Hellenic Petroleum Holdings S.A.

Earnings Release • May 16, 2019

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RNS Number : 3169Z

Hellenic Petroleum S.A.

16 May 2019

PRESS RELEASE

16 May 2018

First quarter 2019 financial results

Satisfactory performance sustained, despite weaker benchmark refining margins; Higher volumes in the Greek market   

HELLENIC PETROLEUM Group 1Q19 Adjusted EBITDA came in at €123m, with Adjusted Net Income at €37m, recording one more quarter of good results and in line with expected industry performance. The drop in benchmark refining margins, mainly on account of the lowest gasoline and naphtha cracks during the last four years and reduced crude availability in the region, as well as maintenance driven production, decrease at 3.6m MT (-9%), led to a negative impact on quarterly operational profitability vs 1Q18.

A mitigating factor to the weak refining environment and crude supply issues has been the flexibility of Group's refineries in processing varied crude grades allowing a sustained over-performance as well as a stronger USD exchange rate. On a comparable basis, non-refining business units' performance at similar levels as 1Q18, contributing by 37% to Group Adj. EBITDA.

With respect to financing costs, a further drop of 16% reflects debt reduction as well as better pricing on account of renegotiation of existing debt facilities. Equity consolidated Power & Gas contribution to Net Income is up (+30%), despite DESFA sale and deconsolidation.

Based on the results above and the positive impact of increasing crude oil prices during the quarter, 1Q19 Reported Net Income amounted to €47m, with results including for the first time the impact of new IFRS 16 on operating leases of retail fuel stations and other equipment.

Benchmark refining margins significantly weaker in 1Q19

During 1Q19, crude oil prices moved higher from the 2018 year-end lows of $50/bbl, reaching $70/bbl at the end of the quarter, mainly due to geopolitical developments and OPEC's decision to reduce crude supply. The lower availability of sour crude grades in the Med led to their prices exceeding those of Brent for the first time since 2013, with negative impact on benchmark margin calculation. This, combined with particularly weak light ends cracks, resulted to complex Med benchmark margins at their lower levels for at least 4 years. Med FCC benchmark margins were 29% lower, averaging $3.4/bbl, with Hydrocracking at $3.7/bbl (-31%).

EUR/USD was flat vs 4Q18, at 1.14, with the USD stronger vs 1Q18.

Increased heating gasoil and bunkering fuels demand

Domestic market fuels demand came in at 1.8m MT (+5%), as heating gasoil consumption was higher (+21%), due to weather conditions, while auto-fuels demand dropped marginally. Aviation and especially bunkering fuels demand recorded another increase (+15%), at 831k MT, mainly on account of increased international marine offtake.

Further balance sheet improvement and financing expenses drop

A reduction of financing expenses was reported for one more quarter and is expected to continue in coming quarters, following the recent renegotiation of existing bank facilities, as well as the repayment of the €325m Eurobond, which matures on 4 July 2019, out of cash reserves.

Overall, Group balance sheet remains strong, with Net debt at €1.5bln, flat q-o-q and debt gearing at 38%, significantly improved vs 1Q18.

The implementation of the new IFRS 16 affected the accounting of operating leases, with a positive EBITDA impact of €9m in 1Q19, mainly in Domestic Marketing, while financial liabilities (mostly retail stations leases) increased by c.€175m.

Key strategic developments

In E&P, on 9 April 2019 the Lease Agreements for Block 10 (HELPE 100%) and Block Ionian (Repsol 50% - operator, HELPE 50%) were signed, while during 1Q19 the scheduled environmental and exploration studies in other W. Greece concessions continued.

Key highlights and contribution for each of the main business units in 1Q19 were:

REFINING, SUPPLY & TRADING

-  Refining, Supply & Trading 1Q19 Adjusted EBITDA at €80m (-29%), on account of weaker benchmark margins.

-  White products' yield remained at 85%, despite the negative impact of maintenance shut-downs.

