REG - Hellenic Petroleum - Half-year Report
26 August 2021
Second quarter / first half 2021 financial results
Improved operating results in 2Q21, due to increased Petchems and Retail sales contribution; Record refined product exports
HELLENIC PETROLEUM Group announced its 2Q21/1H21 financial results, with Adjusted EBITDA up 26% at €79m and the corresponding Adjusted Net Income amounting to €10m. Results are also improved vs LY and 1Q21, as gradual market recovery leads to marginally improved international environment.
The improvement in operating profitability came mainly from the record high Petchems results, where reduced international polypropylene supply led to very strong benchmark margins. Fuels Marketing also reported improved performance, as the auto-fuel market recovers with the gradual lifting of transportation restrictions.
Refining, Supply & Trading delivered a positive operating performance, with record exports, which in 2Q21 accounted for 67% of total sales. These partially offset the negative impact of Med crude oil pricing, the maintenance slow-down at the Elefsina flexicoker due to the power grid issues last February. During the quarter, results were also impacted by higher CO2 emission cost and power tariffs increase.
The contribution of ELPEDISON, as well as of DEPA Commercial and Infrastructure companies was positive, mainly due to improved conditions in the power market, as well as the realisation of commercial opportunities in natural gas.
The recovery of international oil prices for yet another quarter, had a positive impact on the inventory valuation gains, with Reported EBITDA at €133m, while the IFRS Reported Net Income amounted to €54m, with 1H21 at €206m. It is noted that the accounting treatment of CO2 emissions under IFRS does not provide for the quarterly accrual, resulting to an uneven reporting and deferral of cost from the first half of the year to the second. This impact is adjusted for comparability purposes in Adjusted Results, in order to better reflect underlying quarterly business performance.
Strategy update - Main developments
During 2Q21, the AGM approved the required amendments in the Articles of Association and elected the new Board of Directors, with 4 independent members, applying a new fit and proper policy. In 3Q21 the company complied with the new law 4706/2020, putting in place an improved corporate governance framework.
On July 29, 2021, the HELLENIC PETROLEUM BoD initiated the process of changing the Group corporate structure, with the spin-off of Refining, Supply & Trading and Petrochemicals activities and establishment of a holding company, which will be implemented in the coming months, subject to required approvals. The new structure supports implementation of our strategy, including growth in clean energy activities.
Regarding the 204 MW PV park in Kozani, the works continue according to plan, with c. 65% of the construction already completed, targeting operation in 1Q22. In 2Q21 Kozani project represented 45% of the Group's investments.
With reference to the sale process of DEPA Infrastructure (65% HRADF - 35% HELPE), in which the Group participates as a joint seller with the HRADF, binding offers were submitted by EP INVESTMENT ADVISORS and ITALGAS SpA and the assessment of the bids is in progress. It is expected that with this process will be completed soon, with the announcement of the preferred investor.
In E&P, the Group notified the Hellenic Hydrocarbon Resources Management Company about its intention not to proceed with further exploration activities in the onshore areas of "Arta-Preveza" and "NW Peloponnese". The Group is assessing and focusing on higher prospect areas and reviewing its plans with its international partners.
In 2Q21, the Group completed the strategic cooperation agreement with VLPG Plant Ltd. for LPG logistics and distribution in the Cypriot market, through the Group's participation in VLPG Plant Ltd.
Furthermore, significant progress has been recorded in upgrade and expansion works of our international retail network, which considering the impact of the crisis, has led to a material improvement of the Group's international business performance.
Andreas Shiamishis, Group CEO, commented on results:
"During the second quarter, we saw the first signs of recovery in our core business, with the gradual lifting of restrictive measures, however the environment remained particularly weak, as evidenced by benchmark margins close to historic lows.
Our results are improved both y-o-y and q-o-q in almost all our activities. We took advantage of the opportunities presented in the international market, with record fuel exports, while Petrochemicals reported exceptional contribution for another quarter, benefitting from the high international margins and vertical integration with refining. Our Marketing subsidiaries, both in Greece and internationally, increased profitability, with market shares improvement and new products launch. At the same time, our Power & Gas Associates also improved performance.
While we remain optimistic for the coming quarters, the short-term outlook is highly dependent on pandemic developments, which affect the macroeconomic environment and fuels demand.
