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KN Energies AB

Earnings Release Aug 31, 2015

2252_ip_2015-08-31_685998eb-c550-4719-9a4a-e75157af5db7.pdf

Earnings Release

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SC KLAIPĖDOS NAFTA RESULTS FOR THE 6 MONTHS PERIOD OF 2015

Main activities of SC Klaipedos nafta (herinafter the Company)

Details about the company

Company name SC Klaipedos
nafta
Company code 110648893
Authorized share capital EUR 110,231,170
Registered address Buriu
street 19, P.O. Box
81,
91003
Klaipeda-C, Lithuania
Telephone +370 46 391772
Fax +370 46 311399
E-mail [email protected]
Webside www.oil.lt, www.sgd.lt
Legal –
organisational
form
Stock company
Date and place of registration 27 September 1994, State Enterprise
Centre of Registers

The mission of the Company is to be a reliable import and export terminal of oil products and LNG for Lithuania and neighbor regions, to enable the region's oil refineries to export on a continuous basis their production by tankers through the Company's terminal to the Western European and further markets also to ensure alternative gas supply for the users in Lithuania and other neighbor countries.

The vision of the Company is to be a financially sustainable terminal for transhipment of oil products and LNG, implement projects in time and invest in initiatives that will increase economic returns for the investors.

SC Klaipėdos Nafta is a strategic company of the Lithuanian national security and energy sector.

The strategic objectives of AB Klaipėdos nafta:

To increase the effectiveness of the Company, Improvement of the internal processes, Assurance of the safety requirements and environmental protection, To diversify activity of the Company, To become the main centre of oil and gas in

  • Lithuania.

The authorized capital is divided into 380,606,184 ordinary shares with a nominal value of 0.29 EUR.

Main shareholder is The Republic of Lithuania, represented by the Ministry of Energy of the Republic of Lithuania, holding 72.31 % of shares (275,241,290 unit).

The significant events of the 2nd quarter of 2015

  • On 24th of April, 2015 the Company has announced the annual LNGT capacities allocation procedure and an invitation for the potential users of the LNGT to submit their requests for allocation of LNGT capacities for the upcoming Gas Year, lasting from the 1 st of October, 2015 to the 1 st of October, 2016. The total volume of the LNG terminal capacity being allocated is 1.45 bcm per annum.
  • On 30th of April, 2015 the General Meeting of Shareholders of the Company was held during which:
  • the set of the audited financial statements of 2014 was approved and adduced Annual Report of the Company for the year 2014 to the shareholders;
  • The Company's distributable profit was distributed, part of which was allocated for dividends – EUR 93 thousand or 0.0002432210 per share;
  • Audit firm JSC Ernst & Young Baltic was appointed to audit financial statements of the year 2015-2016.
  • On 21th of May, 2015 the Company announced the invitation for the interested investors to acquire shares controlled by the Company of JSC LITGAS (total 1/3 of shares). The sales of shares is executed in order to implement unbundling of the activities in the natural gas sector according to the recommendations of European Commission.

Results for the 6 months period of 2015 4

On 12th June, 2015, the Board of the Company adopted a decision and approved the launch of new type of activity – consulting services on LNGT project implementation issues. The Board of the Company, approving the decision, took into account the fact that the Company has successfully implemented Klaipėda LNG terminal project and has gained valuable experience, knowledge and skills that can be successfully used for the development of new other LNG terminal projects.

On 24th June, 2015, the Company informed investors, that the Company and BNK (UK) Limited which is an affiliate of the leading exporter of Belarusian oil products – ZAT "Belaruskaja neftenaja kampanija", has signed a long term contract on provision of oil products reloading services in KN terminal. The term of the Contract is until 31 October 2016 (with option to extend it for one more year). Not less than 1 million tons of heavy fuel oil shall be reloaded through the Company's terminal during the period up to 31 October 2016.

Oil terminal characteristics

2 Jetties

Results for the 6 months period of 2015

Railway

  • 2 tracks for light oil products LFO (total 60 tank-cars)
  • 2 tracks for heavy oil products HFO (total 64 tank-cars)
  • One of the track is universal: can load both HFO and LFO
  • simultaneously.

