Hellenic Petroleum Holdings S.A.

Earnings Release • Feb 27, 2020

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RNS Number : 4025E

Hellenic Petroleum S.A.

27 February 2020

27 February 2020

Fourth quarter / Full Year 2019 financial results

Positive results and improved outlook led to a

FY19 dividend proposal of €0.5/share

Accelerated strategy implementation

HELLENIC PETROLEUM Group announced its 4Q/FY19 financial results. 4Q19 Adjusted EBITDA came in at €118m, with FY19 at €572m, while FY19 Adjusted Net Income amounted to €185m. Results are satisfactory, considering increased international refining environment volatility and significant deterioration for most of 4Q19, as well as the planned 5-week turnaround at Elefsina refinery for its regular 3-year maintenance, which was safely and successfuly completed in October. Improved operation, following start-up and better performance in other business units offset the negative impact of reduced production and sales during the turnaround period.

Furthermore, at the end of November, the Asporpyrgos refinery completed the transition to its new IMO operating model, supplying Greek bunkering hubs with low-sulphur, high quality marine fuels. During December, IMO FO sales amounted to 85k tons.

The BoD, considering the results, as well as the outlook for the Group, proposed to the AGM the distribution of a €0.25/share final dividend, resulting in a total FY19 proposed dividend of €0.5/share.

IFRS Reported Results were affected by the recovery of crude oil price in 4Q19, with an inventory gain of €4m vs losses in 4Q18, due to the material decline in crude oil prices in the respective period, with 4Q19 Reported EBITDA at €110m, vs €-19m in 4Q18. It should be noted that the results include as of 1 January 2019 the impact of new IFRS 16 on operating leases of retail fuel stations and other equipment.

Strategy implementation - Key developments

On 20 February 2020, the EGM of HELLENIC PETROLEUM approved a Memorandum of Understanding with the HRADF for the joint sale of the total share capital (65% HRADF - 35% ELPE) of DEPA Infrastructure, that will result from the partial spin off of gas distribution activities from DEPA Group, as well as the participation of HELLENIC PETROLEUM in the tender process for the sale of 65% of HRADF in DEPA Commercial, that will result from the restructuring of DEPA Group and will include the gas wholesale and retail activities. The agreement enables the Group to implement its straregy for divesting from gas distribution activites and minority participations, as well as grow in commercial gas activities.

In addition on 17 February 2020, the Group agreed the acquisition of a portfolio of PV projects with total installed capacity of 204MW in the Kozani area, Northern Greece from the German RES developer and contractor juwi. The project, upon completion of the construction process in 4Q21, will be the largest RES plant in Greece and among the 5 largest in Europe. The transaction accelerates the achievement of the target of 300MW of RES operating capacity earlier than scheduled.

Andreas Shiamishis, Group CEO, commented on results:

"2019 has been a transition year for the Group, with a number of business and organizational challenges. During the last months we proceeded with a series of initiatives that enable focus on our transformation strategy, such as the agreement with the HRADF for our participation in DEPA, the agreement for the acquisition and construction of the lagest RES project in Greece, with an effective tariff, which is lower than system energy prices, as well as the planning for the strengthening of our international trading activities. Furthermore, we recorded progress on the governance and organizational fronts, through the amendments of our articles of association and the reorganization of our business activities and management team, introducing a simpler and functional structure.

Regarding results, the Group faced, for the first time after several years, a severe deterioration of the refining environment. In such a backdrop, we responded very successfuly , improving our balance sheet and maintaining high returns for our shareholders. The issue of a 2% €500m Eurobond came at the lowest interest rate for the Group in more than 10 years and opened the international bond market for other Greek corporates. Furthermore, we updated our strategy, focusing on improving competitiveness, though operational excellence and new investments, as well as growth in new activities that will improve our environmental footprint by 50% until 2030, materializing our vision to play a key role in the energy transition in the East Med. I would like to thank all our employees for their efforts that made these achievements possible."

Deterioration of refining environment

International crude oil prices recovered during 4Q19, reflecting mainly macro developments and supply/demand balances, with Brent prices averaging at $62/bbl, lower vs 4Q18 ($68/bbl). Equally on a FY basis, prices moved higher from the lows recorded in January 2019, with Brent at $64/bbl, vs $72/bbl in 2018.

The US dollar maintained its strength during the quarter, with EUR/USD exchange rate at 1.11, while in FY19, euro averaged at 1.12 vs 1.18 in 2018. A stronger USD benefits our international and export oriented business model.

The international refining environment deteriorated significantly during 4Q19. HSFO cracks declined to the lowest levels on record, with the launch to the market of the new compliant VLSFO, ahead of IMO implementation. White products cracks were lower vs 3Q19, with the exception of naphtha. Brent-Urals spread improved slightly, however remained at low levels on average. Those led to a significant deviation among refining benchmarks, with FCC margins averaging at $1.6/bbl, with Hydrocracking margins at $6.6/bbl, the highest in four years, highlighting the importance of the investment at Elefsina refinery, in view of global trends for cleaner fuels.