-  Exports were affected by lower refinery utilisation, leading to total 1Q19 sales of 3.6m MT (-13%).

PETROCHEMICALS

-  Higher sales volumes partly offset weaker PP margins, with 1Q19 Adjusted EBITDA at €25m (-4%).

MARKETING

-  1Q19 Marketing Adjusted EBITDA at €20m (+46%), following IFRS 16 implementation, while comparable performance was at a similar level to last year.

-  In Domestic Marketing, sales volumes were up 5%, on increased heating gasoil demand, with 1Q19 EBITDA at €9m.

-  International Marketing volumes increased by 8%, with EBITDA at €11m (+4%), while construction works for the new fuels terminal in Cyprus commenced.

ASSOCIATED COMPANIES

-  1Q19 DEPA Group contribution to consolidated Net Income amounted to €17m. This is up from last year as a result of a combinations of factors, including the different Group structure, with DESFA no longer included, while ownership and consolidation method for regional gas retail and distribution companies has changed.

-  The application of flexibility compensation mechanism independent power generators, as well as increased production, led Elpedison's EBITDA at €11m in 1Q18, notably higher vs 1Q18.

HELLENIC PETROLEUM Group of Companies

Key consolidated financial indicators (prepared in accordance with IFRS) for 1Q19 are shown below:

€ million				1Q18	1Q19	% Δ
P&L figures
Refining Sales Volumes ('000 ΜΤ)				4,102	3,551	-13%
Sales				2,168	1,991	-8%
EBITDA				166	135	-18%
Adjusted EBITDA 1				149	123	-18%
Net Income				74	47	-37%
Adjusted Net Income 1				62	37	-40%
Balance Sheet Items
Capital Employed				4,419	3,971	-10%
Net Debt				1,973	1,522	-23%
Debt Gearing (ND/ND+E)				45%	38%	-

Notes:

1. Calculated as Reported adjusted for inventory effects and other non-operating items. 1Q19 results includes IFRS16 impact.

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 2019	31 December 2018
ASSETS
Non-current assets
Property, plant and equipment	10	3.245.594	3.268.928
Right of use assets	2,11	215.259	-
Intangible assets	12	105.365	105.617
Investments in associates and joint ventures		407.982	390.091
Deferred income tax assets		62.629	64.109
Investment in equity instruments	3	842	634
Loans, advances and long term assets	2	42.163	73.922
		4.079.834	3.903.301
Current assets
Inventories	13	1.127.235	993.031
Trade and other receivables	2,14	807.613	821.598
Assets held for sale		3.493	3.133
Derivative financial instruments	3	-	-
Cash, cash equivalents and restricted cash	15	1.223.449	1.276.366
		3.161.790	3.094.128
Total assets		7.241.624	6.997.429
EQUITY
Share capital and share premium	16	1.020.081	1.020.081
Reserves	17	266.455	258.527
Retained Earnings		1.099.279	1.052.164
Equity attributable to equity holders of  the parent		2.385.815	2.330.772
Non-controlling  interests		63.445	63.959
Total equity		2.449.260	2.394.731
LIABILITIES
Non-current liabilities
Interest bearing loans & borrowings	18	1.629.332	1.627.171
Lease liabilities	2	149.496	-
Deferred income tax liabilities		192.098	185.744
Retirement benefit obligations		165.708	163.514
Provisions		42.293	42.038
Trade and other payables		28.873	28.852
		2.207.800	2.047.319
Current liabilities
Trade and other payables	19	1.346.411	1.349.153
Derivative financial instruments		5.626	16.387
Income tax payable		90.387	80.171
Interest bearing loans & borrowings	18	1.116.532	1.108.785
Lease liabilities	2	24.732	-
Dividends payable		876	883
		2.584.564	2.555.379
Total liabilities		4.792.364	4.602.698
Total equity and liabilities		7.241.624	6.997.429

