ORLEN Spolka Akcyjna · GPW:PKN
ORLEN Spolka Akcyjna — PKN Orlen — FY2005 Earnings Presentation
40 slides from ORLEN Spolka Akcyjna's earnings presentation, Feb 28, 2006
Slide 1: Financial results: FY 2005 (IFRS) and financial assumptions for the 2006 plan
PSG\JAN05\EP\K2_OVERVIEW(01).PPT Financial results: FY 2005 (IFRS) and financial assumptions for the 2006 plan Igor Chalupec, CEO Paweł Szymański, CFO February 28, 2006 1
Slide 2: Financial results 2005
Financial results 2005 The highest ever results of PKN ORLEN following restructuring and corporate culture changes; supported by market conditions1 The highest ever net profit of PKN ORLEN Operating data PKN ORLEN m PLN Q4 '05 2005 2005 PKN ORLEN main company Wholesale sales ROACE (%)2 6% 22,3% 4 21
Slide 3: Financial assumptions for 2005 were significantly exceeded compared to the plan
Financial assumptions for 2005 were significantly exceeded compared to the plan CAPEX (PLN m) EBITDA (PLN m)1 PKN ORLEN PKN ORLEN TARGET FOR 2005: 2,3 PLN bln TARGET FOR 2005: > 14%1 EXECUTION: 36% INCREASE COMPARED TO 2004 EXECUTION : SIGNIFICANTLY EXCEEDING THE PLAN 2500,0 8 000 7 000 Negative goo
Slide 4: Agenda
Agenda z Financial plan assumptions for 2006 z Financial results FY 2005 – overview z Supporting slides 4
Slide 5: Targeted petrochemical expansion and strengthening retail market position
Targeted petrochemical expansion and strengthening retail market position Main operational assumptions of PKN ORLEN main company Target for 2006 • Wholesale sales volume increase1 3% (gasoline, diesel, Jet, LHO) • Retails sales volume increase2 5% (gasoline, diesel, Jet, LHO) • Petrochemical sales v
Slide 6: Financial assumptions for 2006
Financial assumptions for 2006 Continuing implementation of PKN ORLEN strategy in order to achieve ambitious financial targets for shareholders value creation. PKN ORLEN financial assumptions • EBITDA : > 15 % based on comparable macroeconomic conditions1 • Fixed costs below 2005 level2 • CAPEX app.
Slide 7: Strategic actions for 2006 for PKN ORLEN
Ongoing proefficiency and M&A activities in 2006 in accordance with PKN ORLEN Stratgey Strategic actions for 2006 for PKN ORLEN Tire 1 of PKN ORLEN Strategy Tire 2 & 3 of PKN ORLEN Strategy Strengthening existing core business activities in home markets and Implement improvements and investments fol
Slide 8: Ongoing restructuring of Unipetrol Group and strengthen existing core businesses
Ongoing restructuring of Unipetrol Group and strengthen existing core businesses in home markets Strategic actions for 2006 at Unipetrol • Disposals of Kaucuk, and Spolana in a tender • Combined crude purchases with PKN ORLEN - economies of scale • Operational optimization of the UNIPETROL Group and
Slide 9: Agenda
Agenda z Assumptions for 2006 financial plan z Summary of 2005 financial results z Supporting slides 9
Slide 10: Macroeconomic environment in 2005
Macroeconomic environment in 2005 Variable and volatile refining and petrochemical sector Refinery margin 5,12 $/b average in 20053 Exchange rates average1 Decrease by 9% y/y 5,0 PLN/USD PLN/EUR 16 2005 2006 2 PLN/USD 2006E PLN/EUR 2006E 2 2004 14 2006E 4,5 Since Since 12 January 2006 r. January 200
Slide 11: Macroeconomic assumptions for 2006
