REG - Hellenic Petroleum - Half-year Report
PRESS RELEASE
27 August 2020
Second quarter / first half 2020 financial results
Positive operational performance and high utilization sustained amid significant deterioration of the international oil market due to COVID-19
HELLENIC PETROLEUM Group announced its 2Q20 consolidated financial results, with Adjusted EBITDA coming in at €63m in 2Q20 and €191m in 1H20.
The last few months have been marked by a significant decline in global economic activity, while mobility restriction measures in response to the COVID-19 pandemic have led to a corresponding reduction in fuel demand. The crisis particularly affected the aviation sector with the air traffic reduction in the 2Q20 reaching 81%, while in Greece, tourist arrivals for the 1H20 were down by 77%. The significant drop in global product demand, combined with the agreement by OPEC++ to limit crude oil production resulting in an increase in crude oil prices, led to a decline of refining margins at historically low levels.
An important challenge faced by many refineries in the area, was the continuous operation of the units in an environment of significant challenges and the lack of product storage capacity. Despite the adverse conditions, the Group maintained high operating levels, with the production amounting to 3.7m MT, at the same levels vs 2Q19, utilizing the large storage capacity of its refineries, while, at the same time, proceeded with contango trades, avoiding excessive exposure to price risk and took advantage of the market structure to improve results from international trading.
With regards to the financial results in accordance with IFRS, the gradual recovery of crude oil and product prices, from the lows recorded in the beginning of 2Q, resulted to inventory valuation gains of €26m, partially offsetting the significant loss recorded in the 1Q20 and led Reported EBITDA to €76m.
Strategy and main developments
The gradual lifting of the COVID-19 measures from the middle of 2Q, both in our country and in the Mediterranean region, led to a recovery of economic activity and fuel consumption, which however is still lagging last year levels, especially in sectors such as tourism, air transport and coastal marine. The Group closely monitors developments, with main priority the health and safety of its staff and contractors in its facilities, especially ahead of the turnaround of the Aspropyrgos Refinery and adjusts its operations accordingly.
On 28 August, the full turnaround of the Aspropyrgos Refinery begins with the gradual temporary shut-down of the main units. The program will last 9 weeks, two more than planned, to include additional safety measures for COVID-19. The turnaround, with a total budget of €130m, is the largest similar project in the Group's history. In addition to the maintenance at all units, it includes investments of €60m of projects focused on safety and environment, which will be implemented during the shut-down and are expected to further reduce the refinery's particulate emissions (PMs) by 50%.
Regarding the implementation of the Group's strategy, in relation to the 204MW PV project in Kozani, for which the transaction is expected to be completed in the 3Q20, the technical configuration has been finalised, while the financing is expected to be arranged during 2020.
Regarding the sale procedures of DEPA Commercial and Infrastructure, in which HELLENIC PETROLEUM participates, due diligence procedures are underway.
Finally, the digital transformation program was officially launched with total annual EBITDA benefits expected to exceed €50m in the next three years.
Significant decline in refining margins and recovery of crude oil prices
Crude oil prices reached their lowest levels since 2003, with Brent prices at $30/bbl on average, dropping below $20/bbl during April, a $45/bbl decline since the beginning of the year. However, since May they recorded a gradual recovery, following the OPEC++ countries agreement.
Diesel and gasoline cracks, the main output of the Group's refineries, fell to multi-year lows due to the collapse of demand, especially in the first half of the 2Q20 and the high global inventories. Combined with the strengthening of Urals prices to higher levels than those of Brent, led benchmark refining margins to historically low levels. Specifically, the FCC margins averaged at $0.5/bbl, with Hydrocracking margins at $0.1/bbl.
The €/$ exchange rate remained at the same levels vs the previous quarter, as well as y-o-y, at an average of 1.10 for the 2Q20.
