Hellenic Petroleum Holdings S.A.

Quarterly Report • May 13, 2020

National Storage Mechanism | Additional information

RNS Number : 8203M

Hellenic Petroleum S.A.

13 May 2020

13 May 2020

First quarter 2020 financial results

Improved results on higher production and exports, amid negative oil price environment and covid-19 crisis

HELLENIC PETROLEUM Group announced its 1Q20 financial results, with Adjusted EBITDA 4% higher, at €128m and Adjusted Net Income amounting to €44m (+18%).

Refining environment was driven by increased volatility and the covid-19 pandemic, especially at quarter end; improved Refining and Fuels Marketing performance outweighed the negative impact of crude oil and feedstocks' pricing, as well as the weaker domestic market sales due to covid-19. Increased refining availability led exports higher by 27% and total sales at 3.9m MT (+9%). Aspropyrgos refinery successfuly completed the first full quarter of IMO operation model, supplying the market with the full range of products, with a substantial change in the crude mix and required adjustments on operation and working capital.

The significant drop in crude and oil product prices by approximately 50% between December and March, to the lowest levels of the last few years, affected IFRS Reported Results, resulting in inventory losses of €540m, leading Reported Net Results to €-341m. It is noted that losses would have been higher, had the Group not proceeded with an inventory management program, already from 4Q19.

Covid-19 impact and response - Key developments

The outbreak of the pandemic and the measures implemented globally are having a significant impact on the economy, affecting the international energy sector. It is estimated that world demand decline, during restrictions on mobility and economic activity will reach or even exceed 20% in 2Q20, leading to a significant drop and volatility in crude oil and product prices; combined with the inability of existing storage capacity to absorb the supply surplus, resulted in an agreement from oil producing countries for a c.10mbpd output reduction from May, while many refineries internationally are reducing runs or shutting down in 2Q20. The Greek market is also affected, with the decline in auto-fuels demand during April estimated at approximately 40%.

The Group proceeded with a series of measures to manage the crisis, already from end of February, with key priorities the health and safety of all staff and contractors, the smooth operation of facilities for uninterrupted market supply, ensuring sufficient liquidity and managing risks, as well as capturing opportunities in the contago pricing structure of crude and products. A policy for the prevention and response to the impact of the pandemic was established, with continuous information updating for employees, regular disinfection at facilities and offices and provision of personal protection equipment. Furthermore, refinery shifts were adjusted and a new tele-working model (WFH) was adopted for the vast majority of head-office staff, utilizing digital technologies.

The Group has a strong balance sheet, with sufficient liquidity at the start of the crisis. Since the beginning of March, in the context of risk management for the pandemic, the Group's access to credit, from Greek and international banks, grew by €300m, which combined with the utilization of existing facilities headroom, resulted in a total liquidity increase since the beginning of the year of €550m, to help manage the crisis. Furthermore, finance expenses are at historic lows, recording a further significant reduction of 21%, to €26m in 1Q20.

In terms of its strategy, the Group is assessing the impact of the crisis and will adjust its business planning accordingly. Growing in the energy sector and improving carbon footprint by 50% in the next 10 years, remain key priorities, despite any delays due to the crisis. Design and implementation works for the 204MW Kozani project, as well as the sale process of DEPA subsidiaries (Commercial and Infrastructure) in which the Group is involved are in process. It is noted that during 2Q20, the corporate restructuring of DEPA SA, with the spin off of international projects and the demerger of DEPA Infrastructure was completed.

Andreas Shiamishis, Group CEO, commented on results:

"In 1Q20 we managed to improve our operational performance and financial results in almost all our activities, while continuing the fast implementation of our strategy. Despite the notable recent developments in the oil industry, there is no doubt that the event that will define 2020 is the covid-19 pandemic and its impact on the world economy. Already from the first weeks of the crisis, we witnessed unprecedented changes in international supply and demand levels, with respective impact on prices. The crisis will continue to negatively affect most economic activity sectors, especially tourism that is more relevant to our markets.

The Group was among the first to take necessary measures, achieving uninterrupted operations, in the safest possible conditions for our personnel, which successfully responded to the challenge of transitioning to a different operating model. Furthermore, with full awareness of our responsibility to the Greek society, we designed and implement actions totaling €8m, aimed at supporting the national health system and vulnerable groups, that are most affected during this period."

Deterioration of refining environment

International crude oil prices moved lower throughout 1Q20, recording a significant decline in March, as the impact from covid-19 and OPEC+ not agreeing to extend its production cuts escalated, with Brent prices averaging at $50/bbl in 1Q20, while in March Brent came in at $32/bbl, the lowest since 1Q16.