Group Consolidated statement of comprehensive income

		For the three month period ended
	Note	31 March 2019	31 March 2018
Revenue from contracts with customers	4	1.991.216	2.168.386
Cost of sales		(1.804.901)	(1.944.687)
Gross profit		186.315	223.699
Selling and distribution expenses		(75.548)	(74.475)
Administrative expenses		(33.963)	(32.129)
Exploration and development expenses		(450)	(126)
Other operating income/(expenses) and other gains/(losses)-net	5	2.916	2.023
Operating profit		79.270	118.992
Finance income		1.000	975
Finance expense		(33.296)	(39.508)
Lease finance cost		(2.273)	-
Currency exchange gain/(loss)	6	1.255	(2.118)
Share of profit of investments in associates and joint ventures	7	18.091	13.895
Profit  before income tax		64.047	92.236
Income tax expense	8	(17.433)	(18.015)
Profit for the period		46.614	74.221
Profit attributable to:
Owners of the parent		47.115	74.272
Non-controlling interests		(501)	(51)
		46.614	74.221
Other comprehensive income:
Other comprehensive income that will not be reclassified to profit or loss (net of tax):
Changes in the fair value of equity instruments	17	(4)	(147)
Other comprehensive income that may be reclassified subsequently to profit or loss (net of tax):
Fair value gains on cash flow hedges	17	7.889	1.884
Currency translation differences and other movements	17	30	(124)
Other comprehensive income  for the period, net of tax		7.915	1.613
Total comprehensive income for the period		54.529	75.834
Total comprehensive income/(loss) attributable to:
Owners of the parent		55.043	75.889
Non-controlling interests		(514)	(55)
		54.529	75.834
Basic and diluted earnings per share (expressed in Euro per share)	9	0,15	0,24

Group Consolidated statement of cash flows

		For the three month period ended
	Note	31 March 2019	31 March 2018
Cash flows from operating activities
Cash generated (used in)/ from operations	20	4.514	(98.029)
Income tax received/(paid)		(2.660)	4.492
Net cash generated from / (used in) operating activities		1.854	(93.537)
Cash flows from investing activities
Purchase of property, plant and equipment & intangible assets	10,1	(31.360)	(25.452)
Proceeds from disposal of property, plant and equipment & intangible assets		245	20
Participation in share capital (increase)/ decrease of associates		200	-
Purchase of subsidiary, net of cash acquired		-	(16.000)
Settlement of consideration of acquisition of further equity interest in subsidiary		-	(1.298)
Grants received		-	80
Interest received		1.000	975
Prepayments for right-of-use assets		(259)	-
Proceeds from disposal of investments in equity instruments		-	257
Net cash used in investing activities		(30.174)	(41.418)
Cash flows from financing activities
Interest paid		(26.215)	(32.663)
Dividends paid to shareholders of the Company		-	(3)
Movement in restricted cash	15	-	144.445
Acquisition of treasury shares	17	-	(249)
Proceeds from borrowings		7.722	-
Repayments of borrowings		148	(165.734)
Payment of lease liabilities		(10.854)	-
Net cash used in financing activities		(29.199)	(54.204)
Net decrease in cash and cash equivalents		(57.519)	(189.159)
Cash and cash equivalents at the beginning of the period	15	1.275.159	873.261
Exchange gain/(loss) on cash and cash equivalents		4.602	(2.514)
Net decrease in cash and cash equivalents		(57.519)	(189.159)
Cash and cash equivalents at end of the period	15	1.222.242	681.588

