REG - Hellenic Petroleum - Half-year Report
PRESS RELEASE
30 August 2018
Second quarter / first half 2018 financial results
Record reported profitability and strong operating results despite weaker refining margins, stronger euro and planned refining maintenance
HELLENIC PETROLEUM Group announced its 2Q/1H18 financial results. IFRS Reported EBITDA came in at €307m in 2Q18 vs €152m in 2Q17, with 1H18 Reported EBITDA at €473m (+25%). 2Q18 IFRS Reported Net Income amounted to €151m (vs €44m in 2Q17) and €225m (+34%) in 1H. Sales Revenues were €2.5bn in 2Q18 and €4.7bn in 1H18, reflecting increased prices and high sales volumes.
Excluding the effect of increasing prices on inventory and other non-recurring items, Adjusted results were as follows:
- 2Q18 Adjusted EBITDA at €187m, vs €228m in 2Q17, with 1H18 at €336m vs €457m.
- 2Q18 Adjusted Net Income at €66m, vs €98m in 2Q17, with 1H18 at €128m vs €224m.
Operating results in 2Q and 1H reflect a weaker than last year industry environment, in terms of benchmark margins and stronger Euro vs USD. Results were also affected by the increased provisions for CO2 emission rights and the scheduled maintenance at Elefsina and Thessaloniki refineries, which was successfully completed in 2Q. These turnarounds already support further improvement in the production units performance and a significant positive impact in 3Q18 operations.
In 1H18, production remained at high levels, amounting to 7.65m MT, while sales volumes reached 8.27m MT, with exports up by 10% to 5m MT, accounting for 60% of total sales. Conversely, sales in the domestic market were lower, mainly on account of lower fuel oil sales to PPC and bunkering.
The Group's financial position strengthened further following the completion of the 2018 refinancing program; funding costs in 1H18 were 14% lower while loans maturity improved significantly as well.
Finally, the formal launch and implementation of a Digital Transformation program, as well as an Energy Efficiency program, are important initiatives aiming to improve our competitive position in the medium and longer term.
Higher crude oil prices and stronger EUR
The resumption of US sanctions on Iran resulted in a further increase in crude oil prices in 2Q18, despite the production output control by OPEC, with Brent averaging $75/bbl in 2Q18, +10% vs 1Q18, and significantly higher vs 2Q17 ($51/bbl).
Macro and political developments in Eurozone and the US led to the strengthening of Euro vs USD, averaging 1.19 vs 1.10 in 2Q17.
Stronger diesel cracks and normalization of FO spreads compared to last year were the key drivers of benchmark refining margins, with Med Hydrocracking higher at $5.7/bbl vs $4.4/bbl in 2Q17, while FCC was lower at $5.4/bbl vs $6.1/bbl.
Increased aviation & bunkering fuels demand
Domestic fuels demand was 2% lower in 2Q18, with total volumes at 1.5m MT, while transport fuels recorded a 0.5% increase. Aviation and bunkering fuels were higher by 11% and 3% respectively, on increased tourism.
Refinancing completed, finance costs reduced further
The Group has successfully completed the refinancing of c.€900m of existing bank debt, further improving its financial position. In particular, the Group proceeded to the following:
- The refinancing of an existing €400m syndicated facility, with participation of Greek and international banks, maturing in 2023
- A new 3-year, $250m revolving credit facility
Furthermore, a €240m syndicated loan, which was put in place as part of the 2016 liability refinancing (Eurobonds), has been fully repaid. As a result of those developments, Group has fully refinanced its funding requirements for the next 2 years, while significantly improving commercial terms.
Net financing costs were €37m in 2Q18, 10% lower vs 2Q17 and 20% lower since the first quarter of 2017; the completion of the 2018 refinancing program is expected to provide additional benefits. Operating cash flows (Adjusted EBITDA - Capex) amounted to €152m in 2Q18, with Net Debt at €1.9bn and Gearing at 43%, lower vs 1H17.
Key developments
In E&P, the JV of Total (40% - operator), ExxonMobil 40% and HELPE 20% was announced on 3 July 2018 as Selected Applicant for two offshore areas West and SW of Crete.
On 20 July 2018, the SPA for the sale of DESFA's 66% stake was signed between HRADF, HELPE and a consortium comprising of Snam S.p.A., Enagás Internacional S.L.U. και Fluxys S.A., for a total cash consideration of €535m, while the transaction is expected to be completed in the next few months.
DEPA and Attiki Gas BV (a subsidiary of Shell Gas BV) signed an agreement on 13 July 2018, for the sale of 49% of the share capital of EPA and EDA Attikis.
