REG - Hellenic Petroleum - Annual Financial Report <Origin Href="QuoteRef">HEPr.AT</Origin>

HELLENiQ ENERGY Holdings SAAnnouncement

22/02/2018 16:40

RNS Number : 7046F
Hellenic Petroleum S.A.
22 February 2018
PRESS RELEASE
22 February 2018
 Fourth quarter / Full year 2017 financial results
Record high profitability on operational performance and positive refining environment; Lower finance costs and FY17 dividend proposal of 0.40/share
HELLENIC PETROLEUM Group announced its 4Q/FY17 results, according to IFRS. FY17 Adjusted EBITDA came in at 834m (+14%), the highest on record, with Group refineries improving utilisation and operations and achieving a record over-performance vs benchmark margins. Furthermore, the Group took advantage of the opportunities in the Med crude oil pricing structure, thus benefiting from significant savings in feedstock costs. Average benchmark refining margins remained at high levels, with the Group system margin increasing by $0.5/bbl, while the USD was slightly lower vs the euro.
The significant reduction of the Group's financing costs by 18%, and the increased profitability of the affiliated companies, mainly due to DESFA's performance, resulted to even larger improvement at the Adjusted Net Income level, which amounted to 372m (+40%).
Marketing and Petrochemicals divisions maintained their contribution at high levels, recording sales growth and improved performance. Adjusted EBITDA for Marketing was at 107m, with Petrochemicals at 95m for FY17.
In terms of FY17 Reported results, according to IFRS, the recovery of crude oil prices had a positive impact on inventory valuation, leading the IFRS Reported Net Income at 384m (+17%), as well as on Net Sales, which combined with sales volumes increase, amounted to 8bln (+20%), net of taxes. 
With regards to 4Q17 results, the decline in benchmark margins and the appreciation of euro against the dollar, led Adjusted EBITDA to 170m (-21%) and Adjusted Net Income to 59m (-28%). Financing costs during the quarter recorded a further reduction for the 5th consecutive quarter, and at 37 million are down 28% vs 4Q16.
Considering financial results as well as 2018 outlook, the Board of Directors proposed to the General Meeting the distribution of a final dividend of 0.25 per share, which corresponds to a FY17 DPS of 0.40 (2016: FY 0.20 / share)
Higher crude oil prices and weaker benchmark margins in 4Q17
The recovery in crude oil prices continued in the fourth quarter, as OPEC announced the extension of the agreement for the control of crude oil production and exports. In 4Q17, Brent crude oil averaged $62/bbl, the highest level in the last two years, while in FY17 Brent was $10/bbl higher vs 2016, at $55/bbl.
The increase in crude oil prices, combined with the products supply, had a negative impact on Med benchmark refining margins, with FCC at $4.6/bbl (-15%), and Hydrocracking at $5.3/bbl (-3%). In FY17, margins were stronger with FCC averaging $5.9/bbl (+17%) and Hydrocracking $5.2/bbl (+ 4%).
Euro strengthened against US dollar in 4Q17, with the exchange EUR/USD rate averaging 1.18, while FY17 stood at 1.13.
Increased aviation and bunkering demand
In 2017 domestic fuels demand was 6.9MT, 1.9% lower compared to 2016. Aviation fuel consumption reached 1.15MT (+11%), growing for 5th consecutive year, while bunkering fuel demand increased by 18% to 2.8MT.
Improved operating cash flow, finance cost reduction, increased investments
In 2017, Net Finance costs amounted to 165m, the lowest levels in the last 5 years, following the refinancing of bonds and bank loans, and the reduction of Gross Debt by 600m over the last two years. Furthermore, the refinancing of loans maturing in 2018 is in progress, with a significant positive impact on the average costand duration of debt, as well as improved risk management.
2017 operating cash flows (Adjusted EBITDA - CAPEX) amounted to 625m, recording a small increase vs FY16, despite higher capital expenditure (209m), due to heavier refinery maintenance and competitiveness improvement projects. Net Debt came in at 1.8bln, at similar levels with the previous quarters.
Key strategic developments
In Exploration and Production, the planned exploration works on the concession of the Patraikis Gulf continues. Furthermore, the ratification of the Lease Agreements, for the onshore areas of Arta - Preveza and NW Peloponnese, as well as for offshore Block 2 by the Greek Parliament, is expected in the next few days, with the initial exploration works being scheduled to begin immediately after.
Regarding the participation in DESFA, the process for the sale of 66%, accounting for 35% of the Group's participation and 31% of the Greek State, is in progress. The two international JVs that qualified to participate in the final phase of the process, submitted binding offers on 16 February 2018, with ELPE and TAIPED currently evaluating the offers. In 2017, the participation of the DEPA Group in the consolidated financial results of Hellenic Petroleum amounted to 46m, with DESFA having a significant contribution.
Furthermore in 4Q17, the Group completed the acquisition of the 37% of the share capital of ELPET Balkaniki (owner of 80% and 81.5% of the share capital of the VARDAX pipeline and OKTA respectively), which it did not own, as well as 12 EKO Bulgaria stations, which were operating under long-term lease agreement.
Key highlights and contribution for each of the main business units in 4Q/FY17 were:
REFINING, SUPPLY & TRADING
- Refining, Supply & Trading 4Q17 Adjusted EBITDA at 130m (-23%), with FY17 at 639m (+19%)
- The smooth operation of the refineries led to an increase in production and sales to 3.9m MT (+5%) and 4.1m MT (+7%) respectively in 4Q17,
- Total production and sales for 2017 came in at 15m MT (+1%) and 16.1m MT (+4%) respectively, with middle distillates yield at 48% and respective gasoline at 22%.
- Crude mix optimisation and improved operating performance led to a significant over-performance vs benchmark margins, offsetting the impact of the unplanned shut-down of the hydrogen unit at Elefsina refinery.
PETROCHEMICALS
- A small decline in polypropylene sales and stronger euro led to a decrease in the operating profitability, with 4Q17 Adjusted EBITDA at 20m (-20%).
MARKETING
- FY17 Marketing Adjusted EBITDA was 107m (+6%) 
- Domestic Marketing volumes were higher by 3% to 1m MT for another quarter, with 4Q17 Adjusted EBITDA at 9m (-1%).
- International Marketing reported an increase in operating profitability, with 4Q17 Adjusted EBITDA at 13m (+10%).
ASSOCIATED COMPANIES
- DEPA Group participation to consolidated Net Income came in at -1m, due to the increased provisions and lower sales volume.
- Elpedison EBITDA amounted to 14m (+19%), despite the delay in resuming the gas-fired generation flexibility remuneration mechanism.
Key consolidated financial indicators (prepared in accordance with IFRS) for 4Q/FY17 are shown below:
 million
4Q16
4Q17
% 
FY16
FY17
% 
P&L figures