Macroeconomic assumptions for 2006 Macro assumtions1 2005 (realised) 2006 • Refinery margin2: 5,12 5,33 • Brent/Ural differential2: 4,38 3,50 • Brent crude oil2: 54,4 53,0 • Exchange rate PLN/USD2 3,23 2,98 • Exchange rate PLN/EUR2 4,02 3,95 • Fuel consumption in Poland4: +1,3% +1,1% • Retail Fuel c
Slide 12: Profit and loss account
Profit and loss account Increase of net profit by 6% excluding negative goodwill* IFRS, PLN m 2004 Unipetrol 2005 change Comments 7months'05 2005/2004 Revenues 30 729 8 984 42 804 39,3% zUnipetrol consolidation visible across all items in Cost of sales -24 602 -8 558 -35 869 45,8% profit and loss ac
Slide 13: Net profit bridge 2004 to 2005
Increase of net profit mainly due to further operating improvement and Unipetrol consolidation as well as one off negative goodwill effect* 2004 2005 In m PLN One off item due to excess of fair value of acquired net assets over their 4 500 acquisition cost. 4 000 2 006 3 500 365 8 346 3 000 (36) 2 5
Slide 14: Revenues by segment
Revenues by segment Higher petrochemical share in total revenues1 IFRS basis, PLN m 2004 2005 y/y Comments Revenue total 30 729 42 804 39% of which z Visible impact of Unipetrol 2) 14 338 21 421 consolidation and increase of Refining 49% Unipetrol 905 1 117 refinery and petrochemical prices Germany
Slide 15: Expenses
Expenses Operating costs grew by less than revenues excluding Unipetrol Unipetrol Comment IFRS basis, PLN m 2004 7 monts ''2005 2005 y/y Raw m aterials and energy 12 494 5 346 21 529 72,3% z Excluding Unipetrol Costs of goods for resale 10 594 1 341 11 561 9,1% consolidation decrease in External ser
Slide 16: Operating profit PKN ORLEN by segment
Operating profit PKN ORLEN by segment Visible improvement in results across all core business segments Im pact of Unipetrol Comment IFRS basis, PLN m 2004 consolidation 2005 y/y Operating profit 2 670 229 5 060 89,5% zzExcluding Unipetrol and of which: one-off effect of negative negative goodwill 2
Slide 17: Refinery segment
Refinery segment Impressive 21% increase in sales of refining products and execution of major plant investments to increase value of the company1 IFRS, PLN m 2004 2005 y/y Q4'04 Q4'05 q/q Revenues 21 197 32 811 55% 5 933 10 387 75% Segm ent costs 18 946 29 937 58% 5 434 10 037 85% Segm ent profit 2
Slide 18: Refining segment result bridge
Refining segment Increase in efficiency operating due to Unipetrol consolidation using at the same time advantageous fuels cracks PLN m 2004 2005 4 500 125 93 48 9 158 4 000 (50) (149) 3 500 562 (282) 664 3 000 (350) 839 Consolidation of 7 months of (350) Unipetrol operating effect Strengthening PLN
Slide 19: Retail
Retail Implementation of Retail Sales Development Plan for Poland provides the first effects – segment profit amounts to PLN 105 m excluding negative goodwill1 IFRS, PLN m 2004 2005 y/y change Q4 '04 Q4 '05 q/q change Revenue 11 584 13 753 19% 2 937 3 762 28% Segm ent costs 11 590 13 649 18% 2 991 3
Slide 20: Retail segment result bridge
Retail segment Result increase due to pro-efficiency actions and Unipetrol consolidation PLN m 2004 2005 300 One-off effect of Unipetrol negative goodwill 15 250 17 38 200 161 (40) 150 266 (49) Consolidation of 7 months of 100 (73) Unipetrol operating effect 157 46 105 50 Result excluding negative g
Slide 21: Petrochemical