Parent Company Statement of Financial Position

		As at
	Note	31 March 2019	31 December 2018
ASSETS
Non-current assets
Property, plant and equipment	9	2.673.521	2.684.237
Right of use assets	2,10	24.311	-
Intangible assets	11	5.427	4.799
Investments in subsidiaries, associates and joint ventures		1.032.372	1.032.372
Investment in equity instruments	3	513	318
Loans, advances and long-term assets		8.625	8.887
		3.744.769	3.730.613
Current assets
Inventories	12	1.023.867	893.859
Trade and other receivables	13	659.114	680.347
Cash, cash equivalents and restricted cash	14	1.039.379	1.071.585
		2.722.360	2.645.791
Total assets		6.467.129	6.376.404
EQUITY
Share capital and share premium	15	1.020.081	1.020.081
Reserves	16	270.135	262.263
Retained Earnings		900.388	864.333
Total equity		2.190.604	2.146.677
LIABILITIES
Non-current liabilities
Interest bearing loans and borrowings	17	1.661.904	1.657.598
Lease liabilities	2	18.014	-
Deferred income tax liabilities		158.701	151.873
Retirement benefit obligations		134.422	132.539
Provisions		37.725	37.858
Trade and other payables		14.654	14.810
		2.025.420	1.994.678
Current liabilities
Trade and other payables	18	1.232.400	1.226.107
Derivative financial instruments	3	5.626	16.387
Income tax payable		86.148	76.322
Interest bearing loans and borrowings	17	919.791	915.350
Lease liabilities	2	6.263	-
Dividends payable		877	883
		2.251.105	2.235.049
Total liabilities		4.276.525	4.229.727
Total equity and liabilities		6.467.129	6.376.404

Parent Company Statement of Comprehensive Income

		For the three-month period ended
	Note	31 March 2019	31 March 2018
Revenue from contracts with customers	4	1.824.373	2.010.635
Cost of sales		(1.703.824)	(1.855.792)
Gross profit		120.549	154.843
Selling and distribution expenses		(24.294)	(22.238)
Administrative expenses		(21.043)	(19.557)
Exploration and development expenses		(29)	(21)
Other operating income/(expenses) & other gains/(losses)-net	5	2.851	619
Operating profit		78.034	113.646
Finance income		2.388	2.487
Finance expense		(30.567)	(36.419)
Lease finance cost		(219)	-
Currency exchange gains/(losses)	6	1.563	(2.501)
Profit before income tax		51.199	77.213
Income tax expense	7	(15.144)	(17.398)
Profit for the period		36.055	59.815
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	(17)	(123)
		(17)	(123)
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	7.889	1.884
		7.889	1.884
Other Comprehensive income/(loss) for the period, net of tax		7.872	1.761
Total comprehensive income for the period		43.927	61.576
Basic and diluted earnings per share (expressed in Euro per share)	8	0,12	0,20

Parent Company Statement of Cash flows

		For the three-month period ended
	Note	31 March 2019	31 March 2018
Cash flows from operating activities
Cash generated from/(used in) operations	19	9.177	(81.202)
Income tax (paid)/received		(1.768)	5.768
Net cash generated from/(used in) operations		7.409	(75.434)
Cash flows from investing activities
Purchase of property, plant and equipment & intangible assets	9,11	(25.851)	(17.401)
Proceeds from disposal of property, plant and equipment & intangible assets		4	-
Interest received		2.388	2.487
Settlement of consideration of acquisition of further equity interest in subsidiary		-	(16.000)
Participation in share capital increase of subsidiaries & associates		-	(850)
Net cash used in investing activities		(23.459)	(31.764)
Cash flows from financing activities
Interest paid		(23.295)	(29.957)
Dividends paid		(7)	(3)
Movement in restricted cash		-	144.445
Acquisition of treasury stock		-	(249)
Proceeds from borrowings		4.442	7.700
Repayments of borrowings		-	(161.567)
Payment of lease liabilities		(1.854)	-
Net cash generated from / (used in) financing activities		(20.714)	(39.631)
Net decrease in cash and cash equivalents		(36.764)	(146.829)
Cash and cash equivalents at the beginning of the period	14	1.070.377	667.599
Exchange losses on cash and cash equivalents		4.559	(2.501)
Net decrease in cash and cash equivalents		(36.764)	(146.829)
Cash and cash equivalents at end of the period	14	1.038.172	518.269

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