Increasing demand for domestic fuels market

Domestic fuel demand in FY19 was up 3% at 6.9m MT, the highest in the last 3 years, as both auto-fuels and heating gasoil consumption increased. Aviation and bunkering fuels grew significantly (+10%), at 4.6m MT, mainly driven by marine fuels.

Strong balance sheet, improved capital structure, reduction in finance costs

The new €500m Eurobond issue, combined with the partial refinancing of 2021 Eurobond through a tender offer, as well as improvements in bank loans commercial terms, strengthened our balance sheet and reduced financing costs by 21%, which is expected to continue in 2020. As a result, Net Debt stood at €1.5bn, at the lower end of the Group's target range, with gearing ratio at 40%.

Key highlights and contribution for each of the main business units in 4Q/FY19 were:

REFINING, SUPPLY & TRADING

-     Refining, Supply & Trading 4Q19 Adjusted EBITDA at €76m (-39%).

-  Net production amounted to 3.2m MT (-17%), with sales at 3.5m MT (-15%), with FY19 at 14.2 and 15.2 respectively.

-  Realised ELPE system margin came in at $8.6/bbl in 4Q19, a significant over performance vs benchmarks.

PETROCHEMICALS

-  4Q19 Adjusted EBITDA came in at €20m (-9%), as operational performance and increased integration with Aspropyrgos refinery mitigated the impact of weak benchmark PP margins.

MARKETING

-  In Domestic Marketing, improved performance in Retail and Aviation led 4Q19 Comparable EBITDA at €3m, with FY19 at €49m (+14%).

-  International Marketing Comparable EBITDA at €15m (+44%), on account of improved in-market operations and supply optimisation, with FY19 at €56m (+11%).

ASSOCIATE COMPANIES

- DEPA Group contribution to consolidated Net Income was €21m for FY19.

- ELPEDISON EBITDA amounted to €20m in FY19, almost flat vs 2018. 

Key consolidated financial indicators (prepared in accordance with IFRS) for 4Q/FY19 are shown below:

€ million	4Q18	4Q19	% Δ	FY18	FY19	% Δ
P&L figures
Refining Sales Volumes ('000 ΜΤ)	4,137	3,496	-15%	16,490	15,223	-8%
Sales	2,428	2,052	-15%	9,769	8,857	-9%
EBITDA	-19	110	-	711	574	-19%
Adjusted EBITDA 1	156	118	-24%	730	572	-22%
Net Income	-145	-4	-	215	160	-26%
Adjusted Net Income 1	57	25	-56%	296	185	-37%
Balance Sheet Items
Capital Employed				3,855	3,869	-
Net Debt				1,460	1,543	6%
Debt Gearing (Net Debt/Capital Employed)				38%	40%	-

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	31 December 2019	31 December 2018
ASSETS
Non-current assets
Property, plant and equipment	6	3.297.668	3.268.928
Right-of-use assets	2,7	242.934	-
Intangible assets	8	104.426	105.617
Investments in associates and joint ventures	9	384.747	390.091
Deferred income tax assets	19	59.358	64.109
Investment in equity instruments	3	1.356	634
Loans, advances and long term assets	10	55.438	73.922
		4.145.927	3.903.301
Current assets
Inventories	11	1.012.802	993.031
Trade and other receivables	12	748.153	776.487
Income tax receivable	29	91.391	37.466
Assets held for sale		2.520	3.133
Derivative financial instruments	23	3.474	-
Cash and cash equivalents	13	1.088.198	1.275.159
		2.946.538	3.085.276
Total assets		7.092.465	6.988.577
EQUITY
Share capital and share premium	14	1.020.081	1.020.081
Reserves	15	276.972	258.527
Retained Earnings		964.972	1.052.164
Equity attributable to equity holders of the parent		2.262.025	2.330.772
Non-controlling interests		64.548	63.959
Total equity		2.326.573	2.394.731
LIABILITIES
Non- current liabilities
Interest bearing loans and borrowings	17	1.610.094	1.627.171
Lease liabilities	2,18	169.357	-
Deferred income tax liabilities	19	213.495	185.744
Retirement benefit obligations	20	180.398	163.514
Provisions	21	25.625	38.238
Other non-current liabilities	22	28.376	28.852
		2.227.345	2.043.519
Current liabilities
Trade and other payables	16	1.401.732	1.349.153
Derivative financial instruments	23	-	16.387
Income tax payable	29	7.147	75.119
Interest bearing loans and borrowings	17	1.022.270	1.108.785
Lease liabilities	2,18	30.537	-
Dividends payable		76.861	883
		2.538.547	2.550.327
Total liabilities		4.765.892	4.593.846
Total equity and liabilities		7.092.465	6.988.577