Domestic fuel market demand decline
The domestic ground fuels demand remained at the same level as last year, at 1.6m MT, as the fivefold increase in heating oil market, due to mobility restrictions and low prices, offset the large decline of 24% in motor fuels consumption. The aviation and shipping fuels market recorded an even larger decline (-58%), due to a collapse in aviation fuel demand (-94%) and a reduction in shipping fuels demand of more than 40% in 2Q20.
Strong balance sheet, reduced financing cost
The Group continues its balance sheet management policy for maximization of liquidity and sufficient funding. Discussions are underway for the refinancing of credit lines that mature in the coming months, in order to improve the maturity profile of the Group's debt liabilities.
Financing cost remains at the lowest levels in recent years, down 15% from last year. Net Debt in the 2Q20 stood at €1.8b, with the Gearing Rate at 48%, recording a decrease compared to the previous quarter.
Andreas Shiamishis, Group CEO, commented on results:
"We faced unprecedented conditions during 2Q20, affecting mainly oil products market, as mobility restrictions and air traffic drop led to significantly lower demand.
As expected, our efforts focused mainly on managing this crisis and adjusting our business model to the new reality. Results are positive, as we safely maintained high levels of operation, uninterrupted supply for all markets, while taking advantage of commercial opportunities with positive contribution.
We also continued on our strategy implementation, with progress on the Kozani renewable project, the start of an integrated digital transformation program for the Group, as well as launching new high value products at our network.
Our key objectives in the coming months are the successful implementation of the Aspropyrgos turnaround, as well as the acceleration of our growth strategy."
Key highlights and contribution for each of the main business units in 2Q20 were:
REFINING, SUPPLY & TRADING
- Refining, Supply & Trading 2Q20 Adjusted EBITDA at €40m.
- Production amounted to 3.7m MT, at levels similar to last year, allowing the use of storage capacity for contago transactions, while sales amounted to 3.6m MT (-12%).
- High value-added products yield maintained at high levels, while the crude oil slate was significantly differentiated, due to the IMO operating model of the Aspropyrgos refinery.
PETROCHEMICALS
- Adjusted EBITDA amounted to €16m (-43%) in the 2Q20, mainly due to weak polypropylene benchmark margins.
MARKETING
- In Domestic Marketing, the collapse of the aviation & bunkering market and the of demand drop in ground fuels, due to mobility restrictions, led to a significant decline in sales volumes and profitability with 2Q20 Adjusted EBITDA to €-1m.
- In International Marketing, respectively, a decrease in volumes and contribution was recorded, with the Adjusted EBITDA of the 2Q20 at €10m (-30%).
ASSOCIATED COMPANIES
- DEPA Group contribution to 2Q20 consolidated Net Income (excluding the positive impact of BOTAS case arbitration) came in at €1m.
- Elpedison's EBITDA for the second quarter of 2020 amounted to €11m, significantly improved compared to last year, due to increased production.