The US dollar strengthened further vs the euro, reflecting international macro developments; euro averaged at 1.10 in 1Q20.

White product cracks were lower vs 4Q19, due to weak demand, while HSFO cracks recovered strongly from the historic lows of 4Q19. Brent-Urals widened significantly to the highest levels in the last 9 years, with a positive impact on benchmark refining margins. As a result, FCC margins averaged at $3.8/bbl, with Hydrocracking margins at $5.2/bbl.

Weaker domestic fuel demand

Domestic fuel demand in 1Q20 was 4% lower at 1.7m MT, with auto-fuels consumption recording a respective decline, due to the negative impact of covid-19 on demand in March. Heating gasoil, despite strong demand in March, due to mobility restrictions, was also lower in 1Q20, on mild weather in January-February. Aviation and bunkering fuels was 18% lower, to 681k MT. The negative trend of 1Q20 is expected to intensify in 2Q.

Strong balance sheet, liquidity management

The Group took advantage of favorable international capital markets conditions for the strengthening of its balance sheet, with the €500m Eurobond issue in 4Q19, achieving a material increase of its liquidity. Furthermore, at the initial signs of the crisis, proceeded to the additional improvement of its debt headroom, with new credit facilities of €200m and an increase of its LC issuance capacity for crude supply. Net Debt came in at €1.9bn, with gearing ratio at 49%, mainly due to the commodity price drop and the working capital increase.

Key highlights and contribution for each of the main business units in 1Q20 were:

REFINING, SUPPLY & TRADING

-     Refining, Supply & Trading 1Q20 Adjusted EBITDA at €86m (+8%).

-  Net production 8% higher to 3.9m MT, with a respective increase in sales which came in at 3.9m MT (+9%).

-  High value product output increased, as IMO FO production was higher at Aspropyrgos refinery, minimizing HSFO production respectively.

PETROCHEMICALS

-  1Q20 Adjusted EBITDA came in at €20m (-22%), on account of weaker benchmark PP margins.

MARKETING

-  In Domestic Marketing, improved Retail performance resulted in higher Adjusted EBITDA of €12m, mitigating the impact of weaker demand at the end of the quarter.

-  Higher sales and improved operational performance in International Marketing led Adjusted EBITDA to €15m (+29%).

ASSOCIATE COMPANIES

- DEPA Group contribution to 1Q20 consolidated Net Income (excluding the positive impact of BOTAS case arbitration) came in at €15m.

- ELPEDISON 1Q20 EBITDA was 58% higher, at €17m, due to higher production and supply optimisation. 

Key consolidated financial indicators (prepared in accordance with IFRS) for 1Q20 are shown below:

€ million				1Q19	1Q20	% Δ
P&L figures
Refining Sales Volumes ('000 ΜΤ)				3,551	3,883	9%
Sales				1,991	1,919	-4%
EBITDA				135	-416	-
Adjusted EBITDA 1				123	128	4%
Net Income				47	-341	-
Adjusted Net Income 1				37	44	18%
Balance Sheet Items
Capital Employed				3,971	3,858	-3%
Net Debt				1,522	1,906	25%
Debt Gearing (ND/ND+E)				38%	49%	-

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 March 2020	31 December 2019
ASSETS
Non-current assets
Property, plant and equipment	10	3.280.073	3.297.668
Right of use assets	11	242.172	242.934
Intangible assets	12	104.805	104.426
Investments in associates and joint ventures		429.932	384.747
Deferred income tax assets		60.850	59.358
Investment in equity instruments	3	812	1.356
Loans, advances and long term assets		46.094	55.438
		4.164.738	4.145.927
Current assets
Inventories	13	679.890	1.012.802
Trade and other receivables	14	647.157	748.153
Income tax receivable		92.128	91.391
Assets held for sale		2.018	2.520
Derivative financial instruments	3	-	3.474
Cash and cash equivalents	15	970.652	1.088.198
		2.391.845	2.946.538
Total assets		6.556.583	7.092.465
EQUITY
Share capital and share premium	16	1.020.081	1.020.081
Reserves	17	250.682	276.972
Retained Earnings		625.162	964.972
Equity attributable to equity holders of  the parent		1.895.925	2.262.025
Non-controlling  interests		63.599	64.548
Total equity		1.959.524	2.326.573
LIABILITIES
Non-current liabilities
Interest bearing loans & borrowings	18	1.380.534	1.610.094
Lease liabilities		169.923	169.357
Deferred income tax liabilities		86.349	213.495
Retirement benefit obligations		182.038	180.398
Provisions		25.596	25.625
Trade and other payables		28.391	28.376
		1.872.831	2.227.345
Current liabilities
Trade and other payables	19	1.159.572	1.401.732
Derivative financial instruments		30.044	-
Income tax payable		6.442	7.147
Interest bearing loans & borrowings	18	1.497.419	1.022.270
Lease liabilities		29.475	30.537
Dividends payable		1.276	76.861
		2.724.228	2.538.547
Total liabilities		4.597.059	4.765.892
Total equity and liabilities		6.556.583	7.092.465

