REG - Hellenic Petroleum - 3rd Quarter Results
PRESS RELEASE
5 November 2020
Third quarter / 9M 2020 financial results
Maintaining positive operating results maintained, despite most adverse refining environment on record and COVID-19 impact; successful completion of Aspropyrgos refinery turnaround
HELLENIC PETROLEUM announced its 3Q20 consolidated financial results, with Adjusted EBITDA coming in at €66m in 3Q20 and €256m in 9M20.
In terms of 3Q20 business environment, the significant decline in refining margins to negative levels on average, combined with the lower domestic market demand and the stronger euro, led to the worse international refining backdrop historically. Furthermore, the requirement for additional health & safety measures in facilities due to the pandemic was a key challenge. Increased product inventory levels, as well as reduced output and availability of crude oil combined with slow demand recovery, drove benchmark refining margins to negative levels, the lowest ever on record. The protracted low margin environment leads to adverse economics for a number of refineries globally, as well as the Med region, with some of them ceasing operations temporarily or permanently, or converting to other activities. In terms of the domestic market, auto-fuel demand recovered from 2Q20 lows, however remains materially below last year's levels, especially in aviation and bunkering.
In these exceptionally challenging conditions and despite the 5-year full turnaround of Aspropyrgos, our refineries maintained high utilization levels. Total sales amounted to 3.7m MT (-9%), due to the domestic market drop, being sharper in aviation and marine fuels, while exports were up, as inventory management and realization of contango trades contributed to smooth market supply, with significant economic benefits.
With regards to the financial results in accordance with IFRS, the drop in crude oil and product prices towards the end of the quarter resulted to inventory valuation losses of €42m, with Reported EBITDA at €19m.
Strategy and main developments
Benchmark refining margins recorded small recovery in 4Q20, as high product inventory levels gradually clear, mainly due to lower refining production. In any case, international margins remain significantly lower vs the average of previous years, while demand recovery is expected to be negatively affected by the new lockdown measures in Europe.
Aspropyrgos Refinery has successfully and safely completed a shut-down for its 5-year full turnaround, with a total cost of more than €130m, focused on environmental and safety upgrade projects.
On 12 October 2020, HPF plc, a fully owned subsidiary of HELLENIC PETROLEUM, completed a €99.9m retap on its existing Oct '24 notes, through private placement, with a 2.4% yield. EBRD contributed 75% of the issue proceeds that will be used for the development and construction of the 204MW PV project at Kozani, North Greece. It is noted that the acquisition was completed on 1 October and construction is scheduled to start in November.
Furthermore, regarding the sale procedures of DEPA Commercial and Infrastructure, in which HELLENIC PETROLEUM participates, due diligence procedures are in process, with binding bids scheduled for March 2021.
Benchmark refining margins at the lowest ever
Crude oil prices averaged $43/bbl, significantly lower than last year, having recovered from the multi-year lows recorded in 2Q20, following the OPEC++ countries agreement for the control of crude oil production and exports. This resolution had a negative impact on the availability and pricing of high sulphur grades, affecting European refineries.
Main product cracks remained at particularly low levels, with diesel dropping further to all-time lows, as the collapse in aviation fuel demand led to an adjustment of yields, increasing diesel output and resulting in surplus inventories. Furthermore, Urals pricing higher than Brent, combined with the above, led benchmark refining margins to historically low levels. FCC margins averaged at $0/bbl, with Hydrocracking margins at $-0.9/bbl.
The euro strengthened vs the US dollar to the highest levels of the last two years, with €/$ exchange rate averaging at 1.17 for the 3Q20.
Domestic fuel market demand decline
Domestic demand was affected mainly by the reduced economic activity in sectors like tourism, where the pandemic and measures to control it had a negative impact. More specifically, domestic ground fuels demand was 8% lower y-o-y, at 1.5m MT. The decline was larger in the aviation and shipping fuels market (-49%), with aviation fuel demand recovering q-o-q, however remaining materially lower vs 3Q19 (-63%).
Strong balance sheet, reduced financing cost
The Group continued to improve its capital structure, despite the particularly adverse environment, drawing additional liquidity, from both international capital markets as well as the Greek banking system, with very favorable terms. During 4Q20, the Group expects to conclude negotiations for the refinancing of €900m of credit facilities maturing in the next 6 months, further improving its debt maturity profile.
