First Half/Second Quarter 2010 Financial Results

 

 

Key figures for the 1Η and 2Q period to 30 June 2010 are:

 

GROUP
Despite the adverse macroeconomic environment and weak local market conditions, the Group reported a strong set of results for the second quarter and first half of 2010. The positive results are mainly due to Refining, Supply and Trading which benefited from improved international benchmark refining margins, a stronger USD and the impact of a series of cost control measures initiated over the last 18 months. Retail business on the other hand, suffered in 2Q as expected from lower commercial & industrial fuels demand and the impact of increased excise taxes on auto fuel products.

Note that 1H10 net profits have been adversely affected by the special income tax contribution on 2009 results (amounting to €26m for the Group and €7m from our participation in DEPA), by inventory losses of €8m (compared to gains of €75m in 1H09), as well as FX losses of €66m (vs gains of €3m in 1H09) stemming from the recent short term spike of the USD vs the Euro.

Upgrade projects for Elefsina and Thessaloniki refineries are progressing as scheduled and within budget. Specifically, the Thessaloniki refinery is scheduled for mechanical completion before the end of 2010 with the refinery shutting down for a planned maintenance and tie-ins in 1Q 2011. Elefsina upgrade is well into the phase of construction and erection and is due for completion in 2H11. In addition to the investment program, the Group will benefit from the transformation plans which are aimed to generate over €100m of annual cash benefits. In terms of Balance sheet, given the Group’s strong financial position, a major advantage in the wake of recent market developments, and through long term planning and consistent implementation, all required resources to support the strategic investment plans are available. In particular, at the end of June Net Debt amounted to €1.8bn with Net Debt/Capital Employed of 43%, in line with our plans.

 

Based on half year results, the Board of Directors approved the distribution of a flat y-o-y interim dividend per share of €0.15 for the fiscal year ending 31 December 2010.

Key highlights and contribution for each of the main business units were:

REFINING, SUPPLY & TRADING
­Domestic market sales volume declined by 11%, driven mainly by lower heating gasoil sales (1Q), the impact of the financial crisis on commercial and industrial fuel sales (2Q) and the increased excise taxes on auto fuels (2Q).
­ Improved refining margins, particularly in 2Q due to increased middle distillate cracks and the effect of the stronger USD on realised margins.

 

DOMESTIC MARKETING
Greek marketing subsidiaries, EKO and Hellenic Fuels, 2Q results were negatively affected by the adverse environment which led to lower sales volume and depressed margins.
­ The integration of Hellenic Fuels business progressed well with logistics and supply chain benefits offsetting part of the negative volume and margin pressures.

 

INTERNATIONAL MARKETING
Increased profitability mainly due to the improved performance of our operations in Bulgaria and Serbia. A key element of the improved performance is the increase in average profit margins in most markets.

 

PETROCHEMICALS
Significant improvement in profitability (EBITDA reached €29m from €9m in 1H09), mainly due to increased polypropylene margins.
Global industry conditions have rebounded from last year’s lows positively affecting our large export business, however demand in the Greek market remains weak.

 

ASSOCIATED COMPANIES
While the long term outlook remains positive, weaker electricity market and structural issues present a short-term challenge for independent power producers such as ELPEDISON. 2Q results are marginally positive at EBITDA level while consolidated net results for the joint venture report a small loss. ELPEDISON second gas-fired power generation unit in Thisvi has been completed and the plant is expected to be commissioned in 2H10, as originally planned.

DEPA’s contribution to Group’s results was negative in 2Q as  a result of providing for recently imposed special income tax on the Group’s consolidated results for 2009.