Refining Sales Volumes ('000 )
3,802
4,077
7%
15,471
16,069
4%
Net Sales
1,860
2,106
13%
6,613
7,995
21%
EBITDA
303
243
-20%
841
851
1%
Adjusted EBITDA 1
215
170
-21%
731
834
14%
Net Income
145
111
-24%
329
384
17%
Adjusted Net Income 1
82
59
-28%
265
372
40%
Balance Sheet Items






Capital Employed



3,903
4,173
7%
Net Debt



1,759
1,800
2%
Leverage



45%
43%

Notes:
1. Calculated as Reported adjusted for inventory effects and other non-operating items.
Note to Editors:
Founded in 1998, Hellenic Petroleum is one of the leading energy groups in South East Europe, with activities spanning across the energy value chain andpresence in 6 countries.
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 December 2017
31 December 2016
ASSETS



Non-current assets



Property, plant and equipment
6
3.311.893
3.290.806
Intangible assets
7
105.684
108.294
Investments in associates and joint ventures
8
701.635
689.607
Deferred income tax assets
17
71.355
100.973
Available-for-sale financial assets
3
1.857
1.626
Loans, advances and long term assets
9
89.626
91.131


4.282.050
4.282.437
Current assets



Inventories
10
1.056.393
941.281
Trade and other receivables
11
791.205
868.331
Derivative financial instruments
21
11.514
15.192
Cash, cash equivalents and restricted cash
12
1.018.913
1.081.580


2.878.025
2.906.384
Total assets

7.160.075
7.188.821




EQUITY



Share capital
13
1.020.081
1.020.081
Reserves
14
358.056
469.788
Retained Earnings

930.522
549.891
Capital and reserves attributable to owners of the parent

2.308.659
2.039.760




Non-controlling interests

62.915
101.875




Total equity

2.371.574
2.141.635




LIABILITIES



Non- current liabilities



Borrowings
16
920.234
1.456.204
Deferred income tax liabilities
17
131.611
42.736
Retirement benefit obligations
18
131.256
110.912
Provisions for other liabilities and charges
19
8.371
9.306
Trade and other payables
20
28.700
259.644