Regarding the implementation of our strategy, we took important steps over the last months in the context of "VISION 2025", through the alignment of corporate governance with the regulatory framework, the process of changing the Group corporate structure, as well as number of other projects for operational improvements. The approval by our shareholders of a new strategic direction is timely and extremely important, as it will enable improvement of existing activities, but also growth in a second pillar of cleaner energy, improving the Group's position in a changing environment.".
Crude oil prices recovery continued, while refining margins remained weak. Further increase in CO2 emission allowance prices
International crude oil prices continued to recover in the second quarter, as global demand increased further, with a deficit in supply, due to the OPEC+ crude oil production cut agreement; Brent prices averaged at $69/bbl in 2Q21.
The US Dollar/Euro exchange rate remained at the same levels vs 1Q21, at 1.20 on average, compared to 1.10 in the corresponding period last year, negatively affecting export-oriented sectors such as refining, whose margins are USD driven and denominated.
CO2 emission allowance prices continued to increase significantly, amounting to €52/tonne, 132% higher compared to 2Q20; combined with the reduction of allowances for European manufacturing in phase 4 (2021-2025) of the European Emissions Trading Scheme, has a negative impact on European refining competitiveness.
The gradual lifting of travel restrictions led to an additional increase in gasoline cracks, while the weak aviation recovery kept middle distillates cracks close to multi-year lows, while the Brent-Urals spread averaged at $1.7/bbl. The above led to a slight improvement in the benchmark margins, which remained low, with FCC margins at $2.3/bbl and Hydrocracking at $0.1/bbl.
Recovery of domestic market auto-fuel demand
The gradual lifting of mobility restrictions led to 20% higher auto-fuels demand, compared to 2Q20, while June consumption approached 2019 levels. Total demand decreased by 9% compared to last year to 1.4m MT, due to the particularly high demand for heating oil in 2Q20, which normalized this year. In the duty-free market, bunkering fuel demand increased to 582k MT (+17%), while aviation fuel consumption, although increased compared to last year, remains 72% lower vs 2Q19.
Reduced financing cost
Financing cost continued to decline, improving by 8% in 2Q21, to €24m, following the refinancing of €900m credit facilities, which took place in the 4Q20. The Group will proceed with the update of its financial strategy and capital structure, in the context of "Vision 2025" including the potential of a new bond issue in the coming period, while it will proceed with the repayment of its €200m October '21 bonds.
Net Debt in the 2Q21 came in at €1.8bn, at the same levels as last year.
Key highlights and contribution for each of the main business units in 2Q21 were:
REFINING, SUPPLY & TRADING
- Refining, Supply & Trading 2Q21 Adjusted EBITDA at €12m.
- Production at 3.7m MT (+1%), while sales increased by +11% at 4.1m MT, with exports at 2.7m MT (+20%) accounting for 67% of total.
PETROCHEMICALS
- Petrochemicals achieved its highest profitability for the second consecutive quarter, capturing strong PP margins, with Adjusted EBITDA amounting to €45m (+181%) in 2Q21 and €81m in total in 1H21 (+125%).
MARKETING
- In domestic marketing, auto-fuels demand recovery, improved market shares and the high premium fuels penetration led 2Q21 Adjusted EBITDA to €9m.
- In international marketing, the results were mainly affected by the fuel demand recovery in retail due to the gradual lifting of lockdown restrictions, with 2Q21 Adjusted EBITDA at €15m (+47%).
ASSOCIATE COMPANIES
- DEPA Commercial and DEPA Infrastructure contribution to 2Q21 consolidated Net Income came in at €4m.
- ELPEDISON 2Q21 EBITDA almost doubled, to €21m, due to the increase in wholesale prices and the improved performance of the upgraded Thessaloniki plant.