Group Consolidated statement of comprehensive income

		For the three month period ended
	Note	31 March 2020	31 March 2019
Revenue from contracts with customers	4	1.918.964	1.991.216
Cost of sales		(2.287.093)	(1.804.901)
Gross profit / (loss)		(368.129)	186.315
Selling and distribution expenses		(80.846)	(75.548)
Administrative expenses		(34.437)	(33.963)
Exploration and development expenses		(1.305)	(450)
Other operating expense	5	(2.960)	(2.764)
Other operating income / (expenses) and other gains / (losses)	5	5.669	2.916
Operating profit / (loss)		(479.048)	79.270
Finance income		1.062	1.000
Finance expense		(26.707)	(33.296)
Lease finance cost		(2.748)	(2.273)
Currency exchange gains / (losses)	6	2.262	1.255
Share of profit / (loss) of investments in associates and joint ventures	7	45.407	18.091
Profit / (loss) before income tax		(459.772)	64.047
Income tax credit / (expense)	8	119.074	(17.433)
Profit / (loss) for the period		(340.698)	46.614
Profit / (loss) attributable to:
Owners of the parent		(339.809)	47.115
Non-controlling interests		(889)	(501)
		(340.698)	46.614
Other comprehensive income / (loss):
Other comprehensive income / (loss) that will not be reclassified to profit or loss (net of tax):
Share of other comprehensive income / (loss) of associates	17	(224)	-
Changes in the fair value of equity instruments	17	(436)	(4)
		(660)	(4)
Other comprehensive income / (loss) that may be reclassified subsequently to profit or loss (net of tax):
Fair value gains / (losses) on cash flow hedges	17	(25.474)	7.889
Currency translation differences and other movements	17	(216)	30
		(25.690)	7.919
Other comprehensive income  / (loss) for the period, net of tax		(26.350)	7.915
Total comprehensive income / (loss) for the period		(367.048)	54.529
Total comprehensive income / (loss) attributable to:
Owners of the parent		(366.098)	55.043
Non-controlling interests		(949)	(514)
		(367.048)	54.529
Earnings / (losses) per share (expressed in Euro per share)	9	(1,11)	0,15

Group Consolidated statement of cash flows

		For the three month period ended
	Note	31 March 2020	31 March 2019
Cash flows from operating activities
Cash generated (used in)/ from operations	20	(221.655)	4.514
Income tax received/(paid)		(3.590)	(2.660)
Net cash generated from / (used in) operating activities		(225.245)	1.854
Cash flows from investing activities
Purchase of property, plant and equipment & intangible assets	10,12	(35.532)	(31.360)
Proceeds from disposal of property, plant and equipment & intangible assets		665	245
Participation in share capital (increase)/ decrease of associates		-	200
Grants received		43	-
Interest received		1.062	1.000
Prepayments for right-of-use assets		(215)	(259)
Net cash used in investing activities		(33.977)	(30.174)
Cash flows from financing activities
Interest paid		(15.659)	(26.215)
Dividends paid to shareholders of the Company		(76.215)	-
Proceeds from borrowings		239.681	7.722
Repayments of borrowings		68	148
Payment of lease liabilities - principal		(10.015)	(8.581)
Payment of lease liabilities - interest		(2.748)	(2.273)
Net cash used in financing activities		135.112	(29.199)
Net decrease in cash and cash equivalents		(124.110)	(57.519)
Cash and cash equivalents at the beginning of the period	15	1.088.198	1.275.159
Exchange gain/(loss) on cash and cash equivalents		6.564	4.602
Net decrease in cash and cash equivalents		(124.110)	(57.519)
Cash and cash equivalents at end of the period	15	970.652	1.222.242

