ORLEN Spolka Akcyjna · GPW:PKN
ORLEN Spolka Akcyjna — PKN Orlen — Q2 2004 Earnings Presentation
29 slides from ORLEN Spolka Akcyjna's earnings presentation, Aug 13, 2004
Slide 1: Q2 2004 Results
Q2 2004 Results Record profits - momentum maintained 13 August 2004
Slide 2: Internal strengthening supports Q2 results
Internal strengthening supports Q2 results z The highest net profit in the company’s history* -> PLN 668 m z ROACE 20.2%** >> WACC 9.4% z PLN 163 m savings in Q2 04 due to cost cutting programme z Increase in wholesale volume by 12.7%*** y-o-y – driven by long-term contracts with foreign companies z
Slide 3: Q2 performance exceeds 2006 targets
Q2 performance exceeds 2006 targets Favourable market conditions ROACE* 18% 15% ROACEreported exceeded 12% WACC by over 7pp in 1H ‘04 9% WACC 6% 3% ROACE 0% WACC 2001 2002 2003 1H '04 ROACE** ROACE Value streams Q2 ’04 2006 Favourable market PKN ORLEN Group 14.3% 9 8% conditions allowed us to exceed
Slide 4: Operating cost reduction in PKN ORLEN
Operating cost reduction in PKN ORLEN Q2 ‘04 plan fully realised In m PLN ~800 Savings (sustainable) Investments and M&A (one-offs) 450-500 450-500 XX* 306* 163* XX* One-off spending - M&A -13 -20 -46 - - Implementation cost -7 -29 -18 - - Capex -10 -11 -40 -40 -30 -60 -104 -40 % of target completed
Slide 5: Refining and wholesale still the main contributor to revenues
Refining and wholesale still the main contributor to revenues In m PLN Revenue* Q2 ‘04 Q2 ‘03 Q1’04 Retail 3 030 2 883 2 473 Germany 1 764 1 797 1 476 Wholesale 3 362 2 210 2 724 Germany 481 - 451 Pet-chem 869 724 953 All revenues in Germany were included in retail in 2003 Other 145 116 175 Total re
Slide 6: All segments delivered higher profitability
All segments delivered higher profitability In m PLN Operating profits Q2 ‘04 Q2 ‘03 Q1 ‘04 Gross profit 1 523 1 002 1 213 Admin. expenses -235 -250 -184 Distribution costs -525 -571 -542 Cost cutting programme visible in 8% reduction in Other -26 -6 18 distribution costs EBIT* 737 175 505 Wholesale
Slide 7: Net profit – cost-cutting and utilisation of favourable market conditions
Net profit – cost-cutting and utilisation of favourable market conditions drive profitability In m PLN Q2 ‘03 Q2 ‘04 21* 18 800 9 700 -12** -8 -82 0 600 500 562 400 668 300 200 0 100 160 0 ∆ EBIT one-off items one-off items net profit net profit other ∆ equity method ∆ interests ∆ Forex ∆ minorities
Slide 8: Efficient cash flow management
Operating CF >> organic CAPEX Efficient cash flow management Operating CF PLN 1,040 m*** ⇓ Decrease in ⇑ 425% debt Purchase of PLN 344 m assets PLN 16 m * Dividend and interest PLN 12 m 140 120 Organic 100 R&M investment 80 Retail PLN 315** m 60 Petrochemicals Others 40 ⇑ 35% 20 0 * others -> PLN 35
Slide 9: Refining: visible improvement in operating efficiency
Refining Visible improvement in operating efficiency In m PLN Q2 ‘03 Q2 ‘04 116 700 76 600 0 6 59 500 -22 400 -63* 235 88 654 300 Significant internal improvements 200 0 100 159 0 ∆exchange other ∆ local pricing ∆ refining allowance ∆ Urals/Brent ∆ volumes ∆ cost cutting segment segment one-off item
Slide 10: Retail: cost-cutting drives profitability
Retail Cost-cutting drives profitability In m PLN Q2 ‘03 Q2 ‘04 47 90 Strong margins in 2Q ‘03 due to Iraq war 80 -4 70 8 60 3 3 50 0 40 30 -43 0 53 20 39 10 0 ∆Germany ∆ volume ∆cost-cutting ∆fuel margin ∆ non-fuel segment segment other one-off items one-off items margin result result Further devel
Slide 11: Petrochemicals: strong profitability in face of expansion in polyolefins
Petrochemicals Strong profitability in face of expansion in polyolefins In m PLN Q2 ‘03 Q2 ‘04 26 120 4 0 8 26 100 80 0 13 60 117 82 -42* 40 Cost-cutting and strong 20 PVC and fertiliser margins - drivers of profitability 0 ∆volume ∆exchange ∆ Anwil ∆cost-cutting segment segment other one-off items
Slide 12: Implementation of operating targets after Q2 '04
Implementation of operating targets after Q2 ‘04 Promise 2004 Result 1H’04 Cost-cutting exceeding PLN 450 m in ‘04, expectations – Cost cutting PLN 800 m by ‘05 9 PLN 306 m reflected in strong profitability sales ∆ total sales volume* 6% 9 7.1% Synergies with German ∆ retail sales** 2% -0.2% operati
Slide 13: Strategic milestones
Strategic milestones internal strengthening z Implement necessary management processes to increase efficiency and prepare the company for expansion steps z Reduce the headcount z Restructure the Capital Group -> sale of non-core assets z Reduce costs by PLN 800m till end of 2005 expansion z Restruct
