K2 OVERVIEW(01) - PKN Orlen · 1 PSG\JAN05\EP\K2_OVERVIEW(01).PPT Financial results: FY 2004 and...
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Transcript of K2 OVERVIEW(01) - PKN Orlen · 1 PSG\JAN05\EP\K2_OVERVIEW(01).PPT Financial results: FY 2004 and...
1
PSG\JAN05\EP\K2_OVERVIEW(01).PPT
Financial results: FY 2004 and financial assumptions for the 2005 plan
Igor Chalupec, CEO2 March 2005
2
Financial results 2004The highest net profit in PKN ORLEN’s history
Cost cutting5 PLN 637 m
Wholesale volume sales6 + 8.0%
Utilisation ratio7 90.0%
Headcount in PKN ORLEN Group -5.5 %
Key financial data 20041 Operating data 2004
ROACE2 19.0%
EBITDA PLN 4.0 bnNet profit3 PLN 2.4 bnCAPEX PLN 1.5 bnOperating cash flow PLN 3.6 bn
Gearing4 1.5%
1) Refers to the Capital Group, IFRS numbers in the whole presentation if not otherwise pointed2) ROACE = operating profit after tax / average employed capital (equity + net debt)3) Includes net profit of PKN ORLEN subsidiaries for 2004 of PLN 285 m IFRS based4)Gearing = net debt / equity
5) For further details please go to slides 28, 29, 306) Refers to PKN ORLEN sales (gasoline, diesel, Jet, LHO)7) Based on deep processing capacity of PKN ORLEN 13.5 m tonnes/year
4
Refinery margin $5.6/b average in 2004 Increase of 84% 2004/2003Exchange rate average in 20041
1)2)
Macroeconomic environment in 2004Extraordinary favourable conditions in oil & gas business
0
2
4
6
8
10
12
01.04 02.04 03.04 05.04 06.04 08.04 09.04 10.04 12.04
2004 20032 3
2.5
3.0
3.5
4.0
4.5
5.0
01.04 02.04 03.04 05.04 06.04 08.04 09.04 10.04 12.04
PLN/USD 2004 PLN/EUR 2004
Brent $38.3/b average in 2004 Increase of 33% 2004/2003
Brent/Ural differential $4.1/b average in 2004 Increase of 134% 2004/2003
0.0
2.0
4.0
6.0
8.0
10.0
01.04 02.04 03.04 05.04 06.04 08.04 09.04 10.04 12.04
2004 2003
202530354045505560
01.04 02.04 03.04 05.04 06.04 08.04 09.04 10.04 12.04
2004 2003
1) Source: NBP (Polish National Bank) 2) Calculated as: Products (88.36%) vs Brent Dtd (100%). Products contain Premium Unl (25.21%),
EN590 (23.20%), Naphtha (16.51%), LHO (15.31%), HSFO (5.44%) i Jet (2.69%) 3) As in 2) above with a change: EN590 should be replaced by ULSD (source: CIF NWE quotations, except HSFO FOB ARA)
5
Revenues in segmental breakdown Dynamic increase across all segments
IFRS basis, PLN m 2003 2004 y/y
Revenue total 24 412 30 535 25%
of whichRefining1) 2) 10 066 14 337 42%
Poland 10 066 12 533 25%
Germany (without excise tax) 391 902 -
excise tax - Germany 902 1 094 -
Retail 2) 10 651 11 548 8%
Poland 4 381 4 910 12%
Germany (without excise tax) 1 998 2 646 32%
excise tax - Germany 4 272 3 992 -7%
Petrochemicals 3 145 4 000 27%
Others 550 650 18%
Revenues increased by 25% across all segments
due to growth of fuels sales volume by 5.6% and
growth of fuels and petrochemical products
prices quotations
Extraordinary increase of revenues in refining
segment due to change in Orlen Deutschland
revenues classification between retail and
wholesale
Higher dynamic due to shorter 10 month
consolidating period starting from March 2003
1) Refining, Wholesale and Logistics 2) The total revenue of Orlen Deutschland was attributed to the retail segment in 2003.