Group Consolidated statement of comprehensive income

		For the year ended
	Note	31 December 2019	31 December 2018
Revenue from contracts with customers	5	8.856.965	9.769.155
Cost of sales	24	(8.051.806)	(8.769.769)
Gross profit		805.159	999.386
Selling and distribution expenses	24	(329.711)	(324.430)
Administrative expenses	24	(140.012)	(150.518)
Exploration and development expenses	25	(4.843)	(1.403)
Other operating income / (expenses) and other gains / (losses)	26	10.351	(8.823)
Operating profit		340.944	514.212
Finance income	27	5.843	3.827
Finance expense	27	(146.303)	(149.532)
Lease finance cost	18,27	(10.081)	-
Currency exchange gains / (losses)	28	(1.255)	2.194
Share of profit / (loss) of investments in associates and joint ventures	9	17.862	(1.771)
Profit before income tax		207.010	368.930
Income tax expense	29	(43.434)	(154.218)
Profit for the year		163.576	214.712
Profit attributable to:
Owners of the parent		160.798	211.614
Non-controlling interests		2.778	3.098
		163.576	214.712
Other comprehensive income / (loss):
Other comprehensive income that will not be reclassified to profit or loss (net of tax):
Actuarial gains / (losses) on defined benefit pension plans	20	(12.369)	(11.012)
Changes in the fair value of equity instruments	15	544	(695)
Share of other comprehensive income / (loss) of associates	15	(188)	(288)
		(12.013)	(11.995)
Other comprehensive income that may be reclassified subsequently to profit or loss (net of tax):
Fair value gains / (losses) on cash flow hedges	15	12.890	(5.006)
Recycling of (gains) / losses on hedges through comprehensive income	15	1.501	(14.920)
Currency translation differences and other movements		272	(745)
		14.663	(20.671)
Other comprehensive income / (loss) for the year, net of tax		2.650	(32.666)
Total comprehensive income for the year		166.226	182.046
Total comprehensive income / (loss) attributable to:
Owners of the parent		163.425	178.958
Non-controlling interests		2.801	3.088
		166.226	182.046
Εarnings per share (expressed in Euro per share)	30	0,53	0,69

Group Consolidated statement of cash flows

		For the year ended
	Note	31 December 2019	31 December 2018
Cash flows from operating activities
Cash generated from / (used in) operations	32	634.718	652.291
Income tax received / (paid)		(148.655)	(4.918)
Net cash generated from / (used in) operating activities		486.063	647.373
Cash flows from investing activities
Purchase of property, plant and equipment & intangible assets	6,8	(241.045)	(156.713)
Proceeds from disposal of property, plant and equipment & intangible assets		1.616	277
Participation in share capital increase of associates and joint ventures		(10.295)	-
Purchase of subsidiary, net of cash acquired	36	(5.341)	(1.298)
Settlement of consideration of acquisition of further equity interest in subsidiary		-	(16.000)
Grants received		439	299
Interest received	27	5.843	3.827
Prepayments for right-of-use assets		(717)	-
Dividends received	9	30.490	307.735
Proceeds from disposal of assets held for sale		1.334	-
Proceeds from disposal of investments in equity instruments		19	265
Net cash generated from / (used in) investing activities		(217.657)	138.392
Cash flows from financing activities
Interest paid		(150.411)	(140.755)
Dividends paid to shareholders of the Company		(153.248)	(148.767)
Dividends paid to non-controlling interests		(2.246)	(2.061)
Acquisition of treasury shares		-	(683)
Participation of minority shareholders in share capital increase of subsidiary		34	17
Proceeds from borrowings		514.700	409.694
Repayments of borrowings		(625.581)	(506.358)
Payment of lease liabilities - principal	18	(30.712)	-
Payment of lease liabilities - interest	18	(10.081)	-
Net cash generated from / (used in) financing activities		(457.545)	(388.913)
Net increase/ (decrease) in cash and cash equivalents		(189.139)	396.852
Cash and cash equivalents at the beginning of the year	13	1.275.159	873.261
Exchange gains / (losses) on cash and cash equivalents		2.179	5.046
Net increase / (decrease) in cash and cash equivalents		(189.139)	396.852
Cash and cash equivalents at end of the year	13	1.088.198	1.275.159