Two four-track railway trestles provide a possibility to discharge or load 124 tank-cars

Storage tank farm

450 cub. m thousand total volume (plus in Subacius FS 340 cub. m thousand )

  • Total 28 tanks
  • Biological Waste Water Treatment Facilities
  • Waste water collected and treated annually up to 400 cub. m thousand (160 m3/h)

Depth: 14 m Harbour entrance depth: 14.5 m Length: 270 each Tanker batch: up to 100,000 t with 12.5 m allowable

  • draught.

Auto tankers loading system

A service to import gasoline and diesel by tankers for the Lithuanian market needs

  • 4 loading points at the same time

LNG terminal infrastructure

Results for the 6 months period of 2015 6

LNG terminal: the first LNG terminal in the Baltic states, which comprise of the LNG floating storage and regasification unit – FSRU (170,000 thousand m3 ), jetty (450 m length), pipeline (18 km) and gas metering station. LNG to the terminal are delivered by the vessels - LNG carriers.

Results for the 6 months period of 2015 7

294 m

12.6 m

45 m

Storage capacity 170,000 m3

Regas capacity 11 mln.m 3/d

LNG terminal floating storage regasification unit (FSRU) technical parameters

SC Klaipėdos nafta transshipment of oil products in H1 of 2011 – 2015 years

Key operating figures

Import and other transhipment

Transit (Belorussian and Russian refineries petroleum products)

Export (AB "Orlen Lietuva")

The petroleum products transhipment volume has increased by 37.8 % (from 2,415 thousand tons in the first half of 2014 to 3,329 thousand tons in 2015). The main reasons:

  • Due to the favorable change in macroeconomics conditions the oil refinery margins has increased so SC Orlen Lietuva (OL) increased refinery volume and transhipment in the Company's terminal. Total OL transhipment increased by 29.8%.
  • The Company has expanded the range of clients and attracted additional petroleum products from Belorussia refineries that increased transhipment volume of transit freights (including light petroleum products).

Key financial results

1) The Company's managers include: General Manager, Deputy Manager, Heads of Divisions and their deputies, Heads of Divisions.

Results for the 6 months period of 2015

Pokytis
H1
2015
H1 2014 +/- %
Sales revenue thousand EUR 53,871 16,726 37,145 222.1%
Gross profit thousand EUR 13,363 6,049 7,314 120.9%
EBITDA thousand EUR 17,822 7,709 10,113 131.2%
EBIT thousand EUR 11,467 4,088 7,379 180.5%
EBITDA margin % 33.1% 46.1% -13.0% -28.2%
EBIT margin % 21.3% 24.4% -3.1% -12.7%
Financial and investment activities result thousand EUR -579 195 -774 -396.9%
Profit before taxation thousand EUR 10,888 4,283 6,605 154.2%
Net profit thousand EUR 9,458 3,670 5,788 157.7%
Net profit margin % 17.6% 21.9% -4.3% -19.6%
Transhipment of oil products by type: thousand tons 3,329 2,415 914 37.8%
-
HFO -
heavy oil products
thousand tons 1,580 1,428 152 10.6%
-
LFO -
light oil products
thousand tons 1,749 987 762 77.2%
Average number of employees in
categories
370 379 -9 -2.4%
Managers 1) 36 34 2 5.9%
Specialists 135 126 9 7.1%
Workers 199 219 -20 -9.1%
Average monthly salary (gross) EUR/month 1,299 1,223 76 6.2%
Managers 1) EUR/month 3,399 3,434 -35 -1.0%
Specialists EUR/month 1,594 1,593 1 0.1%
Workers EUR/month 1,097 1,010 87 8.6%

SC Klaipedos nafta sales revenues for the H1 of 2015 has risen 3.2 times comparing to the H1 of 2014 and comprised EUR 53.9 million.

The activity of the LNG terminal which commenced in the end the year 2014 is the main reason for the increase in Company's revenues. Total recognized revenues from the LNG terminal operations for the six months of 2015 comprise EUR 32.4 million.

The revenues of the oil terminal also has increased – by 27.1% or by EUR 4.3 million.

The net profit of the Company for the 6 months period of 2015 has increased 2.6 times to EUR 9.5 million (for H1 2014 – EUR 3.7 million). EBITDA for the 6 months comprise 17.8 EUR million and is higher almost 2.3 times comparing to the 6 months of 2014.