Financing cost is 14% lower y-o-y in 9M20, at €78m, the lowest of the last few years.
Andreas Shiamishis, Group CEO, commented on results:
"During 3Q20, we faced the most adverse industry environment in history. Already many refineries in the region have reduced utilization, while some are curtailing or terminating activities. Despite the partial recovery of the world economy vs 2Q20, the fuels market remains at significantly lower levels, as the pandemic affects tourism and travel in general. Operating environment remains challenging, with the health and safety of our employees, as well as the uninterrupted operation of the supply chain, being top priorities.
In this environment, we managed to sustain our production at high levels, increasing our exports, while taking advantage of the international market opportunities, in order to mitigate, to the extent possible, the negative impact.
The safe and successful completion of the turnaround program of our largest refinery in Aspropyrgos, which was a demanding project, due to the very large scale of works in a short time frame and the additional health and safety challenges due to COVID-19, was particularly important for us. On behalf of the Management, I would like to congratulate all the colleagues that were involved. The full restart of the refinery in the coming days will result in improved financials and environmental performance.
In terms of strategy implementation, we took important steps in relation to the large RES project in Kozani. We completed the acquisition and secured funding with especially favorable terms and the tangible support of international capital markets and the EBRD.
At the same time, we continued and increased our contribution towards facing the pandemic, especially in terms of supporting the National Health System, with notable increase of the testing capacity, as well as strengthening the ICU system.
The environment is expected to remain difficult in the coming months, with expectations for a substantial improvement after mid-2021. The fragile recovery in the oil market is not enough to return to previous levels and our objective remains to effectively manage the Covid-19 impact on our activities and performance in the best possible way. At the same time, despite the structural issues in the energy market, we intend to take advantage of this period to implement our growth plans to cleaner energy, as well as to accelerate the digital transformation in our activities, in order to improve the Group's position in the future."
Key highlights and contribution for each of the main business units in 3Q20 were:
REFINING, SUPPLY & TRADING
- Refining, Supply & Trading 3Q20 Adjusted EBITDA at €17m.
- Production amounted to 3.3m MT (-14%), due to the Aspropyrgos shut-down. Sales amounted to 3.7m MT, with exports up 10%, at 2.2m MT, partly offsetting domestic market decline.
- Crude mix was driven mainly by the new IMO operating model at Aspropyrgos, while white products yields exceeded 90%.
PETROCHEMICALS
- Adjusted EBITDA amounted to €15m (-24%) in the 3Q20, due to reduced propylene output at Aspropyrgos during maintenance, as well as weak PP benchmark margins.
MARKETING
- In Domestic Marketing, the significant drop in aviation and bunkering fuels and the demand decline due to lower tourism in the country, led sales volumes and profitability lower, with 3Q20 Adjusted EBITDA at €17m (-50%).
- In International Marketing, good operating performance resulted in limiting the impact of the pandemic in terms of volumes and contribution, with 3Q20 Adjusted EBITDA at €17m (-16%).
ASSOCIATED COMPANIES
- DEPA Group contribution to 3Q20 consolidated Net Income amounted to €4m.
- Elpedison's EBITDA for the 3Q20 came in at €15m, with 9M20 at €43m, a notable increase vs last year, due to supply mix optimisation.