Starting from 2004, German revenues are split into retail and wholesale segments
6
Operating costVariable costs grew less than revenues
IFRS basis, PLN m 2003 2004 y/y
Raw materials and energy 11 005 12 407 12.7%
Costs of goods for resale 7 537 10 594 40.6%
External services 1 789 1 774 -0.8%
Staff costs 1 055 1 035 -1.9%
Depreciation and amortisation 1 236 1 234 0.2%
Taxes and charges 263 262 -0.4%
Other 595 1 004 68.7%
Total costs 23 480 28 310 20.6%
Variable costs 19 147 23 766 24.1%
Fixed costs 3 945 3 825 -3.0%
Other operating costs 388 719 85.3%
Change in inventories 87 -182 -309.2%
Total operating costs 23 567 28 128 19.4%
Increase due to the growth of fuel prices in OrlenDeutschland (39.8%)1
Increase of PKN ORLEN efficiency supported by decrease in fixed costs
Increase in other costs a result of higher provisions for: the cost of
land reclamation and contamination removal (PLN 128 m), economic
risk (PLN 147 m), asset revaluation (PLN 138 m)
and non-financial assets revaluation (PLN 161 m)
1) Also higher purchase goods for resale in Orlen Deutschland in 2004 in relation to 2003 due to the consolidation starting from 1 March 2003
7
Operating costs and segment split of operating profit2004 vs. 2003
Operating profit improvement due to a favourable refining and petrochemical margin,
the Brent/Ural differential and efficient
cost control
Significant increase in petrochemical results due to high demand for PKN
ORLEN and Anwil products
IFRS basis, PLN m 2003 2004 change
Operating profit 1 267 2 777 119.2%of which
Refining1 1 213 2 292 89.0%
Retail 38 49 28.9%
Petrochemical 418 810 93.8%
Others2 6 22 266.7%
Non attributable3 -408 -396 -2.9%
1) Refining, Wholesale and Logistics 2) Departments responsible for energetic media and social activity and services subsidiaries of PKN ORLEN
3) Includes corporate centre of PKN and subsidiaries not mentioned in previous segments included
8
Profit and loss accountRecord net profit
Impact of foreign exchange rates on financial revenues
and costs at a level of PLN 226 m and PLN 6 m
respectively. Financial costs increased due to provision for
sales receivables of NOM stake (PLN 111 m)
Reduction of distribution cost and administrative
expenses by PLN 187 m (2004/2003)
Effective tax rate at the level of 17.3%
IFRS basis, PLN m 2003 2004 change
Revenue 24 412 30 535 25.1%
Cost of sales -19 986 -24 403 22.1%
Distribution costs -2 259 -2 180 -3.5%
Administrative expenses -934 -826 -11.6%
Other1 34 -349 -
Profit from operations 1 267 2 777 119.2%
Financial income 279 400 43.4%
Financial expenses -377 -256 -32.1%
Profit before tax & minor. int. 1 219 3 021 147.8%
Income tax -198 -524 164.6%
Net profit 987 2 442 147.4%
1) Other operating income and expenses
9
Operating activity main driver supporting 2.5x increase in net profit
987
1510
325 58 50
(21)
(326) (141)
2 442
0
500
1 000
1 500
2 000
2 500
3 000ne
t pro
fit
oper
atin
g pr
ofit
FOR
EX
inte
rest
equi
ty m
etho
d
min
ority
inte
rets
taxe
s
othe
rs
net p
ofit
∆
PLN m2003 2004
∆∆ ∆
∆∆
Operating profit increase more than 119% shows unquestionable
improvement in oil & gas sector
10
EBITDA and ROACE in 2004 compared to adjusted 2003 results1
EBITDA (PLN bn)
1
4.0
4.3
3.5
3.6
3.7
3.8
3.9
4.0
4.1
4.2
4.3
4.4
2003 - adjusted 2004
ROACE (%)
1
19.0
19.8
16.0
17.0
18.0
19.0
20.0
2003 - adjusted 2004
1)2003 results adjusted to 2004 results with: Brent price 38.3$/b, Brent-Ural differential 4.1$/b, refinery margin 5.6 $/b, PLN/EUR 4.52; PLN/USD 3.65
11
Refining segment1
Increase in operating efficiency through favourable macroeconomic conditions
1 213
737
733
219151 62 17
(43)(96)
(155)(254)
(292)
2 292
0
500
1 000
1 500
2 000
2 500
3 000
3 500se
gmen
t res
ult
2003 re
finer
ym
argi
n
Bren
t/Ura
l diff
.