1.220.172
1.878.802
Current liabilities



Trade and other payables
15
1.661.457
1.777.909
Current income tax liabilities

5.883
3.534
Borrowings
16
1.900.269
1.386.299
Dividends payable

720
642


3.568.329
3.168.384
Total liabilities

4.788.501
5.047.186
Total equity and liabilities

7.160.075
7.188.821
Group Consolidated statement of comprehensive income


For the year ended

Note
31 December 2017
31 December 2016




Sales
5
7.994.690
6.613.253
Cost of sales

(6.907.198)
(5.606.125)
Gross profit

1.087.492
1.007.128
Selling and distribution expenses

(276.182)
(279.912)
Administrative expenses

(133.427)
(128.828)
Exploration and development expenses
23
(212)
(2.167)
Other operating (expenses) / income and other gains/( losses) - net
24
(15.888)
35.550
Operating profit

661.783
631.771
Finance income
25
4.600
5.129
Finance expense
25
(169.653)
(205.909)
Currency exchange (losses) / gains
26
(8.173)
20.773
Share of profit of investments in associates and joint ventures
8
31.228
13.907
Profit before income tax

519.785
465.671
Income tax expense
27
(135.862)
(136.936)
Profit for the year

383.923
328.735
Other comprehensive income:



Items that will not be reclassified to profit or loss:



Actuarial losses on defined benefit pension plans

(9.589)
(7.776)
Share of other comprehensive income of associates
14
-
(869)


(9.589)
(8.645)
Items that may be reclassified subsequently to profit or loss:



Changes in the fair value on available-for-sale financial assets
14
6
(6.267)
Transfer of available-for-sale reserve to operating profit
14, 24
-
6.414
Reduction in value of land
14
(1.669)
-
Fair value (losses)/gains on cash flow hedges
14
(4.590)
15.862
Derecognition of gains on hedges through comprehensive income
14
1.979
19.642
Currency translation differences and other movements

752
(1.076)


(3.522)
34.575
Other comprehensive (loss)/income for the year, net of tax

(13.111)
25.930
Total comprehensive income for the year

370.812
354.665
Profit attributable to:



 Owners of the parent

381.372
329.760
 Non-controlling interests

2.551
(1.025)


383.923
328.735
Total comprehensive income/(loss) attributable to:



 Owners of the parent

368.989
355.819
 Non-controlling interests

1.823
(1.154)


370.812
354.665
Basic and diluted earnings per share
(expressed in Euro per share)
28
1,25
1,08
Group Consolidated statement of cash flows


For the year ended

Note
31 December 2017
31 December 2016
Cash flows from operating activities



Cash generated from/(used in) operations
30
453.311
(317.366)
Income tax paid

(10.375)
(16.159)
Net cash generated (used in) / from operating activities

442.936
(333.525)




Cash flows from investing activities



Purchase of property, plant and equipment & intangible assets
6,7
(208.732)
(125.719)
Acquisition of subsidiary, net of cash acquired

-
(350)
Proceeds from disposal of property, plant and equipment & intangible assets
30
2.168
Grants received

110
1.431
Interest received
25
4.600
5.129
Dividends received
8
19.346
1.139
Participation in share capital increase of associates
8
(147)
-
Proceeds from disposal of available for sale financial assets

8
-
Net cash used in investing activities

(184.785)
(116.202)




Cash flows from financing activities



Interest paid

(160.830)
(190.479)
Dividends paid to shareholders of the Company

(104.115)
(473)
Dividends paid to non-controlling interests

(2.561)
(2.925)
Movement in restricted cash
12
11.873
(1.969)
Acquisition of treasury shares

(10.245)
-
Participation of minority shareholders in share capital increase of subsidiary

76
-
Proceeds from borrowings

288.000
507.732
Repayments of borrowings

(322.622)
(900.799)
Net cash used in financing activities

(300.424)
(588.913)




Net decrease in cash and cash equivalents

(42.273)
(1.038.640)




Cash and cash equivalents at the beginning of the year
12
924.055
1.952.808
Exchange gains / (losses) on cash and cash equivalents

(8.521)
9.887
Net decrease in cash and cash equivalents

(42.273)
(1.038.640)
Cash and cash equivalents at end of the year
12
873.261
924.055
Parent Company Statement of Financial Position