HELLENIC PETROLEUM GROUP
Key consolidated financial indicators (prepared in accordance with IFRS) for 2Q/1H20 are shown below:
€ million
2Q19
2Q20
% Δ
1H19
1H20
% Δ
P&L figures
Refining Sales Volumes ('000 ΜΤ)
4,139
3,623
-12%
7,690
7,506
-2%
Sales
2,465
1,067
-57%
4,457
2,986
-33%
EBITDA
187
76
-60%
323
-341
-
Adjusted EBITDA 1
130
63
-52%
252
191
-24%
Net Income
75
5
-93%
121
-336
-
Adjusted Net Income 1
33
-22
-
70
21
-70%
Balance Sheet Items
Capital Employed
3,766
3,658
-3%
Net Debt
1,398
1,752
25%
Debt Gearing (ND/ND+E)
37%
48%
-
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 2020
31 December 2019
ASSETS
Non-current assets
Property, plant and equipment
10
3.270.843
3.297.668
Right-of-use assets
11
236.648
242.934
Intangible assets
12
105.274
104.426
Investments in associates and joint ventures
7
403.365
384.747
Deferred income tax assets
68.991
59.358
Investment in equity instruments
3
906
1.356
Loans, advances and long term assets
44.187
55.438
4.130.214
4.145.927
Current assets
Inventories
13
631.536
1.012.802
Trade and other receivables
14
606.557
748.153
Income tax receivables
91.587
91.391
Assets held for sale
2.209
2.520
Derivative financial instruments
3
5.830
3.474
Cash and cash equivalents
15
1.128.570
1.088.198
2.466.289
2.946.538
Total assets
6.596.503
7.092.465
EQUITY
Share capital and share premium
16
1.020.081
1.020.081
Reserves
17
270.958
276.972
Retained Earnings
552.465
964.972
Equity attributable to equity holders of the parent
1.843.504
2.262.025
Non-controlling interests
63.173
64.548
Total equity
1.906.677
2.326.573
LIABILITIES
Non-current liabilities
Interest bearing loans & borrowings
18
1.231.906
1.610.094
Lease liabilities
169.564
169.357
Deferred income tax liabilities
51.926
213.495
Retirement benefit obligations
183.253
180.398
Provisions
25.485
25.625
Other non-current liabilities
28.102
28.376
1.690.236
2.227.345
Current liabilities
Trade and other payables
19
1.237.498
1.401.732
Income tax payable
7.975
7.147
Interest bearing loans & borrowings
18
1.649.190
1.022.270
Lease liabilities
27.986
30.537
Dividends payable
76.941
76.861
2.999.590
2.538.547
Total liabilities
4.689.826
4.765.892
Total equity and liabilities
6.596.503
7.092.465
Group Consolidated statement of comprehensive income
For the 6 month period ended
For the 3 month period ended
Note
30 June 2020
30 June 2019
30 June 2020
30 June 2019
Revenue from contracts with customers
4
2.986.016
4.456.629
1.067.051
2.465.413
Cost of sales
(3.233.578)
(4.037.224)
(946.485)
(2.232.323)
Gross profit / (loss)
(247.562)
419.405
120.566
233.090
Selling and distribution expenses
(158.445)
(157.434)
(77.599)
(81.887)
Administrative expenses
(67.680)
(65.660)
(33.243)
(31.696)
Exploration and development expenses
(2.337)
(1.712)
(1.033)
(1.262)
Other operating income / (expenses) and other gains / (losses) - net
5
9.589
13.080
3.920
10.164
Operating profit / (loss)
(466.435)
207.679
12.611
128.409
Finance income
2.725
2.956
1.664
1.956
Finance expense
(54.932)
(66.444)
(28.225)
(33.149)
Finance expense - lease finance cost
(5.435)
(4.705)
(2.687)
(2.432)
Currency exchange gain / (loss)
6
4.254
743
1.992
(512)
Share of profit / (loss) of investments in associates and joint ventures
7
18.398
14.445
(27.009)
(3.646)
Profit / (loss) before income tax
(501.425)
154.674
(41.654)
90.626
Income tax credit (expense)
8
165.646
(33.313)
46.571
(15.881)
Profit / (loss) for the period
(335.779)
121.361
4.917
74.745
Profit / (loss) attributable to:
Equity holders of the parent
(335.841)
121.321
3.966
74.205
Non-controlling interests
62
40
951
540
(335.779)
121.361
4.917
74.745
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
17
-
(56)
-
-
Share of other comprehensive income / (loss) of associates
17
217
(41)
441
(41)
Changes in the fair value of equity instruments