LIFO
cost
cut
ting
volu
mes
inla
nd p
rem
ium
recu
ltivat
ion
&re
stru
ctur
ing
tax
allo
wan
ce
exch
ange
rate
crud
e oi
l ow
nco
nsum
ptio
n
othe
rs
segm
ent r
esul
t20
04
PLN m 2003 2004
∆
∆
∆
∆
∆
∆
∆ ∆ ∆ ∆
Effective realisation of cost cutting programme
Increase in the segment result a result of favourable
environmental conditions
1) Refining, Wholesale and Logistics
12
Retail segment Improvement results due to cost cutting programme
38
141
187
(20)
(25)
(87)
(23)
49
0
50
100
150
200se
gmen
t res
ult
2003
cost
cut
ting
non-
fuel
pro
duct
sm
argi
n
fuel
s un
it m
argi
ns
volu
mes
recu
ltivat
ion
&re
stru
ctur
ing
Orle
nD
euts
chla
nd
Oth
ers
segm
ent r
esul
t20
04
PLN m 2003 2004
∆
∆
∆ ∆
∆
∆
Keeping favourable trend in non-fuel products sales
Poor Orlen Deutschland result confirms the validity
of current strategy
13
PetrochemicalAlmost double increase in segment result mainly due to petrochemical margins improvement
418
493
147
6326
(28) (29)(98)
(112)(70)
810
0
200
400
600
800
1000
1200se
gmen
t res
ult
2003
petro
chem
ical
mar
gin An
wil
volu
mes
cost
cut
ting
crud
e oi
l ow
nco
nsum
ptio
n
recu
ltivat
ion
&re
stru
ctur
ing
exch
ange
rate
cons
olid
atio
n of
cont
ribut
ion
to B
OP
othe
rs
segm
ent r
esul
t20
04
PLN m2003 2004
∆
∆ ∆
∆
∆ ∆ ∆ 1) Consolidation of contribution to Basell Orlen Polyolefins (BOP)
Anwil took advantage of favourable macroeconomic
conditions Due to the difference in valuation of contribution
to BOP in 2003
15
Macroeconomic assumptions for 2005
Macro assumptions1 2004 2005
• Refinery margin2: 5.6$/b 3.4$/b
• Brent/Ural differential: 4.1$/b 3.5$/b
• Brent crude oil: 38.3$/b 36.0$/b
• Exchange rate PLN/USD2 3.65 3.20
• Exchange rate PLN/EUR2 4.53 4.40
• Fuel consumption in Poland3: +8.1% +3.7%
• Retail fuel consumption4: +6.9% +1.4%
of which: Gasoline 0% 0% Diesel +12% +10%
1) Semi annual assumptions2) Source: please go to slide no 4
3) Own estimates calculated as: 100% gasoline and LPG consumption, and 75% diesel consumption4) Own estimates calculated as: 100% gasoline, diesel and LHO consumption
16
Operating assumptions for 2005
• Wholesale volume sales increase > 4% (gasoline, diesel, Jet, LHO)
• Retail volume sales increase >5% (gasoline, diesel, LPG)
• Petrochemical volume sales increase: >5%
• Crude oil processed 13.1 m tonnes
• Utilization rate1 96%
• Main maintenance shutdowns:
Olefins 60 days; 1H’05Hydrocracking 27 days; 2H’05Diesel oil desulphurisation 20 days; 2H’05Aromatic extraction 70 days; 1H’05
1) In relation to the deep processing capacity 13,5 m tonnes/year
17
Financial assumptions for 2005
Financial assumptions
• EBITDA : > 14% referring to macro environment in 20041
• Personnel cost: below the 2004 level2
• CAPEX PLN 2.3 bn3
• Dividend: recommendation of 30% payout ratio4