Slide 14: Challenges in H2 '04
Challenges in H2 ‘04 z Face the challenges of growing competition z Take advantage of pick up in domestic economy as well as favourable Oil & Gas environment z Maintain market share in retail z Accelerate investment process in retail z Introduce fuels meeting new EU specifications z Advance process
Slide 15: Supporting slides: Market environment
Supporting slides Market environment 15
Slide 16: Market environment in oil & gas sector
Market environment in oil & gas sector Favourable conditions utilised Crude oil price, Brent (USD/b) Q2 ‘04 vs Q2 ‘03 37 Crude oil ⇑ 35.7% (y-o-y) 32 35.7% to 35.35 USD/b 27 22 Refinery margin ⇑ 138.4% (y-o-y) Margin* Refinery margin, Brent (USD/b) to 5.84 USD/b Q2 ‘04 vs Q2 ‘03 8,0 Ural/Brent diffe
Slide 17: Market environment – Poland
Market environment – Poland Noticeable recovery in the economy Real GDP growth 7,0% 6.0E% z Visible increase of GDP proves 6,0% stable economic recovery. High 5,0% unemployment rate continues – 4,0% 19.5% (fall of 0.2pp, y-o-y 3,0% vs. decrease of 0.5 pp, q-o-q) 2,0% 1,0% z Increaseof new car sales
Slide 18: Supporting slides: Cost cutting programme
Supporting slides Cost cutting programme 18
Slide 19: Positive influence of cost cutting programme on Q2 '04 results
Positive influence of cost cutting programme on Q2 ‘04 results In PLN m PLN 163 m 23 57 7 42 133 64 Production & Logistics Savings Other Implementation Savings on Technology achieved in costs costs EBIT level in other Q2 ‘04 segments 19
Slide 20: Supporting slides: ORLEN Deutschland
Supporting slides ORLEN Deutschland 20
Slide 21: ORLEN Deutschland: performance better than market in volume sales
ORLEN Deutschland Performance better than market in volume sales ¾ Trends in Q2 ’04 : • Increase of retail margin by 35% q-o-q has positive effect on ORLEN Deutschland results • Total volume of sales increased by 4.7%, due to substantial increase or STAR sites • STAR sites (B-Brand - low margin) - v
Slide 22: ORLEN Deutschland financial highlights Q2 '04
ORLEN Deutschland Financial highlights Q2 ‘04 Balance sheet - selected items Change Change Q2 '04 Q2 '03 Q1 '04 IFRS basis, in PLN m Q2'04/Q2'03 Q2'04 /Q1 '04 Property plant and equipement 767 597 28,4% 807 -5,0% Inventories 131 109 20,2% 128 2,9% Trade and other receivables 308 488 -36,9% 310 -0,7%
Slide 23: Supporting slides: Other data
Supporting slides Other data 23
Slide 24: Operating highlights
Operating highlights Increase of utilisation and reduction of headcount change change IFRS basis, in PLN m Q2 '04 Q2 '03 Q1 '04 y-o-y q-o-q Total sales, of w hich 3 548 3 407 4,1% 3 306 7,3% - light product sales (tt) ** 2 426 2 298 5,6% 2 238 8,4% - other refinery product sales (tt) 587 628 -6,5% 4
Slide 25: Profit – result of restructuring reflected in net profit
Profit – result of restructuring reflected in net profit ⇑ change change IFRS basis, PLN m Q2 '04 Q2 '03 Q1 '04 y-o-y q-o-q Revenues* 7 406 5 933 24,8% 6 325 17,1% Cost of sales* -5 883 -4 931 19,3% -5 112 15,1% Distribution costs -525 -571 -8,1% -542 -3,1% Administrative expenses -235 -250 -6,0% -1
Slide 26: Balance sheet: low gearing – future M&A payments fully secured
Balance sheet Low gearing – future M&A payments fully secured change change IFRS basis, in PLN m Q2 '04 2003 Q1 '04 Q2'04/2003 Q2'04/Q1'04 Non current assets 10 656 10 715 -0,6% 10 684 -0,3% Current assets, of which 7 475 6 434 16,2% 6 972 7,2% Inventories 3 365 3 058 10,0% 3 148 6,9% Cash and cash
Slide 27: Refining and wholesale
Refining and wholesale Excellent performance of the segment Refining and wholesale IFRS basis,PLN m Q2 '04 Q2 '03 Q1 '04 Revenue 5 291 3 457 3 958 ⇑ 311% y-o-y Total costs 4 637 3 298 3 534 Increase in profits of the of the segment segment due to strong Profit of 654 159 424 refining margins and hig
Slide 28: Retail segment
Retail segment Increasing profitability of the segment Retail IFRS basis,PLN m Q2 '04 Q2 '03 Q1 '04 Revenue 3 037 2 984 2 478 Total costs of the segment 2 984 2 945 2 497 ⇑ 35.9%, y-o-y Profit of Increase in profit of the retail 53 39 -19 the segment segment due to savings in OPEX Sales (tt) 847 1 0
Slide 29: Petrochemical segment
Petrochemical segment Profitability on a satisfactory level Petrochemicals IFRS basis,PLN m Q2 '04 Q2 '03 Q1 '04 Revenue 1 220 1 039 1 270 ⇑ 42.7%, y-o-y Total costs Increase in segment’s profit 1 103 957 1 068 of the segment mainly due to good performance Profit of 117 82 202 Anwil subsidiary the s