HELLENIC PETROLEUM GROUP
Key consolidated financial indicators (prepared in accordance with IFRS) for for 2Q/1H21 are shown below:
€ million
2Q20
2Q21
% Δ
1H20
1H21
% Δ
P&L figures
Refining Sales Volumes ('000 ΜΤ)
3,623
4,056
12%
7,506
7.467
-1%
Sales
1,067
2,235
-
2,986
3.957
33%
EBITDA
76
133
76%
-341
391
-
Adjusted EBITDA 1
63
79
26%
191
139
-27%
Net Income
5
54
-
-336
206
-
Adjusted Net Income 1
-22
10
-
21
12
-42%
Balance Sheet Items
Capital Employed
3.658
3.769
3%
Net Debt
1.752
1.751
0%
Debt Gearing (ND/ND+E)
48%
46%
-
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 2021
31 December 2020
ASSETS
Non-current assets
Property, plant and equipment
10
3.382.058
3.379.813
Right-of-use assets
11
232.785
235.541
Intangible assets
12
108.607
105.841
Investments in associates and joint ventures
7
449.169
416.542
Deferred income tax assets
70.892
72.161
Investment in equity instruments
3
419
959
Loans, advances and long term assets
69.879
71.676
4.313.809
4.282.533
Current assets
Inventories
13
1.077.396
694.410
Trade and other receivables
14
604.581
544.795
Income tax receivables
8
19.940
37.699
Assets held for sale
32
2.466
Derivative financial instruments
3
37.448
9.945
Cash and cash equivalents
15
1.220.416
1.202.900
2.959.813
2.492.215
Total assets
7.273.622
6.774.748
EQUITY
Share capital and share premium
16
1.020.081
1.020.081
Reserves
17
269.591
273.959
Retained Earnings
666.245
492.457
Equity attributable to equity holders of the parent
1.955.917
1.786.497
Non-controlling interests
62.183
62.340
Total equity
2.018.100
1.848.837
LIABILITIES
Non-current liabilities
Interest bearing loans & borrowings
18
2.106.296
2.131.371
Lease liabilities
174.126
170.896
Deferred income tax liabilities
74.213
32.572
Retirement benefit obligations
195.494
194.887
Provisions
38.264
39.022
Other non-current liabilities
27.589
27.957
2.615.982
2.596.705
Current liabilities
Trade and other payables
19
1.711.318
1.546.844
Derivative financial instruments
3
858
4.635
Income tax payable
2.986
1.673
Interest bearing loans & borrowings
18
865.342
744.561
Lease liabilities
27.455
30.240
Dividends payable
31.581
1.253
2.639.540
2.329.206
Total liabilities
5.255.522
4.925.911
Total equity and liabilities
7.273.622
6.774.748
Group Consolidated statement of comprehensive income
For the six month period ended
For the three month period ended
Note
30 June 2021
30 June 2020
30 June 2021
30 June 2020
Revenue from contracts with customers
4
3.957.067
2.986.016
2.234.740
1.067.051
Cost of sales
(3.482.556)
(3.233.578)
(2.057.034)
(946.485)
Gross profit / (loss)
474.511
(247.562)
177.706
120.566
Selling and distribution expenses
(150.058)
(158.445)
(79.368)
(77.599)
Administrative expenses
(64.272)
(67.680)
(32.813)
(33.243)
Exploration and development expenses
(1.662)
(2.337)
(801)
(1.033)
Other operating income and other gains
5
17.170
23.807
11.112
15.748
Other operating expense and other losses
5
(11.029)
(14.218)
(6.988)
(11.828)
Operating profit /(loss)
4
264.660
(466.435)
68.848
12.611
Finance income
1.415
2.725
692
1.664
Finance expense
(50.095)
(54.932)
(25.191)
(28.225)
Finance expense - lease finance cost
(5.130)
(5.435)
(2.580)
(2.687)
Currency exchange gain / (loss)
6
8.217
4.254
3.055
1.992
Share of profit / (loss) of investments in associates and joint ventures
7
32.481
18.398
12.794
(27.009)
Profit / (loss) before income tax
251.548
(501.425)
57.618
(41.654)
Income tax credit / (expense)
8
(45.103)
165.646
(3.947)
46.571
Profit / (loss) for the period
206.445
(335.779)
53.671
4.917
Profit / (loss) attributable to:
Equity holders of the parent
204.928
(335.841)
52.464
3.966
Non-controlling interests
1.517
62
1.207
951
206.445
(335.779)
53.671
4.917
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
(1.280)
-
(1.280)
-
Share of other comprehensive income / (loss) of associates
17
146
217
122
441
Changes in the fair value of equity instruments
17
(335)
(348)
(294)
88
Net other comprehensive income / (loss) that will not be reclassified to profit or loss (net of tax):