Total increase in CAPEX of ca. PLN 800 m 2005 vs. 2004
392 319
722
105
622 639777
267
Refining Wholesale andLogistics
Retail Petrochemical Others
2004 2005
1) Macroeconomic environment conditions as in 2004 :Brent price 38.3$/b, Brent-Ural differential 4.1$/b, refinery margin 5.6 $/b, PLN/EUR 4.52; PLN/USD 3.65
2) Refers to PKN ORLEN 3) Refers to PKN ORLEN Group
4) Refers to PKN ORLEN net profit of 2004
18
Strategic actions in 2005
Internal strengthening of home markets
• Effective implementation of new retail strategy
• Closing the Unipetrol acquisitiontransaction programme
• Preparation and implementation of the integration plan for Unipetrol
• Defining of further actions on German market
• Preparation of new cost cutting programme
• Centralization of procurement
• Implementation of a new management system
• Implementation of Management by Objectives
19
PKN ORLEN share price performance against WSE indexes
0
10
20
30
40
50
60
70
PKN Orlen share pricePKN Orlen share pricePKN ORLEN price performance1Brokers’ commentsBrokers’ commentsAnalysts comments2
Strategy will create shareholder value for shareholders
neutral Strongly agree
yes%
PKN ORLEN strategy
announcement
PKN ORLEN
WIG20
WIG
27 4 11October
18 25 2 8 15November
22 29 6 13December
20 27 3 102005
17 24 31 7February
14 21 28March
32333435363738394041424344454647484950
PKN ORLEN strategy is the best way of equity utilization
“The story coming out from the strategy presentation shows in our opinion determination on internal depolitisation and strengthening and corporate governance. 2009 financial targets are ambitious and exceed our estimations. It supports our opinion than our model and assumption were conservative and realistic”
JPMorgan, 03 February
“The story coming out from the strategy presentation shows in our opinion determination on internal depolitisation and strengthening and corporate governance. 2009 financial targets are ambitious and exceed our estimations. It supports our opinion than our model and assumption were conservative and realistic”
JPMorgan, 03 February
1) Source: PKN ORLEN source based on closing pries2) Source: Based on interview made by Smithfield in 9,10 February 2005
20
Agenda – supporting slides
Supporting slides
Macroeconomic environment
Operating and financial data for Q4 2004
Cost cutting
ORLEN Deutschland
21
Macroeconomic environment in Q4 2004
Exchange rates1 in Q4’04 Refining margin – $7/b average in Q4’04 Increase by 139% 2004/2003
2.5
3.0
3.5
4.0
4.5
5.0PLN/USD '04 PLN/EUR '04
10.04 11.04 12.040
2
4
6
8
10
124Q '2004 4Q 2003
2)3)
10.04 11.04 12.04
Brent $44/b average in Q4 ’04Increase by 49% 2004/2003
Brent/Ural differential $6,1/b average in Q4 ’04Increase by 262% 2004/2003
20
25
30
35
40