Petrochemical Dynamic increase in sales and building strong position on the petrochemical market in the region (BOP, Chemopetrol)1 IFRS, PLN m 2004 2005 y/y change Q4 '04 Q4 '05 q/q change Revenue 5 624 9 085 62% 1 544 3 225 109% Segm ent costs 4 743 8 190 73% 1 266 2 978 135% Segm ent profit 881 89
Slide 22: Petrochemical segment result bridge
Petrochemical segment Chemopetrol assets consolidation and Olefins II installation revamping in Plock are the main factors influencing segment result PLN m 2004 2005 2000 One-off effect of Unipetrol 1800 negative goodwill 1600 105 1 1 077 1400 1200 (31) (44) 350 (78) 86 1000 (100) 1 972 (130) 800 (1
Slide 23: Successful realisation of Cost cutting programme
Successful realisation of Cost cutting programme Target exceeded by over 10% Cost cutting programme effects summary in 2003 - 2005 z Implementation of initiatives and management determination allowed to increase the level of cost reduction by 5% to the level of PLN 882 m. Efficiency improvement PLN
Slide 24: Supporting slides
Agenda Supporting slides z Supporting slides z Characteristics of macroeconomic environment z Financial and operating results Q4’2005 z CAPEX z ORLEN Deutschland z Unipetrol z Petrochemicals market – environment summary 24
Slide 25: Macroeconomic environment 4Q'2005
Macroeconomic environment 4Q’2005 Refinery margin average $5.17/b in Q4’ 20053 Exchange rates average1 Decrease of 27% y/y PLN/USD PLN/EUR 16 Q4'2005 5,0 2 2 PLN/USD 2005 E PLN/EUR 2005 E Q4'2004 14 20052E 4,5 12 4,0 10 8 3,5 6 3,0 4 2 2,5 0 3-Oct 2-Nov 2-Dec 31 Dec 31 Dec 3-Oct 2-Nov 2-Dec Brent 56
Slide 26: Macroeconomic environment in Poland and in Czech Republic
Macroeconomic environment in Poland and in Czech Republic Fuel consumption – Poland Fuel consumption – Poland (gasoline, diesel, LHO); (in thousand tonnes) (gasoline, diesel); (in thousand tonnes) +6,7% 0% 12 650 13 500 13 500 +6,5% +4,3% 5 400 5 750 6 000 2003 2004 2005E 2003 2004 2005E Real GDP gr
Slide 27: Revenues by segment Q4 2005
Operating profit by segment Increasing share of petrochemicals IFRS basis, PLN m Q4'2004 Q4'2005 y/y Comments Revenue total 8 376 12 940 54% of which zRevenue increase due to 1) 4 127 Refining 6 464 57% Unipetrol consolidation Unipetrol 265 289 9% Germany (without excise tax) 265 289 9% z Over 22% i
Slide 28: Profit and loss account 4Q 2005
Profit and loss account 4Q 2005 Results affected by provision on economic risk and restructurization Unipetrol IFRS, PLN m Q4'2004 Q4'2005 Q4'2005 Change Comment Revenues 8 399 3 721 12 969 54,4% zDecrease in operating profit Cost of sales -6 840 -3 618 -11 371 66,2% caused by 27% drop in refining D
Slide 29: Expenses Q4 2005
Expenses Cost cutting initiative visible in fixed cost decrease IFRS basis, PLN m Q4'2004 Q4'05 Unipetrol Q4'2005 y/y Comment Raw m aterials and energy 3 383 2 341 7 191 112,6% Costs of goods for resale 2 912 442 3 069 5,4% zUnipetrol consolidation External services 466 310 803 72,3% effect visible
Slide 30: Operating profit by segment Q4 2005
Operating profit by segment Over 40% operating profit recorded in petrochemicals Q4'05 IFRS basis, PLN m Q4'04 Unipetrol Q4'05 y/y Comment Operating profit 561 34 400 -28,7% zDecrease in refinery result of which: caused by lower refining 1 margin and URAL/Brent Refining 499 34 352 -29,5% differentia
Slide 31: Operating data 4Q 2005 vs 4Q 2004