Key highlights and contribution for each of the main business units in 2Q/1H18 were:
REFINING, SUPPLY & TRADING
- Refining, Supply & Trading 2Q18 Adjusted EBITDA at €136m (-24%), with 1H18 at €248m (-32%).
- 2Q18 sales and production came in at 4.2m MT (-2%) και 3.7m MT (-5%) respectively, affected by the planned maintenance in Elefsina and Thessaloniki refineries.
- HELPE 2Q18 realised margin amounted to $10.6/bbl, on improved refining performance and crude mix optimisation.
- Middle distillate yield was 50%, with FO at 12%, highlighting the Group's competitive position ahead of the implementation of the new bunkering fuels specs, following the investment in the Elefsina refinery.
PETROCHEMICALS
- Higher sales volume (+27%) had a positive impact on profitability, with 2Q18 Adjusted EBITDA at €27m (+15%), while 1H18 came in at €53m (+4%).
MARKETING
- 2Q18 Marketing Adjusted EBITDA at €25m (-4%), with 1H18 at €38m (-5%)
- Domestic Marketing sales volumes were lower, due to the decrease in PPC volumes, leading 2Q18 Adjusted EBITDA at €12m (-6%).
- International Marketing affected by the reduced wholesale volumes in Bulgaria, with 2Q18 Adjusted EBITDA at €13m (-5%).
ASSOCIATED COMPANIES
- DEPA Group participation to the consolidated Net Income came in at €4m, due to the lower sales volumes (-19%).
- Elpedison's EBITDA at -€2m in 2Q18, mainly due to the shutdown of the Thessaloniki plant, despite improved profitability in Retail business.
Key consolidated financial indicators (prepared in accordance with IFRS) for 2Q/1H18 are shown below:
€ million
2Q17
2Q18
% Δ
1H17
1H18
% Δ
P&L figures
Refining Sales Volumes ('000 ΜΤ)
4,227
4,165
-1%
8,204
8,267
1%
Sales
2,000
2,499
25%
4,066
4,667
15%
EBITDA
152
307
-
378
473
25%
Adjusted EBITDA 1
228
187
-18%
457
336
-26%
Net Income
44
151
-
168
225
34%
Adjusted Net Income 1
98
66
-33%
224
128
-43%
Balance Sheet Items
Capital Employed
4,024
4,431
10%
Net Debt
1,799
1,916
6%
Debt Gearing (ND/ND+E)
45%
43%
-
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 June 2018
31 December 2017
ASSETS
Non-current assets
Property, plant and equipment
3.281.051
3.311.893
Intangible assets
106.135
105.684
Investments in associates and joint ventures
691.632
701.635
Deferred income tax assets
70.773
71.355
Investment in equity instruments
2,3
957
1.857
Loans, advances and long term assets
88.493
89.626
4.239.041
4.282.050
Current assets
Inventories
1.049.322
1.056.393
Trade and other receivables
904.069
791.205
Derivative financial instruments
3
13.396
11.514
Cash, cash equivalents and restricted cash
14
909.323
1.018.913
2.876.110
2.878.025
Total assets
7.115.151
7.160.075
EQUITY
Share capital and share premium
1.020.081
1.020.081
Reserves
270.964
358.056
Retained Earnings
1.161.551
930.522
Capital and reserves attributable to owners of the parent
2.452.596
2.308.659
Non-controlling interests
62.412
62.915
Total equity
2.515.008
2.371.574
LIABILITIES
Non-current liabilities
Borrowings
1.738.995
920.234
Deferred income tax liabilities
174.232
131.611
Retirement benefit obligations
137.942
133.256
Provisions for other liabilities and charges
5.694
6.371
Trade and other payables
26.218
28.700
2.083.081
1.220.172
Current liabilities
Trade and other payables
1.293.905
1.661.457
Income tax payable
60.979
5.883
Borrowings
1.087.218
1.900.269
Dividends payable
74.960
720
2.517.062
3.568.329
Total liabilities
4.600.143
4.788.501
Total equity and liabilities
7.115.151
7.160.075
Group Consolidated statement of comprehensive income
For the 6 month period ended
For the 3 month period ended
Note
30 June 2018
30 June 2017
30 June 2018
30 June 2017
Sales
4
4.666.909
4.065.702
2.498.523
1.999.949
Cost of sales
(4.071.307)
(3.562.812)
(2.126.620)
(1.781.723)
Gross profit
595.602
502.890
371.903
218.226
Selling and distribution expenses
(154.463)
(133.488)
(79.988)
(67.254)
Administrative expenses
(66.393)
(63.044)
(34.264)
(33.150)
Exploration and development expenses
(29)
(208)
97
(79)
Other operating income/(expenses) and other gains/(losses)-net