HELLENIC PETROLEUM GROUP
Key consolidated financial indicators (prepared in accordance with IFRS) for 3Q/9M20 are shown below:
€ million
3Q19
3Q20
% Δ
9M19
9M20
% Δ
P&L figures
Refining Sales Volumes ('000 ΜΤ)
4,037
3,667
-9%
11,727
11,173
-5%
Sales
2,348
1,474
-37%
6,805
4,460
-34%
EBITDA
141
19
-86%
464
-321
-
Adjusted EBITDA 1
201
66
-67%
453
256
-44%
Net Income
46
-43
-
167
-379
-
Adjusted Net Income 1
90
-8
-
160
13
-92%
Balance Sheet Items
Capital Employed
3,916
3,989
2%
Net Debt
1,509
2,125
41%
Debt Gearing (ND/ND+E)
39%
53%
-
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
30 September 2020
31 December 2019
ASSETS
Non-current assets
Property, plant and equipment
3.288.304
3.297.668
Right-of-use assets
229.732
242.934
Intangible assets
104.771
104.426
Investments in associates and joint ventures
7
400.389
384.747
Deferred income tax assets
66.038
59.358
Investment in equity instruments
3
820
1.356
Loans, advances and long term assets
41.694
55.438
4.131.748
4.145.927
Current assets
Inventories
740.090
1.012.802
Trade and other receivables
568.839
748.153
Income tax receivables
92.172
91.391
Assets held for sale
2.292
2.520
Derivative financial instruments
3
4.936
3.474
Cash and cash equivalents
828.333
1.088.198
2.236.662
2.946.538
Total assets
6.368.410
7.092.465
EQUITY
Share capital and share premium
1.020.081
1.020.081
Reserves
271.679
276.972
Retained Earnings
507.313
964.972
Equity attributable to equity holders of the parent
1.799.073
2.262.025
Non-controlling interests
64.950
64.548
Total equity
1.864.023
2.326.573
LIABILITIES
Non-current liabilities
Interest bearing loans & borrowings
18
1.232.937
1.610.094
Lease liabilities
167.143
169.357
Deferred income tax liabilities
30.340
213.495
Retirement benefit obligations
188.499
180.398
Provisions
25.413
25.625
Other non-current liabilities
28.106
28.376
1.672.438
2.227.345
Current liabilities
Trade and other payables
1.078.832
1.401.732
Derivative financial instruments
1.806
-
Income tax payable
2.133
7.147
Interest bearing loans & borrowings
18
1.721.163
1.022.270
Lease liabilities
26.738
30.537
Dividends payable
1.277
76.861
2.831.949
2.538.547
Total liabilities
4.504.387
4.765.892
Total equity and liabilities
6.368.410
7.092.465
Group Consolidated statement of comprehensive income
For the nine month period ended
For the three month period ended
Note
30 September 2020
30 September 2019
30 September 2020
30 September 2019
Revenue from contracts with customers
4
4.459.739
6.804.877
1.473.723
2.348.248
Cost of sales
(4.637.613)
(6.186.569)
(1.404.035)
(2.149.345)
Gross profit / (loss)
(177.874)
618.308
69.688
198.903
Selling and distribution expenses
(235.075)
(238.828)
(76.630)
(81.394)
Administrative expenses
(101.141)
(102.154)
(33.461)
(36.494)
Exploration and development expenses
(4.160)
(624)
(1.823)
1.087
Other operating income / (expenses) and other gains / (losses) - net
5
9.378
14.545
(211)
1.465
Operating profit /(loss)
(508.872)
291.247
(42.437)
83.567
Finance income
3.904
4.427
1.179
1.471
Finance expense
(81.433)
(94.185)
(26.501)
(27.741)
Finance expense - lease finance cost
(8.108)
(7.320)
(2.672)
(2.615)
Currency exchange gain / (loss)
6
10.831
833
6.577
90
Share of profit / (loss) of investments in associates and joint ventures
23.870
15.012
5.472
567
Profit / (loss) before income tax
(559.808)
210.014
(58.382)
55.339
Income tax credit / (expense)
8
180.666
(42.577)
15.020
(9.264)
Profit / (loss) for the period
(379.142)
167.437
(43.362)
46.075
Profit / (loss) attributable to:
Equity holders of the parent
(380.972)
165.690
(45.131)
44.367
Non-controlling interests
1.830
1.747
1.769
1.708
(379.142)
167.437
(43.362)
46.075
Other comprehensive income / (loss):
Other comprehensive income / (loss) that will not be reclassified to profit or loss (net of tax):
Actuarial gains / (losses) on defined benefit pension plans
(2.953)
(6.494)
(2.953)
(6.438)
Share of other comprehensive income / (loss) of associates
288
(41)
71
-
Changes in the fair value of equity instruments
17
(411)
626
(62)
(74)