45
50
55
60 4Q 2004 4Q 2003
1) Source: NBP (Polish National Bank)2) Calculated as: Products (88.36%) vs. Brent Dtd (100%). Products contain Premium Unl (25.21%), EN590 (23.20%),
Naphtha (16.51%), LHO (15.31%), HSFO (5.44%) and Jet (2.69%)3) As in 1) above with a change: EN590 should be replaced by ULSD (source: CIF NWE quotations, except HSFO FOB ARA
0.0
2.0
4.0
6.0
8.0
10.04Q 2004 4Q 2003
10.04 11.04 12.0410.04 11.04 12.04
22
Macroeconomic environment in Poland
• Strong growth of GDP supports stable economic tendency. Still high unemployment rate – 19.1% (decrease by 0.9 pp y/y)
• New car sales estimated decline to 10% to 318.1 thousand (2004/2003)
• Growth in fuel consumption (gasoline, diesel, LHO) estimated at 6.9%E (2004/2003)
• Decrease in exchange rate of PLN/USD by over 6% from 3.89 to 3.65 (2004/2003)
Real GDP growth
4.5%4.8%
6.1%6.9%
4.7%4.0%3.9%
2.3%
1q '03 2q '03 3q '03 4q '03 1q '04 2q '04 3q '04 4q '04E
Unemployment rate
19.1%18.9%19.4%
20.5%20.0%
19.4%19.7%
20.6%
1q '03 2q '03 3q '03 4q '03 1q '04 2q '04 3q '04 4q '04
23
Profit and loss accountQ4 2004 vs. Q4 2003
IFRS basis, PLN m Q4 '03 Q4 '04
Revenue 6 908 8 313
Cost of sales -5 775 -6 674
Distribution costs -664 -585
Administrative expenses -243 -205
Other1 -74 -251
Profit from operations 152 598
Financial income 43 251
Financial expenses -55 -168
Profit before tax & minor. int. 148 710
Income tax 78 -88
Net profit 219 610
Distribution and GA cost reduction by PLN 117 m
Increase in „oincludes i
relating to environmental readjustment, business
risk and asset
ther costs” tems mainly
revaluation
1) Other operating revenue and costs included
24
Operating highlightsQ4 ‘04 vs. Q4 ‘03
Opearing data1 Q4 '03 Q3 '04 Q4 '04 y/y q/q
Total sales (tt), of w hich 4 112 4 053 4 041 -1,7% -0,3%
l ight product sales 2 2 721 2 743 2 754 1,2% 0,4%
- other refinery products sales (tt) 801 675 618 -22,8% -8,4%
- pet-chem sales (tt) 563 579 569 1,1% -1,7%
- other products sales (tt) 27 56 100 270,4% 78,6%
Retail sales of motor fuels3 971 893 852 -12,3% -4,6%
Processed crude (tt) 3 001 3 256 3 240 8,0% -0,5%
Utilisation 88,9% 96,5% 96,0% +7.1pp -0.5pp
White product yield 81,9% 80,3% 80,0% -1.9pp -0.3pp
Fuel yield 71,0% 67,5% 68,0% -3pp +0.5pp
Headcount4 15 133 14 191 14 296 -5,5% 0,7%
1) Refers to PKN ORLEN2) Gasoline, Diesel, LHO, Jet
3) Gasoline, diesel, LPGProduction data refers to Płock Refinery only, nameplate capacity of 13.5 m t
25
Refining, Wholesale and Logistics 4Q‘04 vs. 4Q ‘03
IFRS basis, PLN m Q4 '03 Q3 '04 Q4 '04 y/y q/q
Revenue 4 372 6 015 5 933 36% -1%
Segment costs - total 4 133 5 245 5 392 30% 3%
Profit 239 770 541 126% -30%
Sales (tt) 2 473 2 524 2 519 2% 0%
⇑ 2% y/yTotal volume sales increase. Visible
shift towards middle distillates.