The profitability of the Company for the H1 2015 has significantly increased due to the two main reasons:

  • The expenses of the LNG terminal project implementation in 2014 has been replaced by the activity profit as terminal has started its operations (total impact EUR 2.0 million).
  • The significantly increased (+34.7%) transhipment volume of the oil terminal has positively affected sales income and profit (total impact for the net profit – EUR 3.6 million).

Employees

Sales revenues

Main financial ratios

Main financial ratios - segments

Assets, equity and liabilities

Assets turnover ratio - 0.23 (30-06-2014 – 0.08).

revenues (Eur 4.3 million) and received prepayments (Eur 7.6 million) related with the LNG terminal activity.

Investments

  • To increase the oil terminal's flexibility in accepting different types of oil products;
  • To ensure the compliance with environmental and fire safety requirements;
  • The implementation of the LNGT Project.
  • Implementation of the onshore LNG reloading station

Total investments into the noncurrent assets during the first quarter of 2015 comprise EUR 2.6 million. The major part of investments were allocated to the finalizing works of the construction of the LNG terminal infrastructure.

The Company invests into construction of an on-shore small-scale LNG reloading station in the port of Klaipeda. That will offer LNG bunkering services, LNG loading into trucks services and possibly other in order to meet the increasing demand for LNG in the Baltic States and Poland. With this investment the Company aims to become a center of the LNG distribution in the Baltics region. The project shall be partially financed by the EU funds. The Company together with French company Sofregas in March 2015 have finished the LNG reloading station Front-end Engineering Design (FEED) preparation and environment impact assessment. On the 22 of July the tender for reloading station construction has been announced. Expanding the infrastructure of the LNG all legal, environmental and other regulatory requirements are followed step by step very responsibly and all the required procedures are made. At the same time the negotiations are in progress with the potential clients/users of the LNG reloading station. In the nearest future the first preliminary contracts for the LNG capacities usage are to be signed.

Bomin Linde LNG, Germany based LNG provider of LNG as marine fuel, intends to become the user of the Klaipeda LNG terminal and to book regulated LNG reloading capacities in order to use the facility as the regional break-bulking hub for the Baltic Sea.

LNG onshore reloading station project

The main directions of the investments of the Company:

Approved the most important investment projects of the Company

In the extraordinary shareholders meeting held on 25th of August 2015 the decisions regarding

new investments approval were adopted:

  • To implement the LNG on-shore reloading station project which value is Eur 27.17 million; for more information about the project see below;
  • To implement the light petroleum products reservoirs expansion project with a value of Eur 9.55 million. This project include construction of the additional reservoirs with the total capacity of 20.6 thousand m3 and technological expansion of the auto tankers loading system. This investments shall give a competitive advantage for the oil terminal of the Company.

Technological concept BOG management unit

LNG onshore reloading station project (1)

LNG onshore reloading station project (2)

LNG loading and

bunkering location

Synergies with the oil terminal

  • Boil off would feed existing boilers
  • Existing jetty sufficient to hold required equipment
  • Existing firefighting systems
  • Instrument air and electrical systems
  • Qualified staff
  • Existing sufficient security measures
  • Truck loading performed already (light oil products)
  • Safe distance from neighbors

After evaluation it has been confirmed that from the point of safety and the optimal usage of the existing infrastructure the optimal location for the LNG reloading station is the territory of SC Klaipedos nafta (oil terminal) next to the Jetty no. 2. According to the study analysts this location is mostly appropriate as the safe distance requirements from neighbor companies and urban buildings are met and fire protection systems are in place.

Achievements and awards

During the Transport Week, one of the most important transport events in Central and Eastern Europe, took place on March 17-19th 2015 in Gdańsk, Poland, the Company was awarded the Baltic Trendsetters Club Certificate for developing the floating LNG terminal Independence and rearranging the Baltic's gas market through one ship call.

Results for the 6 months period of 2015

On the 22th of the January 2015 in the annual Baltic Market Awards (BMA), organized by the Nasdaq, Klaipėdos nafta became the winner in the category "The Most Visible Improvement over the Year" and was invited to ring the Opening Bell at Nasdaq Market Site in Times Square, New York by Bob Greifeld, CEO of Nasdaq.

