REG - Hellenic Petroleum - 1st Quarter Results
PRESS RELEASE
31 May 2018
First quarter 2018 financial results
Strong 1Q18 profitability, with increased production and sales, despite weaker refining environment; record high exports.
HELLENIC PETROLEUM Group announced financial results, according to IFRS, with 1Q18 Adjusted EBITDA at €149m and Adjusted Net Income at €62m, recording a decrease vs 1Q17.
Weaker benchmark margins and USD vs the Euro were the key drivers for the results. In this environment, the Group's refineries achieved record high utilisation, resulting in increased production and sales to 3.9m MT (+2%) and 4.1m (+3%) respectively, as well as record high exports at 2.5m MT, exceeding 60% of total sales. The strong operating performance of the refineries and crude mix optimisation kept performance vs benchmarks and the overall HELPE realised margin at high levels.
1Q18 Reported Net Income amounted to €74m, vs €124m in 1Q17, as increased oil prices y-o-y had a positive impact on inventory valuation of €19m.
Increasing crude oil prices at the highest level since 2014, stronger EUR
Geopolitical developments and the implementation of OPEC's decision to reduce crude oil production led oil prices at the highest level since 4Q14, with Brent averaging $67/bbl in 1Q18, increased significantly (+22%) vs 1Q17 ($55/bbl).
Macro developments and monetary policy in Eurozone and the US resulted in the further strengthening of the EUR, with EUR/USD averaging at 1.23, +16% yoy.
The significant increase in crude oil prices negatively affected Med benchmark margins, with the exception of high middle distillates yield refineries, such as Elefsina. Med FCC benchmark margins averaged at $4.8/bbl (-19%), with Hydrocracking at $5.3/bbl (+5%).
Increased auto-fuels demand
Auto-fuels demand recorded an overall increase of 4%, while the reduction in HGO consumption due to mild weather conditions led to a decline in total domestic fuels demand of 6% for the first quarter of 2018, with total consumption at 1.7m MT. The Bunkering and Aviation demand also fell by 5%.
Reduced gross debt and finance expenses, completion of refinancing
The refinancing of the Group's loans, totaling circa €900m, will be completed in 1H18. More precisely, the refinancing of a €400m syndicated loan facility, maturing in 2023, has been agreed with the participation of both Greek and foreign banks, while a revolving credit facility of €300m, maturing in 2021, was signed. The interest rates have been reduced significantly, with upsizing on loan amounts committed on both facilities. In addition, a three-year $250m revolving credit facility has been signed, improving balance sheet FX risk management, while an existing syndicated loan facility of €240m, which was arranged in 2016 for Eurobond refinancing, has been fully repaid. As a result, the Group notably improved its debt profile and sourcing, with a significant part of its funding covered by committed medium-term loans. This, combined with a reduction in total borrowing, which as at 31 March 2018 came in at €2.7bln, led finance expenses in 1Q18 to €39m, 17% lower yoy.
Net debt at €2bln, with debt gearing at 45%, on similar levels vs last year.
Key strategic developments
In E&P, HELLENIC PETROLEUM continues its efforts to create a diversified portfolio through alternative partnership structures in Greece. In this context, as part of a JV, it submitted an offer for exploration and production in two offshore areas West and SW of Crete (Total 40% - operator, ExxonMobil 40%, ELPE 20%) and one in Ionian sea (Repsol 50% - operator, ELPE 50%)
Regarding the sales process for 66% of DESFA, which accounts for 35% of the Group's participation and 31% of the Greek State, the sellers accepted an offer of €535m from a JV of European companies Snam SpA, Enagas and Fluxys, while an EGM of HELLENIC PETROLEUM, held on 7 May 2018, approved the transaction, which is currently subject to TAIPED, as well as competent regulatory authorities' approval processes in Greece and the EU.
DEPA, as part of its restructuring plan, announced on 16 May 2017, the sale of 51% of the retail gas company EPA Thessaloniki to ENI for a cash consideration of €57m.
Key highlights and contribution for each of the main business units in 1Q18 were:
REFINING, SUPPLY & TRADING
- Refining, Supply & Trading 1Q18 Adjusted EBITDA at €112m (-40%).
- The Group's refinery production was 3.9m MT, with sales exceeding 4m MT, and exports recording a 15% increase vs last year, to a historical high of 2.5m MT, accounting for 62% of total sales.
- Crude mix optimization and availability of all refining units sustained realised margin at high levels, offsetting part of the reduction in trading contribution due to the higher exports.
PETROCHEMICALS
- 1Q18 Adjusted EBITDA at €26m, with sales volumes and operating profitability at similar with 1Q17 levels.
MARKETING
- 1Q18 Marketing Adjusted EBITDA at €14m (+3%).
- Domestic Marketing 1Q18 Adjusted EBITDA at €3m, similar to 1Q17 results, on better commercial management, despite weaker domestic demand.
- International Marketing sustained its profitability, with Adjusted EBITDA at €11m (+6%), on improved profitability in the Serbian and Bulgarian markets despite the decline in wholesale sales volumes.