Net other comprehensive income / (loss) that will not be reclassified to profit or loss (net of tax):
(3.076)
(5.909)
(2.944)
(6.512)
Other comprehensive income / (loss) that may be reclassified subsequently to profit or loss (net of tax):
Recycling of (gains) / losses on hedges through comprehensive income
25.077
1.501
-
-
Fair value gains / (losses) on cash flow hedges
(27.398)
4.149
3.742
(1.037)
Currency translation differences and other movements
17
78
288
(66)
222
Net other comprehensive income / (loss) that may be reclassified subsequently to profit or loss (net of tax):
(2.243)
5.938
3.676
(815)
Other comprehensive income / (loss) for the period, net of tax
(5.319)
29
732
(7.327)
Total comprehensive income / (loss) for the period
(384.461)
167.466
(42.630)
38.748
Total comprehensive income / (loss) attributable to:
Equity holders of the parent
(386.265)
165.699
(44.401)
37.021
Non-controlling interests
1.804
1.767
1.771
1.727
(384.461)
167.466
(42.630)
38.748
Basic and diluted earnings / (losses) per share
(expressed in Euro per share)(1,25)
0,54
(0,15)
0,15
Group Consolidated statement of cash flows
For the nine month period ended
Note
30 September 2020
30 September 2019
Cash flows from operating activities
Cash generated from / (used in) operations
(176.897)
398.880
Income tax received / (paid)
(30.054)
(63.874)
Net cash generated from / (used in) operating activities
(206.952)
335.006
Cash flows from investing activities
Purchase of property, plant and equipment & intangible assets
10,12
(146.244)
(135.382)
Proceeds from disposal of property, plant and equipment & intangible assets
1.827
1.048
Share capital issue expenses
(51)
(341)
Participation in share capital increase of associates
-
(9.950)
Purchase of subsidiary, net of cash acquired
25
-
(5.341)
Grants received
230
274
Interest received
3.904
4.427
Prepayments for right-of-use assets
0
-
Dividends received
8.519
30.490
Proceeds from disposal of assets held for sale
-
1.334
Proceeds from disposal of investments in equity instruments
-
18
Net cash generated from / (used in) investing activities
(131.816)
(113.423)
Cash flows from financing activities
Interest paid
(62.643)
(87.938)
Dividends paid to shareholders of the Company
(152.622)
(150.077)
Dividends paid to non-controlling interests
(1.060)
(2.246)
Participation of minority shareholders in share capital increase of subsidiary
34
34
Proceeds from borrowings
349.201
12.808
Repayments of borrowings
(22.047)
(346.543)
Payment of lease liabilities - principal, net
(24.123)
(22.244)
Payment of lease liabilities - interest
(8.108)
(7.320)
Net cash generated from / (used in) financing activities
78.633
(603.526)
Net increase / (decrease) in cash and cash equivalents
(260.134)
(381.944)
Cash and cash equivalents at the beginning of the period
1.088.198
1.275.159
Exchange gain / (loss) on cash and cash equivalents
269
9.448
Net increase / (decrease) in cash and cash equivalents
(260.134)
(381.944)
Cash and cash equivalents at end of the period
828.333
902.663
Parent Company Statement of Financial Position
As at
Note
30 September 2020
31 December 2019
ASSETS
Non-current assets
Property, plant and equipment
9
2.693.143
2.693.794
Right-of-use assets
10
27.173
32.084
Intangible assets
11
7.540
8.704
Investments in subsidiaries, associates and joint ventures
1.052.661
1.045.138
Investment in equity instruments
3
428
965
Loans, advances and long-term assets
9.971
22.089
3.790.916
3.802.774
Current assets
Inventories
12
644.103
899.760
Trade and other receivables
13
499.727
791.257
Income tax receivable
89.766
87.616
Derivative financial instruments
3
4.936
3.474
Cash and cash equivalents
14
543.400
888.564
1.781.932
2.670.671
Total assets
5.572.848
6.473.445
EQUITY
Share capital and share premium
15
1.020.081
1.020.081
Reserves
16
277.438
283.106
Retained Earnings
479.490
935.648
Total equity
1.777.009
2.238.835
LIABILITIES
Non-current liabilities
Interest bearing loans and borrowings
17
1.061.123
1.607.838
Lease liabilities
19.060
21.264
Deferred income tax liabilities
85
182.065
Retirement benefit obligations
154.795