As at

Note
31 December 2017
31 December 2016
ASSETS



Non-current assets



Property, plant and equipment
6
2.719.172
2.706.681
Intangible assets
7
7.042
6.490
Investments in subsidiaries, associates and joint ventures
8
671.622
655.265
Deferred income tax assets
17
-
38.839
Available-for-sale financial assets
3
1.252
1.017
Loans, advances and long-term assets
9
19.686
35.109


3.418.774
3.443.401




Current assets



Inventories
10
963.746
851.423
Trade and other receivables
11
989.901
1.036.420
Derivative financial instruments
21
11.514
15.192
Cash, cash equivalents and restricted cash
12
813.251
888.783


2.778.412
2.791.818
Total assets

6.197.186
6.235.219




EQUITY



Share capital
13
1.020.081
1.020.081
Reserves
14
360.694
469.754
Retained Earnings

428.448
100.315
Total equity

1.809.223
1.590.150




LIABILITIES



Non-current liabilities



Borrowings
16
909.579
1.460.281
Deferred income tax liabilities
17
89.959
-
Retirement benefit obligations
18
104.331
88.521
Provisions for other liabilities and charges
19
6.058
6.829
Trade and other payables
20
15.569
246.405


1.125.496
1.802.036
Current liabilities



Trade and other payables
15
1.554.027
1.691.973
Current income tax liabilities

2.769
-
Borrowings
16
1.704.951
1.150.418
Dividends payable

720
642


3.262.467
2.843.033
Total liabilities

4.387.963
4.645.069
Total equity and liabilities

6.197.186
6.235.219
Parent Company Statement of Comprehensive Income


For the year ended

Note
31 December 2017
31 December 2016




Sales

7.233.600
5.925.776




Cost of sales

(6.475.455)
(5.224.611)
Gross profit

758.145
701.165




Selling and distribution expenses

(59.045)
(68.559)




Administrative expenses

(81.825)
(81.516)




Exploration and development expenses
23
(119)
(283)




Other operating (expenses)/income - net
24
(19.735)
31.081
Operating profit

597.421
581.888




Finance (expenses)/income - net
25
(140.271)
(175.474)




Dividend income

33.724
38.348




Currency exchange (losses)/gains
26
(8.483)
21.462
Profit before income tax

482.391
466.224




Income tax
27
(136.400)
(131.901)
Profit for the year

345.991
334.323
Other comprehensive income/(loss):



Items that will not be reclassified to profit or loss:



Actuarial losses on defined benefit pension plans
14
(7.100)
(4.568)


(7.100)
(4.568)
Items that may be reclassified subsequently to profit or loss:



Changes in the fair value on available-for-sale financial assets
14
-
(6.414)
Transfer of available-for-sale reserve to operating profit
14
-
6.414
Fair value gains / (losses) on cash flow hedges
14
(4.590)
15.862
Derecognition of gains/(losses) on hedges through comprehensive income
14
1.979
19.642
Other Comprehensive (loss)/income for the year, net of tax

(9.711)
30.936
Total comprehensive income for the period

336.280
365.259
Basic and diluted earnings per share
(expressed in Euro per share)
28
1,13
1,09
Parent Company Statement of Cash flows


For the year ended

Note
31 December 2017
31 December 2016
Cash flows from operating activities



Cash generated from / (used in) operations
30
307.783
(395.355)
Income tax paid

(20)
(1.279)
Net cash generated from / (used in) operating activities

307.763
(396.634)




Cash flows from investing activities



Purchase of property, plant and equipment & intangible assets

(149.930)
(91.161)
Proceeds from disposal of property, plant and equipment & intangible assets

-
82
Dividends received

33.724
38.348
Interest received
25
12.834
13.541
Participation in share capital increase of subsidiaries & associates

1.584
(9.711)
Net cash used in investing activities

(101.788)
(48.901)




Cash flows from financing activities



Interest paid

(162.494)
(180.425)
Dividends paid

(104.116)
(474)
Movement in restricted cash
12
11.873
(1.969)
Acquisition of treasury stock
13
(10.245)
-
Repayments of borrowings

(279.775)
(839.789)
Proceeds from borrowings

283.606
505.968
Net cash used in financing activities

(261.151)
(516.689)




Net decrease in cash and cash equivalents

(55.176)
(962.224)




Cash and cash equivalents at the beginning of the year
12
731.258
1.683.600
Exchange (losses) / gains on cash and cash equivalents

(8.483)
9.882
Net decrease in cash and cash equivalents

(55.176)
(962.224)
Cash and cash equivalents at the end of the year
12
667.599
731.258

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