(1.469)
(131)
(1.452)
529
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
(31.794)
25.077
(7.806)
25.077
Fair value gains / (losses) on cash flow hedges
17
28.115
(31.140)
3.478
(5.666)
Currency translation differences and other movements
17
(20)
145
(95)
361
Net other comprehensive income / (loss) that may be reclassified subsequently to profit or loss (net of tax):
(3.699)
(5.918)
(4.423)
19.772
Other comprehensive income / (loss) for the period, net of tax
(5.168)
(6.049)
(5.875)
20.301
Total comprehensive income / (loss) for the period
201.277
(341.828)
47.796
25.218
Total comprehensive income / (loss) attributable to:
Equity holders of the parent
199.761
(341.855)
46.588
24.249
Non-controlling interests
1.516
27
1.208
969
201.277
(341.828)
47.796
25.218
Basic and diluted earnings / (losses) per share
(expressed in Euro per share)9
0,67
(1,10)
0,17
0,01
Group Consolidated statement of cash flows
For the six month period ended
Note
30 June 2021
30 June 2020
Cash flows from operating activities
Cash generated from / (used in) operations
20
72.381
16.386
Income tax received / (paid)
16.755
(6.533)
Net cash generated from / (used in) operating activities
89.135
9.853
Cash flows from investing activities
Purchase of property, plant and equipment & intangible assets
10,12
(110.548)
(78.583)
Proceeds from disposal of property, plant and equipment & intangible assets
541
3.382
Share capital issue expenses
(4)
(30)
Grants received
56
174
Interest received
1.415
2.725
Prepayments for right-of-use assets
(220)
(218)
Proceeds from disposal of assets held for sale
2.649
-
Proceeds from disposal of investments in equity instruments
360
-
Net cash generated from / (used in) investing activities
(105.751)
(72.550)
Cash flows from financing activities
Interest paid
(43.456)
(47.946)
Dividends paid to shareholders of the Company
(6)
(76.381)
Dividends paid to non-controlling interests
(580)
-
Participation of minority shareholders in share capital increase of subsidiary
-
34
Proceeds from borrowings
18
136.816
267.927
Repayments of borrowings
18
(44.979)
(21.820)
Payment of lease liabilities - principal, net
(16.904)
(16.877)
Payment of lease liabilities - interest
(5.130)
(5.435)
Net cash generated from / (used in) financing activities
25.761
99.502
Net increase / (decrease) in cash and cash equivalents
9.145
36.805
Cash and cash equivalents at the beginning of the period
15
1.202.900
1.088.198
Exchange gain / (loss) on cash and cash equivalents
8.371
3.567
Net increase / (decrease) in cash and cash equivalents
9.145
36.805
Cash and cash equivalents at end of the period
15
1.220.416
1.128.570
Parent Company Statement of Financial Position
As at
Note
30 June 2021
31 December 2020
ASSETS
Non-current assets
Property, plant and equipment
9
2.733.425
2.766.635
Right-of-use assets
10
27.593
32.157
Intangible assets
11
12.981
8.094
Investments in subsidiaries, associates and joint ventures
1.039.048
1.064.566
Investment in equity instruments
3
37
587
Loans, advances and long-term assets
43.419
42.956
3.856.503
3.914.995
Current assets
Inventories
12
968.074
599.613
Trade and other receivables
13
571.037
489.979
Income tax receivables
7
15.660
33.830
Derivative financial instruments
3
37.448
9.945
Cash and cash equivalents
14
989.581
992.748
2.581.800
2.126.115
Total assets
6.438.303
6.041.110
EQUITY
Share capital and share premium
15
1.020.081
1.020.081
Reserves
16
275.062
279.576
Retained Earnings
642.215
520.475
Total equity
1.937.358
1.820.132
LIABILITIES
Non-current liabilities
Interest bearing loans and borrowings
17
1.878.856
2.064.808
Lease liabilities
18.271
21.279
Deferred income tax liabilities
47.299
2.773
Retirement benefit obligations
160.002
159.782
Provisions
22.240
22.287
Other non-current liabilities
12.316
12.685
2.138.984
2.283.614
Current liabilities
Trade and other payables
18
1.572.370
1.427.067
Derivative financial instruments
3
858
4.635
Income tax payable