Parent Company Statement of Financial Position

		As at
	Note	31 December 2019	31 December 2018
ASSETS
Non-current assets
Property, plant and equipment	6	2.693.794	2.684.237
Right-of-use assets	2,7	32.084	-
Intangible assets	8	8.704	4.799
Investments in subsidiaries, associates and joint ventures	9	1.045.138	1.032.372
Investment in equity instruments	3	965	318
Loans, advances and long-term assets	10	22.089	8.887
		3.802.774	3.730.613
Current assets
Inventories	11	899.760	893.859
Trade and other receivables	12	791.257	643.261
Income tax receivable	29	87.616	38.294
Derivative financial instruments	23	3.474	-
Cash and cash equivalents	13	888.564	1.070.377
		2.670.671	2.645.791
Total assets		6.473.445	6.376.404
EQUITY
Share capital and share premium	14	1.020.081	1.020.081
Reserves	15	283.106	262.263
Retained Earnings		935.648	864.333
Total equity		2.238.835	2.146.677
LIABILITIES
Non-current liabilities
Interest bearing loans and borrowings	17	1.607.838	1.657.598
Lease liabilities	2,18	21.264	-
Deferred income tax liabilities	19	182.065	151.873
Retirement benefit obligations	20	147.074	132.539
Provisions	21	22.797	37.858
Other non-current liabilities	20	13.620	14.810
		1.994.658	1.994.678
Current liabilities
Trade and other payables	16	1.271.809	1.226.107
Derivative financial instruments	23	-	16.387
Income tax payable	29	5.785	76.322
Interest bearing loans and borrowings	17	875.576	915.350
Lease liabilities	2,18	9.919	-
Dividends payable		76.863	883
		2.239.952	2.235.049
Total liabilities		4.234.610	4.229.727
Total equity and liabilities		6.473.445	6.376.404

Parent Company Statement of Comprehensive Income

		For the year ended
	Note	31 December 2019	31 December 2018
Revenue from contracts with customers	5	8.023.563	8.967.702
Cost of sales		(7.563.197)	(8.287.696)
Gross profit		460.366	680.006
Selling and distribution expenses	24	(104.209)	(99.248)
Administrative expenses	24	(85.966)	(95.795)
Exploration and development expenses	25	(2.289)	(875)
Other operating income / (expenses) and other gains / (losses)	26	(6.058)	(8.356)
Operating profit		261.844	475.732
Finance income	27	10.510	9.442
Finance expense	27	(115.800)	(136.636)
Lease finance cost	18,27	(967)	-
Dividend income	9	195.416	318.795
Currency exchange gains / (losses)	28	(910)	2.244
Profit before income tax		350.093	669.577
Income tax expense	29	(33.734)	(146.187)
Profit for the year		316.359	523.390
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	15	(9.835)	(10.878)
Changes in the fair value of equity instruments	15	469	(675)
		(9.366)	(11.553)
Other comprehensive income / (loss), that may be reclassified subsequently to profit or loss (net of tax):
Fair value gains / (losses) on cash flow hedges	15	12.890	(5.006)
Recycling of (gains) / losses on hedges through comprehensive income	15	1.501	(14.920)
Other Comprehensive income / (loss) for the year, net of tax		5.025	(31.479)
Total comprehensive income for the year		321.384	491.911
Earnings per share (expressed in Euro per share)	30	1,04	1,71

Parent Company Statement of Cash flows

		For the year ended
	Note	31 December 2019	31 December 2018
Cash flows from operating activities
Cash generated from / (used in) operations	32	459.810	557.196
Income tax received / (paid)		(143.204)	2.224
Net cash generated from / (used in) operating activities		316.606	559.420
Cash flows from investing activities
Purchase of property, plant and equipment & intangible assets	6,8	(160.831)	(101.318)
Proceeds from disposal of property, plant and equipment & intangible assets		1.074	-
Dividends received		45.416	318.795
Interest received	27	10.510	9.442
Participation in share capital increase of subsidiaries and joint ventures	9	(22.680)	(21.054)
Settlement of consideration of acquisition of further equity interest in subsidiary	9	-	(39.000)
Sale of investment in subsidiaries to related parties		-	7.000
Net cash generated from / (used in) investing activities		(126.511)	173.865
Cash flows from financing activities
Interest paid		(117.527)	(131.965)
Dividends paid		(150.085)	(148.767)
Loans to affiliated companies		-	(3.600)
Acquisition of treasury shares	14	-	(683)
Proceeds from borrowings		231.420	440.748
Repayments of borrowings		(329.168)	(491.303)
Payment of lease liabilities - principal	18	(7.694)	-
Payment of lease liabilities - interest	18	(967)	-
Net cash generated from /(used in) financing activities		(374.021)	(335.570)
Net increase / (decrease) in cash and cash equivalents		(183.926)	397.715
Cash and cash equivalents at the beginning of the year	13	1.070.377	667.599
Exchange gains / (losses) on cash and cash equivalents		2.113	5.063
Net increase / (decrease) in cash and cash equivalents		(183.926)	397.715
Cash and cash equivalents at the end of the year	13	888.564	1.070.377

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