17
(348)
700
88
704
Net other comprehensive income / (loss) that will not be reclassified to profit or loss (net of tax):
(131)
603
529
663
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
17
25.077
1.501
-
-
Fair value gains / (losses) on cash flow hedges
17
(31.140)
5.186
19.411
(1.202)
Currency translation differences and other movements
17
145
66
361
36
Net other comprehensive income / (loss) that may be reclassified subsequently to profit or loss (net of tax):
(5.918)
6.753
19.772
(1.166)
Other comprehensive income / (loss) for the period, net of tax
(6.049)
7.356
20.301
(503)
Total comprehensive income / (loss) for the period
(341.828)
128.717
25.218
74.242
Total comprehensive income / (loss) attributable to:
Equity holders of the parent
(341.855)
128.683
24.249
73.695
Non-controlling interests
27
34
969
547
(341.828)
128.717
25.218
74.242
Basic and diluted earnings / (loss) per share
(expressed in Euro per share)9
(1,10)
0,40
0,01
0,24
Group Consolidated statement of cash flows
For the 6 month period ended
Note
30 June 2020
30 June 2019
Cash flows from operating activities
Cash generated from / (used in) operations
20
16.386
228.949
Income tax received / (paid)
(6.533)
(3.052)
Net cash generated from / (used in) operating activities
9.853
225.897
Cash flows from investing activities
Purchase of property, plant and equipment & intangible assets
10,12
(78.583)
(78.262)
Proceeds from disposal of property, plant and equipment & intangible assets
3.382
363
Share capital issue expenses
(30)
(342)
Purchase of subsidiary, net of cash acquired
25
-
(5.341)
Grants received
174
199
Interest received
2.725
2.956
Prepayments for right-of-use assets
(218)
(463)
Dividends received
-
1.347
Proceeds from disposal of investments in equity instruments
-
21
Net cash generated from / (used in) investing activities
(72.550)
(79.522)
Cash flows from financing activities
Interest paid
(47.946)
(63.127)
Dividends paid to shareholders of the Company
(76.381)
(122)
Dividends paid to non-controlling interests
-
(2.246)
Participation of minority shareholders in share capital increase of subsidiary
34
-
Proceeds from borrowings
267.927
10.000
Repayments of borrowings
(21.820)
(27.671)
Payment of lease liabilities - principal
(16.877)
(19.729)
Payment of lease liabilities - interest
(5.435)
Net cash generated from / (used in) financing activities
99.502
(102.895)
Net increase / (decrease) in cash and cash equivalents
36.805
43.480
Cash and cash equivalents at the beginning of the period
15
1.088.198
1.275.159
Exchange gain / (loss) on cash and cash equivalents
3.567
1.049
Net increase / (decrease) in cash and cash equivalents
36.805
43.480
Cash and cash equivalents at end of the period
15
1.128.570
1.319.688
Parent Company Statement of Financial Position
As at
Note
30 June 2020
31 December 2019
ASSETS
Non-current assets
Property, plant and equipment
9
2.672.864
2.693.794
Right-of-use assets
10
28.684
32.084
Intangible assets
11
7.868
8.704
Investments in subsidiaries, associates and joint ventures
1.053.138
1.045.138
Investment in equity instruments
3
530
965
Loans, advances and long-term assets
10.424
22.089
3.773.508
3.802.774
Current assets
Inventories
12
535.205
899.760
Trade and other receivables
13
527.275
791.257
Income tax receivable
87.955
87.616
Derivative financial instruments
3
5.830
3.474
Cash and cash equivalents
14
930.271
888.564
2.086.536
2.670.671
Total assets
5.860.044
6.473.445
EQUITY
Share capital and share premium
15
1.020.081
1.020.081
Reserves
16
276.712
283.106
Retained Earnings
541.403
935.648
Total equity
1.838.196
2.238.835
LIABILITIES
Non-current liabilities
Interest bearing loans and borrowings
17
1.082.618
1.607.838
Lease liabilities
19.755
21.264
Deferred income tax liabilities
21.258
182.065