645
450
Interest bearing loans and borrowings
17
749.320
494.675
Lease liabilities
7.187
9.284
Dividends payable
31.581
1.253
2.361.961
1.937.364
Total liabilities
4.500.945
4.220.978
Total equity and liabilities
6.438.303
6.041.110
Parent Company Statement of Comprehensive Income
For the six-month period ended
For the three-month period ended
Note
30 June 2021
30 June 2020
30 June 2021
30 June 2020
Revenue from contracts with customers
4
3.625.199
2.690.940
2.052.735
950.340
Cost of sales
(3.286.733)
(3.036.594)
(1.949.526)
(862.662)
Gross profit / (loss)
338.466
(345.654)
103.209
87.678
Selling and distribution expenses
(46.214)
(51.922)
(25.434)
(24.369)
Administrative expenses
(38.270)
(41.058)
(19.617)
(20.446)
Exploration and development expenses
(54)
(1.066)
(24)
(49)
Other operating income and other gains
5
12.462
19.979
8.624
14.965
Other operating expense and other losses
5
(33.605)
(12.697)
(31.006)
(12.147)
Operating profit/(loss)
232.785
(432.418)
35.752
45.632
Finance income
2.930
4.910
1.419
2.690
Finance expense
(45.753)
(52.066)
(22.965)
(26.674)
Finance expense - Lease finance cost
(589)
(692)
(284)
(334)
Currency exchange gains/(losses)
6
8.041
4.316
2.943
2.021
Profit/(Loss) before income tax
4
197.414
(475.950)
16.865
23.335
Income tax credit / (expense)
7
(44.437)
158.114
(289)
39.472
Profit/(Loss) for the period
152.977
(317.836)
16.576
62.807
Other comprehensive income/(loss):
Other comprehensive income/(loss), that will not be reclassified to profit or loss (net of tax):
Actuarial losses on defined benefit pension plans
16
(1.163)
-
(1.163)
-
Changes in the fair value of equity instruments
16
(345)
(331)
(306)
7
Net other comprehensive income / (loss) that will not be reclassified to profit or loss (net of tax):
(1.508)
(331)
(1.469)
7
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
28.115
(31.140)
3.478
(5.666)
Recycling of (gains)/losses on hedges through comprehensive income
16
(31.794)
25.077
(7.806)
25.077
Net other comprehensive income / (loss) that may be reclassified subsequently to profit or loss (net of tax):
(3.679)
(6.063)
(4.328)
19.411
Other Comprehensive income/(loss) for the period, net of tax
(5.187)
(6.394)
(5.797)
19.418
Total comprehensive income/(loss) for the period
147.790
(324.230)
10.779
82.225
Basic and diluted earnings/(losses) per share
(expressed in Euro per share)8
0,50
(1,04)
0,05
0,21
Parent Company Statement of Cash flows
For the six-month period ended
Note
30 June 2021
30 June 2020
Cash flows from operating activities
Cash generated from / (used in) operations
19
(445)
(13.243)
Income tax received / (paid)
18.135
(4.843)
Net cash generated from / (used in) operating activities
17.690
(18.086)
Cash flows from investing activities
Purchase of property, plant and equipment & intangible assets
9,11
(51.323)
(58.706)
Proceeds from disposal of property, plant and equipment & intangible assets
33
4.846
Dividends received
-
150.000
Interest received
2.930
4.910
Participation in share capital increase of subsidiaries, associates and joint ventures
(1.482)
(10.000)
Proceeds from disposal of equity instruments
361
-
Net cash generated from / (used in) investing activities
(49.481)
91.050
Cash flows from financing activities
Interest paid
(39.471)
(49.633)
Dividends paid
(6)
(76.385)
Proceeds from borrowings
17
130.000
265.010
Repayments of borrowings
17
(64.348)
(168.278)
Payment of lease liabilities - principal
(5.004)
(4.866)
Payment of lease liabilities - interest
(589)
(692)
Net cash generated from /(used in) financing activities
20.583
(34.844)
Net increase / (decrease) in cash and cash equivalents
(11.208)
38.120
Cash and cash equivalents at the beginning of the period
14
992.748
888.564
Exchange gains / (losses) on cash and cash equivalents
8.041
3.587
Net increase / (decrease) in cash and cash equivalents
(11.208)
38.120
Cash and cash equivalents at end of the period
14
989.581
930.271
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