147.074
Provisions
22.651
22.797
Other non-current liabilities
12.955
13.620
1.270.669
1.994.658
Current liabilities
Trade and other payables
18
950.754
1.271.809
Derivative financial instruments
3
1.806
-
Income tax payable
450
5.785
Interest bearing loans and borrowings
17
1.564.126
875.576
Lease liabilities
6.757
9.919
Dividends payable
1.277
76.863
2.525.170
2.239.952
Total liabilities
3.795.839
4.234.610
Total equity and liabilities
5.572.848
6.473.445
Parent Company Statement of Comprehensive Income
For the nine-month period ended
For the three-month period ended
Note
30 September 2020
30 September 2019
30 September 2020
30 September 2019
Revenue from contracts with customers
4
3.952.006
6.172.545
1.261.066
2.085.130
Cost of sales
(4.327.683)
(5.814.449)
(1.291.089)
(1.987.544)
Gross profit / (loss)
(375.677)
358.096
(30.023)
97.586
Selling and distribution expenses
(71.764)
(75.320)
(19.842)
(25.683)
Administrative expenses
(61.283)
(62.763)
(20.225)
(23.653)
Exploration and development expenses
(1.094)
(79)
(28)
(27)
Other operating income/(expenses) & other gains/(losses)
5
35
1.215
(7.248)
1.700
Operating profit / (loss)
(509.783)
221.149
(77.366)
49.923
Finance income
7.150
8.141
2.240
2.632
Finance expense
(76.920)
(86.707)
(24.854)
(26.102)
Lease finance cost
(1.003)
(669)
(311)
(205)
Dividend income
11.533
38.416
11.533
30.499
Currency exchange gains/(losses)
6
10.885
1.175
6.569
143
Profit / (Loss) before income tax
(558.138)
181.505
(82.189)
56.890
Income tax credit / (expense)
7
178.389
(34.706)
20.275
(6.040)
Profit / (Loss) for the period
(379.749)
146.799
(61.914)
50.850
Other comprehensive income/(loss):
Other comprehensive income/(loss), that will not be reclassified to profit or loss (net of tax):
Acruarial losses on defined benefit pension plans
16
(2.938)
(6.188)
(2.938)
(6.188)
Changes in the fair value of equity instruments
16
(409)
540
(78)
(111)
(3.347)
(5.648)
(3.016)
(6.299)
Other comprehensive income/(loss), that may be reclassified subsequently to profit or loss (net of tax):
Fair value gains / (losses) on cash flow hedges
16
(27.398)
4.149
3.742
(1.037)
Recycling of losses / (gains) on hedges through comprehensive income
16
25.077
1.501
-
-
(2.321)
5.650
3.742
(1.037)
Other Comprehensive income/(loss) for the period, net of tax
(5.668)
2
726
(7.336)
Total comprehensive income / (loss) for the period
(385.417)
146.801
(61.188)
43.514
Basic and diluted earnings / (losses) per share
(expressed in Euro per share)8
(1,24)
0,48
(0,20)
0,17
Parent Company Statement of Cash flows
For the nine-month period ended
Note
30 September 2020
30 September 2019
Cash flows from operating activities
Cash generated from / (used in) operations
(292.121)
296.793
Income tax received / (paid)
(22.768)
(59.292)
Net cash generated from / (used in) operations
(314.889)
237.501
Cash flows from investing activities
Purchase of property, plant and equipment & intangible assets
9,11
(116.474)
(92.176)
Proceeds from disposal of property, plant and equipment & intangible assets
4.846
1.074
Dividends received
161.042
38.416
Interest received
7.150
8.141
Participation in share capital increase of subsidiaries, associates and joint ventures
(11.618)
(22.702)
Net cash generated from / (used in) investing activities
44.946
(67.247)
Cash flows from financing activities
Interest paid
(62.874)
(80.672)
Dividends paid
(152.622)
(150.078)
Proceeds from borrowings
338.521
11.577
Repayments of borrowings
(190.279)
(306.946)
Payment of lease liabilities - principal
(7.394)
(4.697)
Payment of lease liabilities - interest
(1.003)
(669)
Net cash generated from /(used in) financing activities
(75.651)
(531.485)
Net increase / (decrease) in cash and cash equivalents
(345.594)
(361.231)
Cash and cash equivalents at the beginning of the period
14
888.564
1.070.377
Exchange gains / (losses) on cash and cash equivalents
430
9.266
Net increase / (decrease) in cash and cash equivalents
(345.594)
(361.231)
Cash and cash equivalents at end of the period
543.400
718.412
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