Higher volume of fuel sales despite weaker consumption, the best LIFO-based operating profit since 2006. In Q2 2012, the prices of refined petroleum products went up, which translated into a 9% increase in revenue.
This factor, combined with an improved macroeconomic climate, recovering retail margins and an over twofold rise in the refining margin on global markets, resulted in the Company’s posting the highest LIFO-based operating profit since 2006, in the amount of PLN 1.2bn. Despite a continuing downward trend in fuel consumption across its home markets, the Company recorded a 2% increase in retail sales. This helped compensate for a decline in petrochemical sales and the effect of the periodic maintenance shutdown at ORLEN Lietuva, which eroded the refining segment’s performance.
PKN ORLEN’s debt and financial ratios remained at safe levels. In addition, an issue of seven-year corporate bonds worth PLN 1bn was introduced to stock-exchange trading. Investment projects connected with the exploration for shale gas and expansion of the power generation business were being continued. Work was launched on the third vertical well in the Garwolin licence area, and preparations were being made to drill the first horizontal well in the municipality of Wierzbica.
In Q2 2012, PKN ORLEN recorded:
Over PLN 1.2bn in LIFO-based operating profit
9% increase in revenue
2% increase in fuel sales
The key factors affecting the Company’s Q2 performance included the over twofold rise in the model refining margin and Ural/Brent differential, the weakening of the złoty against the US dollar, and an 8% year-on-year drop in the refining segment’s sales on the back of the maintenance shutdown at ORLEN Lietuva. As a consequence, the Company posted over PLN 1.2bn in LIFO-based operating profit, up by PLN 463m on the same quarter of the previous year. Revenue amounted to PLN 28bn, up by 9% (yoy).
Q2 2012 saw further weakening of demand for gasoline across all PKN ORLEN’s markets. Consumption of diesel oil also fell – except in Germany, where it grew by 2%. Despite these developments, PKN ORLEN recorded a 2% year-on-year increase in retail fuel sales – thanks to higher volumes on the Polish, German and Lithuanian markets. The increase can be attributed to the consistent implementation of a balanced pricing policy.
“Our pricing policy is working to the Company’s advantage. The retail segment’s performance has been improving steadily amid the challenging market conditions and there has been a growth in fuel sales, which means increasingly higher market shares for our products,” said Jacek Krawiec, PKN ORLEN’s CEO. “In Q2, the macroeconomic environment for our business was more favourable, as evidenced by our LIFO-based operating profit, which reached its highest level in six years,” added Jacek Krawiec.
The one-month maintenance shutdown at the Mažeikiai plant and the winding up of production at the inefficient Paramo refinery (following a drop in fuel consumption on the Czech market) significantly affected the refining segment’s sales, which were down by 8% relative to Q2 2011. The decrease was partly offset by higher refining margins