Retirement benefit obligations
149.537
147.074
Provisions
22.797
22.797
Other non-current liabilities
13.049
13.620
1.309.014
1.994.658
Current liabilities
Trade and other payables
18
1.122.853
1.271.809
Income tax payable
5.767
5.785
Interest bearing loans and borrowings
17
1.499.498
875.576
Lease liabilities
7.775
9.919
Dividends payable
76.941
76.863
2.712.834
2.239.952
Total liabilities
4.021.848
4.234.610
Total equity and liabilities
5.860.044
6.473.445
Parent Company Statement of Comprehensive Income
For the 6month period ended
For the 3month period ended
Note
30 June 2020
30 June 2019
30 June 2020
30 June 2019
Revenue from contracts with customers
4
2.690.940
4.087.415
950.340
2.263.042
Cost of sales
(3.036.594)
(3.826.905)
(862.662)
(2.123.081)
Gross profit / (loss)
(345.654)
260.510
87.678
139.961
Selling and distribution expenses
(51.922)
(49.637)
(24.369)
(25.343)
Administrative expenses
(41.058)
(39.110)
(20.446)
(18.067)
Exploration and development expenses
(1.066)
(52)
(49)
(23)
Other operating income/(expenses) & other gains/(losses)
5
7.282
(485)
2.818
(3.336)
Operating profit / (loss)
(432.418)
171.226
45.632
93.192
Finance income
4.910
5.509
2.690
3.121
Finance expense
(52.066)
(60.605)
(26.674)
(30.038)
Lease finance cost
(692)
(464)
(334)
(245)
Dividend income
-
7.917
-
7.917
Currency exchange gains/(losses)
6
4.316
1.032
2.021
(531)
Profit / (Loss) before income tax
(475.950)
124.615
23.335
73.416
Income tax credit / (expense)
7
158.114
(28.666)
39.472
(13.522)
Profit / (Loss) for the period
(317.836)
95.949
62.807
59.894
Other comprehensive income/(loss):
Other comprehensive income/(loss), that will not be reclassified to profit or loss (net of tax):
Changes in the fair value of equity instruments
16
(331)
651
7
668
(331)
651
7
668
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
(31.140)
5.186
(5.666)
(2.703)
Recycling of losses / (gains) on hedges through comprehensive income
16
25.077
1.501
25.077
1.501
(6.063)
6.687
19.411
(1.202)
Other Comprehensive income/(loss) for the period, net of tax
(6.394)
7.338
19.418
(534)
Total comprehensive income / (loss) for the period
(324.230)
103.287
82.225
59.360
Basic and diluted earnings / (losses) per share
(expressed in Euro per share)8
(1,04)
0,31
0,21
0,20
Parent Company Statement of Cash flows
For the 6month period ended
Note
30 June 2020
30 June 2019
Cash flows from operating activities
Cash generated from / (used in) operations
19
(13.243)
172.120
Income tax received / (paid)
(4.843)
(1.768)
Net cash generated from / (used in) operations
(18.086)
170.352
Cash flows from investing activities
Purchase of property, plant and equipment & intangible assets
9,11
(58.706)
(55.856)
Proceeds from disposal of property, plant and equipment & intangible assets
4.846
1.074
Dividends received
150.000
6.571
Interest received
4.910
5.509
Participation in share capital increase of subsidiaries, associates and joint ventures
(10.000)
(10.014)
Net cash generated from / (used in) investing activities
91.050
(52.716)
Cash flows from financing activities
Interest paid
(49.633)
(66.132)
Dividends paid
(76.385)
(122)
Proceeds from borrowings
265.010
10.067
Repayments of borrowings
(168.278)
(302.423)
Payment of lease liabilities - principal
(4.866)
(3.063)
Payment of lease liabilities - interest
(692)
(464)
Net cash generated from /(used in) financing activities
(34.844)
(362.137)
Net increase / (decrease) in cash and cash equivalents
38.120
(244.501)
Cash and cash equivalents at the beginning of the period
14
888.564
1.070.377
Exchange gains / (losses) on cash and cash equivalents
3.587
1.999
Net increase / (decrease) in cash and cash equivalents
38.120
(244.501)
Cash and cash equivalents at end of the period
14
930.271
827.875
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