ASSOCIATED COMPANIES
- DEPA Group contribution to consolidated Net Income came in at €17m, due to a drop in gas demand from power generators as well as domestic and commercial customers due to milder weather conditions than last year.
- Similarly, Elpedison's EBITDA at €5m in 1Q18, due to the reduced demand, while the final approval and activation of the flexible compensation mechanism for independent power generators is still pending.
Key consolidated financial indicators (prepared in accordance with IFRS) for 1Q18 are shown below:
€ million
1Q17
1Q18
% Δ
P&L figures
Refining Sales Volumes ('000 ΜΤ)
3,977
4,102
+3%
Sales
2,066
2,168
+5%
EBITDA
226
166
-26%
Adjusted EBITDA 1
229
149
-35%
Net Income
124
74
-40%
Adjusted Net Income 1
126
62
-51%
Balance Sheet Items
Capital Employed
4,039
4,419
+9%
Net Debt
1,783
1,973
+11%
Debt Gearing (ND/ND+E)
44%
45%
-
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: vtsaitas@helpe.gr
Group Consolidated statement of financial position
As at
Note
31 March 2018
31 December 2017
ASSETS
Non-current assets
Property, plant and equipment
10
3.289.964
3.311.893
Intangible assets
11
107.515
105.684
Investments in associates and joint ventures
715.530
701.635
Deferred income tax assets
73.191
71.355
Investment in equity instruments
2
1.403
1.857
Loans, advances and long term assets
91.199
89.626
4.278.802
4.282.050
Current assets
Inventories
12
1.041.517
1.056.393
Trade and other receivables
2,13
849.445
791.205
Derivative financial instruments
3
15.847
11.514
Cash, cash equivalents and restricted cash
14
682.795
1.018.913
2.589.604
2.878.025
Total assets
6.868.406
7.160.075
EQUITY
Share capital
15
1.020.081
1.020.081
Reserves
16
360.030
358.056
Retained Earnings
2
1.002.765
930.522
Capital and reserves attributable to owners of the parent
2.382.876
2.308.659
Non-controlling interests
62.860
62.915
Total equity
2.445.736
2.371.574
LIABILITIES
Non-current liabilities
Borrowings
17
1.117.488
920.234
Deferred income tax liabilities
156.578
131.611
Retirement benefit obligations
133.856
131.256
Provisions for other liabilities and charges
6.733
8.371
Trade and other payables
28.090
28.700
1.442.745
1.220.172
Current liabilities
Trade and other payables
18
1.433.982
1.661.457
Current income tax liabilities
5.398
5.883
Borrowings
17
1.539.828
1.900.269
Dividends payable
717
720
2.979.925
3.568.329
Total liabilities
4.422.670
4.788.501
Total equity and liabilities
6.868.406
7.160.075
Group Consolidated statement of comprehensive income
For the three month period ended
Note
31 March 2018
31 March 2017
Sales
4
2.168.386
2.065.753
Cost of sales
(1.944.687)
(1.781.089)
Gross profit
223.699
284.664
Selling and distribution expenses
(74.475)
(66.234)
Administrative expenses
(32.129)
(29.894)
Exploration and development expenses
(126)
(129)
Other operating income/(expenses) and other gains/(losses)-net
5
2.023
(7.332)
Operating profit
118.992
181.075
Finance income
975
1.264
Finance expense
(39.508)
(47.651)
Currency exchange losses
6
(2.118)
(854)
Share of profit of investments in associates and joint ventures
7
13.895
30.617
Profit before income tax
92.236
164.451
Income tax expense
8
(18.015)
(40.627)
Profit for the period
74.221
123.824
Other comprehensive income/ (loss) :
Items that will not be reclassified to profit or loss:
Changes in the fair value of equity instruments
2, 16
(147)
14
Items that may be reclassified subsequently to profit or loss:
Fair value gains /(losses) on cash flow hedges
16
1.884
(9.421)
Currency translation differences and other movements
16
(124)
(60)
Other comprehensive (loss) / income for the period, net of tax
1.613
(9.467)
Total comprehensive income for the period
75.834
114.357
Profit attributable to:
Owners of the parent
74.272
123.821
Non-controlling interests
(51)
3
74.221
123.824
Total comprehensive income attributable to:
Owners of the parent
75.889
115.146
Non-controlling interests
(55)
(789)
75.834
114.357
Basic and diluted earnings per share
(expressed in Euro per share)9
0,24
0,41
Group Consolidated statement of cash flows
For the three month period ended
Note
31 March 2018
31 March 2017
Cash flows from operating activities
Cash generated (used in)/ from operations
19
(98.029)
40.600
Income tax received/(paid)
4.492
(1.559)
Net cash generated from / (used in) operating activities
(93.537)
39.041
Cash flows from investing activities
Purchase of property, plant and equipment & intangible assets
10,1
(25.452)
(18.022)
Proceeds from disposal of property, plant and equipment & intangible assets
20
255
Acquisition of further equity interest in subsidiary
(16.000)
-
Purchase of subsidiary, net of cash acquired
(1.298)
-
Grants received
80
-