On the 28th of January, 2015 At the 8th annual European Gas Conference 2015, in Vienna, Klaipedos nafta won the Project of the Year award for the implementation of the Liquefied Natural Gas (LNG) Terminal project. Company was one of four nominees among such wellknown companies like Shell and Total Gas & Power.

Shareholders and share prices

th of December, 2014 –

DYNAMICS OF THE SHARE PRICE AT NASDAQ OMX VILNIUS DURING JANURY-JUNE MONTHS OF 2015 Since 2003 the shares of the Company are listed on NASDAQ OMX Vilnius stock exchange: ISIN code – LT0000111650 Abbreviation – KNF1L Share emission (pcs.) – 380,606,184 Turnover in Vilnius stock exchange during January - June months of 2015 was EUR 1.1 million. As of 30 June 2015 the Company's market capitalization was EUR 144.2 million (on 31 th of December, 2014 – EUR 118.4 million). Highest share price Lowest share price Share price at the end of period Average share price Turnover, unit Turnover, EUR EUR 0.415 0.318 0.379 0.373 2,986,481 1,106,811

Share price at the end
Highest share price Lowest share price
  • As at 30 June 2015 all the shares of the Company were owned by 1,849 shareholders (on 31 1,871). Main shareholder is The Republic of Lithuania, represented by the Ministry of Energy of the Republic of Lithuania, holding 72.31 % of shares (275,241,290 unit).
  • On 30th of June, 2015 the general meeting of shareholders distributed the Company's profit of 2014 in the total sum - EUR 9,257 thousand, available for appropriation and approved the payment of dividends for the shareholders amounting EUR 0.0002432210 per share (total amount allocated for the dividends comprise EUR 93 thousand).

Turnover, EUR thousand KNF1L Share price, EUR NASDAQ OMX Vilnius index, EUR thousand

Results for the 6 months period of 2015

Dynamics of KNF1L share price, turnover and NASDAQ OMX Vilnius index during January – June of 2015

Management of the Company

Results for the 6 months period of 2015 22

30 April 2015 the General Meeting of Shareholders of the Company appointed Audit firm –"Ernst & Young Baltic" UAB to audit financial statements of the years 2015-2016.

The Supervisory Board comprise of 3 (three) members.

The Audit Committee comprise of 2 (two) members (after 26 -01-2015).

The Board comprise of 4 (four) members.

The Supervisory Board by the decision taken on 26 th of January, 2015, approved the resignation of an independent member of the Audit Committee, as well as the Chairman of the Audit committee - Mr. Simonas Rimašauskas as from 31 rd of January, 2015, due to the other business position held.

Members of the Board of the Company

Rytis Ambrazevičius

Independent Member of the Board of the Company. Elected as the Board member by the Supervisory Board on 24 October 2011. The Supervisory renewed the mandate on 29 April 2014 for 4 years or until the time, when the new Board is elected ant starts acting.

Mindaugas Jusius Independent Member of the Board of the Company. Elected as the Board member by the Supervisory Board on 24 October 2011. The Supervisory renewed the mandate on 29 April 2014 for 4 years or until the time, when the new Board is elected ant starts acting.

Dainius Bražiūnas

Member of the Board of the Company. Elected as the Board member by the Supervisory Board on 25 August 2014 until the term of office of the acting Board of Company.

Mantas Bartuška

Member of the Board of the Company, General Manager. Elected as the Board member by the Supervisory Board on 25 September 2014 until the term of office of the acting Board of Company.

There is no permanent Chairman of the Board elected, therefore, the Chairman of the Board is elected from the Board members every meeting by ad hoc principle.

The Directors of the Company

Mantas Bartuška General Manager

Gediminas Vitkauskas Director of Oil terminal department

Osvaldas Sabaliauskas Deputy General Manager of the Company

Tadas Matulionis Director of the LNG terminal department

Marius Pulkauninkas Director of Finance and Administration Department

Darius Turčinskis

Acting Director of Commerce department

From the 17th of February, 2015 Director of the LNGT department - Tadas Matulionis (previously deputy Director of the LNGT Department).

THANK YOU FOR YOUR ATTENTION!

Stock company Klaipedos nafta

Company code 1106488893

VAT payer code LT06488917

Buriu street 19, P.O. Box 81, 91003 Klaipeda-C, Republic of Lithuania

Tel. +370 46 391772

Fax +370 46 311399

[email protected]

www.oil.lt, www.sgd.lt

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