5
4.646
(14.698)
2.623
(7.366)
Operating profit
379.363
291.452
260.371
110.377
Finance income
1.750
2.438
775
1.174
Finance expense
(77.766)
(90.538)
(38.258)
(42.887)
Finance (expenses) / income - net
0
(76.016)
(88.100)
(37.483)
(41.712)
Currency exchange gains/ (losses)
6
4.528
(6.848)
6.646
(5.994)
Share of profit of investments in associates and joint ventures
15.083
30.659
1.188
42
Profit before income tax
322.958
227.163
230.722
62.712
Income tax expense
8
(97.785)
(59.518)
(79.769)
(18.891)
Profit for the period
225.173
167.645
150.953
43.821
Other comprehensive income/ (loss) :
Items that will not be reclassified to profit or loss:
Actuarial losses on defined benefit pension plans
-
(2.219)
-
(2.219)
Changes in the fair value of equity instruments
2, 16
(442)
2.125
(324)
2.111
Reduction in value of land
-
(1.669)
-
-
(442)
(1.763)
(324)
(108)
Items that may be reclassified subsequently to profit or loss:
Derecognition of (losses) / gains on hedges through comprehensive income
(14.920)
1.979
-
-
Fair value gains /(losses) on cash flow hedges
16.256
(21.431)
(548)
(10.031)
Currency translation differences and other movements
16
(357)
167
(232)
227
979
(19.285)
(780)
(9.804)
Other comprehensive income/(loss) for the period, net of tax
537
(21.048)
(1.104)
(9.912)
Total comprehensive income for the period
225.710
146.597
149.849
33.909
Profit attributable to:
Owners of the parent
223.613
167.452
149.341
43.631
Non-controlling interests
1.560
193
1.612
190
225.173
167.645
150.953
43.821
Total comprehensive income attributable to:
Owners of the parent
224.152
147.178
148.298
33.798
Non-controlling interests
1.558
(581)
1.551
111
225.710
146.597
149.849
33.909
Basic and diluted earnings per share
(expressed in Euro per share)0,73
0,55
0,49
0,14
Group Consolidated statement of cash flows
For the six month period ended
Note
30 June 2018
30 June 2017
Cash flows from operating activities
Cash generated from operations
31.448
138.257
Income tax received/(paid)
2.572
(2.021)
Net cash generated from operating activities
34.020
136.236
Cash flows from investing activities
Purchase of property, plant and equipment & intangible assets
10,11
(60.531)
(75.355)
Proceeds from disposal of property, plant and equipment & intangible assets
40
303
Settlement of consideration of acquisition of further equity interest in subsidiary
24
(16.000)
-
Purchase of subsidiary, net of cash acquired
24
(1.298)
-
Grants received
80
-
Interest received
1.750
2.438
Dividends received
-
318
Investments in associates - net
-
(147)
Proceeds from disposal of investments in equity instruments
266
-
Net cash used in investing activities
(75.693)
(72.443)
Cash flows from financing activities
Interest paid
(69.941)
(89.891)
Dividends paid to shareholders of the Company
(214)
(187)
Dividends paid to non-controlling interests
(2.061)
(2.561)
Movement in restricted cash
14
144.445
11.873
Acquisition of treasury shares
16
(511)
-
Proceeds from borrowings
407.810
207.530
Repayments of borrowings
(407.272)
(417.406)
Net cash generated from/ (used in) financing activities
72.256
(290.642)
Net increase/(decrease) in cash and cash equivalents
30.583
(226.849)
Cash and cash equivalents at the beginning of the period
873.261
924.055
Exchange gains/(losses) on cash and cash equivalents
4.272
(7.762)
Net increase/(decrease) in cash and cash equivalents
30.583
(226.849)
Cash and cash equivalents at end of the period
908.116
689.444
Parent Company Statement of Financial Position
As at
Note
30 June 2018
31 December 2017
ASSETS
Non-current assets
Property, plant and equipment
9
2.693.831
2.719.172
Intangible assets
10
8.226
7.042
Investments in subsidiaries, associates and joint ventures
689.172
671.622
Investment in equity instruments
3
595
1.252
Loans, advances and long-term assets
18.926
19.686
3.410.750
3.418.774
Current assets
Inventories
11
931.465
963.746
Trade and other receivables
12
1.106.951
989.901
Derivative financial instruments
3
13.396
11.514