Interest received
975
1.264
Proceeds from disposal of investments in equity instruments
257
-
Net cash used in investing activities
(41.418)
(16.503)
Cash flows from financing activities
Interest paid
(32.663)
(41.477)
Dividends paid to shareholders of the Company
(3)
(187)
Movement in restricted cash
14
144.445
11.873
Acquisition of treasury shares
16
(249)
-
Proceeds from borrowings
-
45.502
Repayments of borrowings
(165.734)
(25.943)
Net cash used in financing activities
(54.204)
(10.232)
Net decrease in cash and cash equivalents
(189.159)
12.306
Cash and cash equivalents at the beginning of the period
14
873.261
924.055
Exchange losses on cash and cash equivalents
(2.514)
(917)
Net decrease in cash and cash equivalents
(189.159)
12.306
Cash and cash equivalents at end of the period
14
681.588
935.444
Parent Company Statement of Financial Position
As at
Note
31 March 2018
31 December 2017
ASSETS
Non-current assets
Property, plant and equipment
9
2.701.763
2.719.172
Intangible assets
10
8.725
7.042
Investments in subsidiaries, associates and joint ventures
672.472
671.622
Investment in equity instruments
3
1.079
1.252
Loans, advances and long-term assets
20.170
19.686
3.404.209
3.418.774
Current assets
Inventories
11
948.317
963.746
Trade and other receivables
12
1.039.840
989.901
Derivative financial instruments
3
15.847
11.514
Cash, cash equivalents and restricted cash
13
519.476
813.251
2.523.480
2.778.412
Total assets
5.927.689
6.197.186
EQUITY
Share capital
14
1.020.081
1.020.081
Reserves
15
362.732
360.694
Retained Earnings
486.830
428.448
Total equity
1.869.643
1.809.223
LIABILITIES
Non-current liabilities
Borrowings
16
1.113.878
909.579
Deferred income tax liabilities
114.659
89.959
Retirement benefit obligations
106.487
104.331
Provisions for other liabilities and charges
3.814
6.058
Trade and other payables
14.919
15.569
1.353.757
1.125.496
Current liabilities
Trade and other payables
17
1.355.203
1.554.027
Current income tax liabilities
1.584
2.769
Borrowings
16
1.346.785
1.704.951
Dividends payable
717
720
2.704.289
3.262.467
Total liabilities
4.058.046
4.387.963
Total equity and liabilities
5.927.689
6.197.186
Parent Company Statement of Comprehensive Income
For the three-month period ended
Note
31 March 2018
31 March 2017
Sales
2.010.635
1.904.474
Cost of sales
(1.855.792)
(1.684.076)
Gross profit
154.843
220.398
Selling and distribution expenses
(22.238)
(15.568)
Administrative expenses
(19.557)
(17.817)
Exploration and development expenses
(21)
(38)
Other operating income/(expenses) & other gains/(losses)-net
5
619
(9.167)
Operating profit
113.646
177.808
Finance income
2.487
3.108
Finance expense
(36.419)
(42.814)
Currency exchange (losses) / gains
6
(2.501)
(721)
Profit before income tax
77.213
137.381
Income tax expense
7
(17.398)
(41.414)
Profit for the period
59.815
95.967
Other comprehensive income / (loss):
Items that will not be reclassified to profit or loss:
Changes in the fair value of equity instruments
15
(123)
-
Items that may be reclassified subsequently to profit or loss:
Fair value gains / (losses) on cash flow hedges
15
1.884
(9.421)
1.884
(9.421)
Other Comprehensive income / (loss) for the period, net of tax
1.761
(9.421)
Total comprehensive income for the period
61.576
86.546
Basic and diluted earnings per share
(expressed in Euro per share)8
0,20
0,31
Parent Company Statement of Cash flows
For the three-month period ended
Note
31 March 2018
31 March 2017
Cash flows from operating activities
Cash (used in) / generated from operations
18
(81.202)
95.323
Income tax paid
5.768
-
Net cash (used in) / generated from operations
(75.434)
95.323
Cash flows from investing activities
Purchase of property, plant and equipment & intangible assets
9,10
(17.401)
(14.663)
Interest received
2.487
3.108
Acquisition of minority interest in subsidiary
(16.000)
-
Participation in share capital increase of affiliated companies
(850)
-
Net cash used in investing activities
(31.764)
(11.555)
Cash flows from financing activities
Interest paid
(29.957)
(31.450)
Dividends paid
(3)
(187)
Movement in restricted cash
13
144.445
11.873
Acquisition of treasury stock
15
(249)
-
Proceeds from borrowings
7.700
34.000
Repayments of borrowings
(161.567)
(43.494)
Net cash used in financing activities
(39.631)
(29.258)
Net (decrease) / increase in cash and cash equivalents
(146.829)
54.510
Cash and cash equivalents at the beginning of the period
13
667.599
731.258
Exchange losses on cash and cash equivalents
(2.501)
(721)
Net (decrease) / increase in cash and cash equivalents
(146.829)
54.510
Cash and cash equivalents at end of the period
13
518.269
785.047
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