OthersLPGGasoline
Diesel i LHO
20042003
18%
54%
2%
26%18%
47%
2%
33%
Changes Structure of volume sales
26
RetailQ4 2004 vs. Q4 2003
IFRS basis, PLN m Q4 '03 Q3 '04 Q4 '04 y/y q/q
Revenue 3 174 3 131 2 937 -7% -6%
Segment costs - total 3 212 3 050 3 003 -7% -2%
Profit -38 81 -66 74% -181%
Sales (tt) 1 049 894 852 -19% -5%
Changes Structure of volume sales
Change in structure and volume sales due to change in consolidation
method of German activities since 2004
OthersLPGGasoline
Diesel
20042003
58%
38%
2%53%
37%
3%
7%
27
Petrochemical4Q’ 04 vs. 4Q’03
IFRS basis, PLN m Q4 '03 Q3 '04 Q4 '04 y/y q/q
Revenue 1 164 1 474 1 496 29% 1%
Segment costs - total 1 092 1 258 1 241 14% -1%
Profit 72 216 255 254% 18%
Sales (tt) 563 579 569 1% -2%
Changes
⇑ 1% y/yTotal volume sales increase. Change
due to shift in polyolefin sales to Basell Orlen Polyolefins.
PolyolefinsOlefins
OthersPVCAmmonium nitrate
Glycols
20042003
2%
49%
15%
4%
17%
7%
1%47%
5%
22%
23%
8%
Structure of volume sales
28
Cost cutting programme in 2004
Realisation of cost cutting programme in 2004
167
637800
-113 -40-208
-300
-200
-100
0
100
200
300
400
500
600
700
800
Q4 '04 realisation 2004 realisation 2005 - plan
- Acquisition
- Implementation costs
- Investment and developmentcosts
-403
0
-851
-28
-35
-1121
-612
-113 -208
-
-
-40
PLN m
Savings (sustainable)
Investments and acquisition costs (one off)
1) Of which mainly: restructuring provision PLN 70 m2) Of which mainly: investments PLN 26 m
3) Excluding acquisition costs planned for 2005
29
Positive effect of cost cutting programme on 2004 results
637 m PLN1PLN m
70
112
77
227
378
119
171
120
0
100
200
300
400
500
600
Production Logistics Retail Other Acquisition anddevelopment
Implementationcosts
Other Impact on EBIT
Effects and costs of implementing cost cutting programme in 2004
• Total gross effect in 2004 of PLN 637 m
• Sustainable improvement of PLN 560 m
• Impact on EBIT of PLN 378 m
• Acquisition and development costs due to strategic projects and organizational changes
• Implementation costs mainly include provisions for future restructuring costs
• Others include mainly an increase in average remuneration costs due to annual rises
1) Operating cost cutting compared to 2002 cost base
30
Impact of cost cutting programme on Q4’04 results
2
18
85 1
46
PLN 149 m1PLN m
64
18
41
26
0
20
40
60
80
100
120
140
Production Logistics Retail Others Acquisition anddevelopment
Implementationcosts
Impact on EBIT
1) Cost cutting refers to 2002 cost base2) Planed restructuring provision
31
ORLEN Deutschland Volume sales higher than average for the market
Trends in Q4’04
Retail margin in Q4’04 at 4.1 cent/litre (decrease in Q4‘04 of almost 30% compared to Q3 ‘04). This had material effect on the financial results of Orlen Deutschland in Q4 ’04 and FY 2004.
Average retail margin in 2004 – 5.02 cent/litre
Total volume sales increase by 5.9%STAR stations increase 11.5%ORLEN stations decrease 13.1%
Fuel consumption in Germany 2004 vs. 20031
Gasoline - decrease 3.3%
Diesel - increase 3.1%
1) Based on estimates of MWW Mineralölwirtschaftsverband e.V.
32
ORLEN DeutschlandFinancial highlights 2004 vs. 2003
Financial highlights, PLN m1 2003 y/y 2004
Total assets 1 628 -13% 1 416
Equity 571 -22% 447
PLN m2
Revenue 6 270 38% 8 634
Costs of sale - 5 946 40% - 8 315
Distribution and GA costs - 375 15% - 433
Profit/loss on sales - 51 121% - 114
Other revenue and costs 55 -49% 28
Operating profit/loss 3 - - 86
Net profit/loss 5 - - 52
1) Based on PLN/EUR: 4.71 for 2003 and 4.08 for 2004 2) Based on PLN/EUR: 4.50 for 2003 and 4.52 for 2004