Cash, cash equivalents and restricted cash
13
736.250
813.251
2.788.062
2.778.412
Total assets
6.198.812
6.197.186
EQUITY
Share capital
14
1.020.081
1.020.081
Reserves
15
273.851
360.694
Retained Earnings
672.060
428.448
Total equity
1.965.992
1.809.223
LIABILITIES
Non-current liabilities
Borrowings
16
1.732.683
909.579
Deferred income tax liabilities
136.189
89.959
Retirement benefit obligations
108.133
104.331
Provisions for other liabilities and charges
2.291
6.058
Trade and other payables
15.061
15.569
1.994.357
1.125.496
Current liabilities
Trade and other payables
17
1.186.635
1.554.027
Current income tax liabilities
55.385
2.769
Borrowings
16
921.483
1.704.951
Dividends payable
74.960
720
2.238.463
3.262.467
Total liabilities
4.232.820
4.387.963
Total equity and liabilities
6.198.812
6.197.186
Parent Company Statement of Comprehensive Income
For the 6 month period ended
For the 3 month period ended
Note
30 June 2018
30 June 2017
30 June 2018
30 June 2017
Sales
4
4.322.650
3.724.054
2.312.015
1.819.580
Cost of sales
(3.877.253)
(3.369.930)
(2.021.461)
(1.685.854)
Gross profit
445.397
354.124
290.554
133.726
Selling and distribution expenses
(48.132)
(31.771)
(25.894)
(16.203)
Administrative expenses
(40.142)
(37.148)
(20.585)
(19.331)
Exploration and development expenses
(162)
(66)
(141)
(28)
Other operating income/(expenses) & other gains/(losses)-net
5
1.044
(21.069)
425
(11.902)
Operating profit
358.005
264.070
244.359
86.262
Finance income
4.614
6.295
2.127
3.187
Finance expense
(71.584)
(81.561)
(35.165)
(38.747)
Dividend income
35.083
33.724
35.083
33.724
Currency exchange losses
6
4.243
(7.024)
6.744
(6.303)
Profit before income tax
330.361
215.504
253.148
78.123
Income tax expense
7
(96.634)
(54.403)
(79.236)
(12.989)
Profit for the period
233.727
161.101
173.912
65.134
Other comprehensive income / (loss):
Items that will not be reclassified to profit or loss:
Acruarial losses on defined benefit pension plans
15
-
(1.775)
-
(1.775)
Changes in the fair value of equity instruments
15
(468)
2.130
(345)
2.130
(468)
355
(345)
355
Items that may be reclassified subsequently to profit or loss:
Fair value gains / (losses) on cash flow hedges
15
16.256
(21.431)
14.372
(12.010)
Derecognition of gains/(losses) on hedges through comprehensive income
15
(14.920)
1.979
(14.920)
1.979
1.336
(19.452)
(548)
(10.031)
Other Comprehensive income / (loss) for the period, net of tax
868
(19.097)
(893)
(9.676)
Total comprehensive income for the period
234.595
142.004
173.019
55.458
Basic and diluted earnings per share
(expressed in Euro per share)8
0,76
0,53
0,57
0,21
Parent Company Statement of Cash flows
For the six-month period ended
Note
30 June 2018
30 June 2017
Cash flows from operating activities
Cash generated from operations
13.860
143.812
Income tax received / (paid)
4.184
(15)
Net cash generated from operations
18.044
143.797
Cash flows from investing activities
Purchase of property, plant and equipment & intangible assets
9,10
(41.992)
(62.446)
Dividends received
-
318
Interest received
4.614
6.295
Settlement of consideration of acquisition of further equity interest in subsidiary
23
(16.000)
-
Participation in share capital increase of subsidiaries & associates
23
(15.853)
(415)
Net cash used in investing activities
(69.231)
(56.248)
Cash flows from financing activities
Interest paid
(65.164)
(100.811)
Dividends paid
(214)
(187)
Movement in restricted cash
13
144.445
11.873
Acquisition of treasury stock
15
(511)
-
Proceeds from borrowings
442.698
229.634
Repayments of borrowings
(406.866)
(406.038)
Net cash generated from / (used in) financing activities
114.388
(265.529)
Net decrease in cash and cash equivalents
63.201
(177.980)
Cash and cash equivalents at the beginning of the period
13
667.599
731.258
Exchange losses on cash and cash equivalents
4.243
(7.024)
Net decrease in cash and cash equivalents
63.201
(177.980)
Cash and cash equivalents at end of the period
735.043
546.254
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