Parent Company Statement of Financial Position

		As at
	Note	31 March 2020	31 December 2019
ASSETS
Non-current assets
Property, plant and equipment	9	2.677.554	2.693.794
Right-of-use assets	10	30.876	32.084
Intangible assets	11	8.862	8.704
Investments in subsidiaries, associates and joint ventures		1.055.138	1.045.138
Investment in equity instruments	3	519	965
Loans, advances and long-term assets		10.616	22.089
		3.783.565	3.802.774
Current assets
Inventories	12	588.244	899.760
Trade and other receivables	13	550.786	791.257
Income tax receivable		88.445	87.616
Derivative financial instruments	3	-	3.474
Cash and cash equivalents	14	738.388	888.564
		1.965.863	2.670.671
Total assets		5.749.428	6.473.445
EQUITY
Share capital and share premium	15	1.020.081	1.020.081
Reserves	16	257.294	283.106
Retained Earnings		555.005	935.648
Total equity		1.832.380	2.238.835
LIABILITIES
Non-current liabilities
Interest bearing loans and borrowings	17	1.225.765	1.607.838
Lease liabilities		20.639	21.264
Deferred income tax liabilities		55.272	182.065
Retirement benefit obligations		148.463	147.074
Provisions		22.797	22.797
Other non-current liabilities		13.455	13.620
		1.486.391	1.994.658
Current liabilities
Trade and other payables	18	1.056.016	1.271.809
Derivative financial instruments	3	30.044	-
Income tax payable		5.192	5.785
Interest bearing loans and borrowings	17	1.329.283	875.576
Lease liabilities		8.846	9.919
Dividends payable		1.276	76.863
		2.430.657	2.239.952
Total liabilities		3.917.048	4.234.610
Total equity and liabilities		5.749.428	6.473.445

Parent Company Statement of Comprehensive Income

		For the three-month period ended
	Note	31 March 2020	31 March 2019
Revenue from contracts with customers	4	1.740.600	1.824.373
Cost of sales		(2.173.932)	(1.703.824)
Gross profit / (loss)		(433.332)	120.549
Selling and distribution expenses		(27.553)	(24.294)
Administrative expenses		(20.612)	(21.043)
Exploration and development expenses		(1.017)	(29)
Other operating income/(expenses) & other gains/(losses)	5	4.464	2.851
Operating profit / (loss)		(478.050)	78.034
Finance income		2.220	2.388
Finance expense		(25.392)	(30.567)
Lease finance cost		(358)	(219)
Currency exchange gains/(losses)	6	2.295	1.563
Profit / (Loss) before income tax		(499.285)	51.199
Income tax credit / (expense)	7	118.642	(15.144)
Profit / (Loss) for the period		(380.643)	36.055
Other comprehensive income/(loss):
Other comprehensive income/(loss), that will not be reclassified to profit or loss (net of tax):
Changes in the fair value of equity instruments	16	(338)	(17)
		(338)	(17)
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	(25.474)	7.889
		(25.474)	7.889
Other Comprehensive income/(loss) for the period, net of tax		(25.812)	7.872
Total comprehensive income / (loss) for the period		(406.455)	43.927
Basic and diluted earnings / (losses) per share (expressed in Euro per share)	8	(1,25)	0,12

Parent Company Statement of Cash flows

		For the three-month period ended
	Note	31 March 2020	31 March 2019
Cash flows from operating activities
Cash generated from / (used in) operations	19	(246.288)	9.176
Income tax received / (paid)		(795)	(1.768)
Net cash generated from / (used in) operations		(247.083)	7.408
Cash flows from investing activities
Purchase of property, plant and equipment & intangible assets	9,11	(24.360)	(25.851)
Proceeds from disposal of property, plant and equipment & intangible assets		-	4
Dividends received		150.000	-
Interest received		2.220	2.388
Participation in share capital increase of subsidiaries, associates and joint ventures		(10.000)	-
Net cash generated from / (used in) investing activities		117.860	(23.459)
Cash flows from financing activities
Interest paid		(14.237)	(23.295)
Dividends paid		(76.215)	(7)
Proceeds from borrowings		218.120	4.442
Repayments of borrowings		(152.002)	-
Payment of lease liabilities - principal		(2.759)	(1.635)
Payment of lease liabilities - interest		(358)	(219)
Net cash generated from /(used in) financing activities		(27.451)	(20.714)
Net increase / (decrease) in cash and cash equivalents		(156.674)	(36.765)
Cash and cash equivalents at the beginning of the period	14	888.564	1.071.585
Exchange gains / (losses) on cash and cash equivalents		6.498	4.559
Net increase / (decrease) in cash and cash equivalents		(156.674)	(36.765)
Cash and cash equivalents at end of the period	14	738.388	1.039.379

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