Operating data 4Q 2005 vs 4Q 2004 4Q' 05 Operating data1 4Q'04 4Q'05 y/y Unipetrol Total sales (tt) , of which 4 041 947 4 719 16,8% - light products sales (tt) 2 2 754 597 3 233 17,4% - other refinery products sales (tt) 618 159 677 9,5% - pet-chem sales (tt) 564 191 748 32,6% - other products sale
Slide 32: Capex in 2005
Capex in 2005 Focus on petrochemicals development Investment in Q4’05 including Unipetrol In PLN m 1100 1050 2004 1000 2005 950 2005, Unipetrol 900 165 850 800 750 700 650 53 600 34 550 500 450 400 722 740 350 300 23 250 469 428 392 200 319 150 178 100 105 50 0 Refining Reta il Petrochemicals Others
Slide 33: ORLEN Deutschland
ORLEN Deutschland Start-up of the retail restructuring Operational activities and trends in 2005 z In 2005 was made a decision to restructure and develope retail network in Germany. In 2005, 11 sites were closed and finally 60 unprofitable petrol station will be disposed from the network. z Accepted
Slide 34: ORLEN Deutschland Financial data 2005 vs 2004
ORLEN Deutschland Financial data 2005 vs 2004 IFRS in m PLN Q4'04 Q4'05 change 2004 2005 change Assets 1 387 1 309 -5,6% 1 387 1 309 -5,6% Equity 419 325 -22,4% 419 325 -22,4% IFRS in m PLN Q4'04 Q4'05 change 2004 2005 change Revenues 2 362 2 182 -7,6% 8 634 8 601 -0,4% Cost of sale -2 286 -2 105 -7
Slide 35: Unipetrol Group selected financial data
Unipetrol Group Selected financial data for FY2004 vs. FY2005 Preliminary financial results of main subsidiaries of Unipetrol a.s. in 000 CZK 2004 IFRS* 2005 IFRS Chem opetrol a.s. Revenues 28,899,450 31,237,276 EBIT 2,743,604 3,163,848 Net result 1,952,507 2,642,690 Equity 13,033,302 14,200,524 Tot
Slide 36: Unipetrol Group Financial and Operational Results for 2005
Unipetrol Group Financial and Operational Results for 2005 Preliminary consolidated financial highlights of Unipetrol a.s. 2004-2005 in '000 CZK 2004 IFRS* 4Q 2005 IFRS 2005 IFRS UNIPETROL a.s. Equity 32 670 542 39 010 634 39 010 634 Total assets 71 894 387 76 511 611 76 511 611 Revenues 86 251 009
Slide 37: Unipetrol Group operational highlights 2003-2005
Unipetrol Group Selected financial data for FY2004 vs. FY2005 Operational highlights for years 2003-2005 Operating data* Q1'03 Q2'03 Q3'03 Q4'03 2003 Q1'04 Q2'04 Q3'04 Q4'04 2004 Q1'05 Q2'05 Q3'05 Q4'05 2005 Total sales (tt) , of which 110 177 720 1 135 2 142 1 024 1 195 1 204 1 269 4 692 1 118 1 32
Slide 38: Financial assumptions for 2006 at Unipetrol
Financial assumptions for 2006 at Unipetrol Financial assumptions • EBITDA : + 11 % referring to macro environment 1 • CAPEX CZK 4.9 bn2 Total increase in CAPEX of ca. CZK 1 448 m 2006 vs. 2005 2 196 1 869 2005 2006 1 595 1 215 311 302 300 179 119 201 Refining Retail Petrochemicals Chemical Others 1
Slide 39: Strategic actions at Unipetrol in 2005
Strategic actions at Unipetrol in 2005 Key steps undertaken in 2005 • Acquisition of Unipetrol by PKN ORLEN • Partnership Program launched by Unipetrol with support from PKN ORLEN • Mandatory Tender Offer for shares of Unipetrol a.s., Spolana and Paramo • Implementation of PKN ORLEN´s Best Practices
Slide 40: Petrochemical market from January 2004 to mid February 2006
Petrochemical market from 1 January 2004 to mid February 2006 Ethylene Prophylene 900 900 800 in EUR/tone 800 in EUR/tone 700 700 600 600 500 500 413 398 398 427 370 383 400 322 314 304 400 353 331 290 293 331 300 300 254 211 232 211 200 200 100 100 0 0 1-Jan 1-Apr 1-Jul 1-Oct 1-Jan 1-Apr 1-Jul 1-Oc