparation of monitoring syste
Slide 18: Realization of voluntary redundancy scheme
Realization of voluntary redundancy scheme • Programme is opened till the end of March 2004 520 • Relatively big ~ 400 interest in programme despite of the early stage • About 400 declarations February Target VRS 2004 till the end of March 2004 Reduction of personal costs within voluntary redundancy
Slide 19: Supporting slides: Other operating and financial data
Supporting slides Other operating and financial data 19
Slide 20: Balance sheet
Balance sheet Financial strengthening of PKN ORLEN’s position IFRS basis, in PLN m 2003 2002 change Non current assets 10 751 9 814 9,5% Current assets, of which 6 435 5 259 22,4% Inventories 3 059 2 868 6,7% z Increase in assets as a Cash and cash equivalents 629 222 183,3% result of German operati
Slide 21: Operating highlights 2003
Operating highlights 2003 Higher production efficiency z Increase in total retail sales of light IFRS basis, in PLN m 2003 2002 change products as a result of German activity Retail sales of motor 3 623 2 176 66,5% consolidation and rising consumption in the fuels (tt) Polish market. Light products
Slide 22: Support slides: Fuel stations in Germany and BOP
Support slides Fuel stations in Germany and BOP 22
Slide 23: All stations in Germany are operating under new brands
All stations in Germany are operating under new brands z By the end of the year the rebranding process of all German stations was fully completed ¾ Planned break even result for the first 10 months of operations in 2003 achieved (PLN 5m profit) ¾ Trends recorded in 2003: • Consumption of fuels in Ge
Slide 24: Influence of ORLEN Deutschland and BOP on consolidated statement
Influence on consolidated statement of ORLEN Deutschland and BOP Balance sheets - selected item s (PLNm )* 2003 Orlen Deutschland Property, plant and equipment 851 Inventories 130 Trade and other receivables 336 Cash and cach equivalents 311 Total assets 1 628 Long term liabilities 129 Short term li
Slide 25: Supporting slides: 4Q2003 results
Supporting slides 4Q2003 results 25
Slide 26: Market environment in gas & oil sector
Market environment in gas & oil sector Satisfactory level of refinery margins Crude oil price, Brent (USD/b) 4q 2003 vs 4q 2002 32 30 USD/bbl 28 9,8% z Increase in crude oil prices 26 (Brent) in 4q by 9.8% from 26.83 24 USD/b to 29.46 USD/b (y-o-y) 22 October November December z Increase in the refi
Slide 27: Profit & Loss account
Profit & Loss account Significant increase in earnings per share z Due to consolidation of sales from IFRS basis, m PLN 4Q 03 4Q 02 change Deutschland, PLN 1.9m, PKN ORLEN Group revenues increased by 4.5% Revenue 6 908 4 777 44,6% Cost of sales -5 775 -3 892 48,4% z Excludingdistribution costs of Di
Slide 28: Refining and wholesale
Refining and wholesale Increase segment profitability Refining and wholesales z Economic upturn visible in IFRS basis, mPLN 4Q03 4Q02 change total increase in light product Revenue 4 372 4 188 4,4% Total costs sales of 4.5% 4 118 4 049 1,7% of the segment Profit of z Evident change in sale 254 139 8
Slide 29: Retail: Margin optimisation
Retail Margin optimisation Retail IFRS basis, mPLN 4Q03 4Q02 change 1 064 198,3% z Excluding German activity retail Revenue 3 174 Total costs revenues increase by 18.1% 3 184 1 114 185,8% of the segment Profit of z Promotional compaign, Vitay -10 -50 - the segment and FLOTA programmes, resulted Sale
Slide 30: Petrochemicals: Promising profitability
Petrochemicals Promising profitability Petrochemicals z Impact of polyolefin sales taken over by BOP visible in slight decrease IFRS basis, mPLN 4Q03 4Q02 change of PKN ORLEN revenues Revenue 1 164 1 171 -0,6% Total costs 1 092 1 114 -2,0% z Visible shift in sales structure of the segment Profit of