Hellenic Petroleum Holdings S.A.

Earnings Release • Nov 5, 2019

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RNS Number : 3731S

Hellenic Petroleum S.A.

05 November 2019

PRESS RELEASE

5 November 2019

Third quarter / Nine month 2019 financial results

Operating profitability significantly higher vs 1H19, with consistent improvement in financials; Interim dividend of €0.25/share

HELLENIC PETROLEUM Group announced its 3Q/9M19 financial results in accordance with IFRS. 3Q19 Adjusted EBITDA came in at €201m, a notable improvement vs last quarters, while Adjusted Net Income amounted to €90m. Higher total production, at 4.3m MT and good operations at refining units, despite end of run performance ahead of scheduled shut-downs and IMO test runs, resulted to sales exceeding 4m MT. Equally, improved performance in Domestic and International Fuels Marketing had a positive contribution.

The BoD, considering the strong results, as well as positive outlook for the Group, decided the distribution of an interim dividend of €0.25/share, payable in January 2020.

Performance was also positively affected by improved refining environment, despite weaker benchmark refining margins compared to historical highs recorded in recent years, as well as the restoration of the Russian crude oil supply infrastructure in Central Europe and a strong US dollar vs the Euro.

IFRS Reported Results were affected by crude price movements, which in 3Q19 dropped to the lower levels of the last two years, leading to a 12% drop in Revenues to €2.3bn. Equally, impact on Net Income was also negative, with inventory valuation losses of €43m, vs €53m gains recorded in 3Q18, as prices then increased. It should be noted that the results include for the first time the impact of new IFRS 16 on operating leases of retail fuel stations and other equipment.

The Group continued to improve its financial position, with finance cost further dropping by 25% y-o-y in 3Q19, at €27m, mainly on account of repayment of the €325m Eurobond issued in 2014. Furthermore, during the quarter, the Group proceeded to the successful issue of a new €500m, 2% Eurobond, with partial refinancing of existing bonds maturing in 2021. The transaction is expected to lead to an additional annual decrease in finance costs of approximately €15m, with total reduction exceeding 50% in the last 3 years, with a notable impact on the Group's cash flow profile and dividend distribution capacity.

Andreas Shiamishis, Group CEO, commented on results:

"Improved 3Q19 results, the strongest of last 3 quarters, are particularly encouraging, on the back of a material improvement in environment. We are operating in a highly cyclical industry, without the ability to influence international developments. As a result, it is important to focus on issues we can control through strategic direction, managing and operating our business units and improving competitiveness. Despite 2019 being the most challenging refining environment in the last few years, our results and financial position are strong. On a positive note, domestic fuels market recorded a 3% growth. We consider the short term outlook to be positive, with the introduction of new bunkering fuel specs; our recent performance in capital markets, with the successful Eurobond issue in 3Q19, further confirms the confidence of the domestic and international investor community in HELLENIC PETROLEUM. I would like to thank once again the management and employees for their significant contribution to our successful performance."

Volatile refining environment and stronger USD

Global macroeconomic developments, especially around international trade relations, led to weaker crude oil prices, with Brent averaging at $62/bbl, lower vs both 2Q19 ($69/bbl), as well as 3Q18 ($76/bbl).

The US dollar strengthened for one more quarter, with average Euro/USD exchange rate at €1.11, mainly driven by central banks monetary policy.

In product markets, an important development was the drop in HSFO cracks, in contrast with other products, that were notably stronger q-o-q, leading refining benchmark margins higher vs 1H19. This trend, was sustained in 4Q19, especially for diesel, ahead of IMO regulation implementation, confirming the Group's strategy for structural minimization of HSFO production, while increasing high value products output, through the investment in Elefsina refinery upgrade, as well as the new Aspropyrgos refinery operating model for bunkering fuels in 2020.

Urals pricing at parity to Brent, albeit with volatility during the quarter, led to weaker refining margins vs last year. FCC margins averaged at $4.9/bbl, vs $5.7/bbl in 3Q18, with Hydrocracking margins at $4.8/bbl (3Q18: $5.6/bbl).

Increasing demand for domestic fuels market

Domestic fuel demand in 3Q19 amounted to 1.6m MT (+3%), with a respective increase in auto-fuels, the highest in the last few quarters. Aviation and bunkering fuels grew significantly (+14%), mainly on account of higher marine fuel offtake (+22%).

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

The new €500m Eurobond issue, at the lowest cost for the Group in more than 10 years, combined with the partial refinancing of 2021 eurobonds through a tender offer, as well as the repayment of the €325m notes in 3Q19, are expected to have a positive impact on finance costs of over €30m. Furthermore, the new issue has improved commercial terms vs previous, enhancing flexibility, while extending the Group's maturity profile.

Net Debt at €1.5bn, significantly lower y-o-y, with gearing ratio at 39%.

Key strategic developments

Aspropyrgos refinery is planning its transition to the new operating model in November, in view of new MARPOL regulation implementation for bunkering fuels, in order to effectively respond to the new market needs. A material part of feedstock required to operate the new model has already been secured, de-risking our planning.

During October 2019 a full turnaround, involving extended maintenance at all units, was successfully completed at Elefsina refinery, safely and in line with timetable. Works are now concluded and the refinery will resume operations in the next days.

In E&P, the Greek parliament proceeded to the ratification of the Lease Agreements (effective 10 October 2019) for the offshore areas of 'West Crete' and 'Southwest Crete' (Total 40% - Operator, ExxonMobil 40%, HELLENIC PETROLEUM 20%), as well as 'Ionio' (REPSOL 50% - Operator, HELLENIC PETROLEUM 50%) and 'Kyparissiakos Gulf' (HELLENIC PETROLEUM 100%), while planned environmental and exploration studies in the other Western Greece concessions continued.

Key highlights and contribution for each of the main business units in 3Q19 were:

REFINING, SUPPLY & TRADING

-     Refining, Supply & Trading 3Q19 Adjusted EBITDA at €129m (-25%).

-  Net production amounted to 3.8m MT (-5%), with sales at 4m MT (-1%).

-  Realised ELPE system margin came in at $10.1/bbl, a significant recovery vs 1H19.

-  During 3Q19, the IMO test run led to further diversify crude slate.

PETROCHEMICALS

-  Lower PP sales (-5%), as well as inventory losses, led EBITDA to €20m (- 20%).

MARKETING

-  3Q19 Marketing Adjusted EBITDA at €51m, with 9M at €111m. Excluding the impact of IFRS 16 implementation, Comparable EBITDA was €46m (+9%), with 9M at €86m (+7%).

-  In Domestic Marketing, improved performance in Retail and Aviation led 3Q19 Comparable EBITDA at €27m (+5%).

-  Profitability improved in most markets the Group operates, with 3Q19 International Marketing Comparable EBITDA at €19m (+16%).

ASSOCIATE COMPANIES

- DEPA Group contribution to consolidated Net Income was €17m for 9M19.

- Higher production in both ELPEDISON plants, led EBITDA to €8m (+79%). 

Key consolidated financial indicators (prepared in accordance with IFRS) for 3Q/9M19 are shown below:

€ million	3Q18	3Q19	% Δ	9M18	1H19	% Δ
P&L figures
Refining Sales Volumes ('000 ΜΤ)	4,087	4,037	-1%	12,354	11,727	-5%
Sales	2,674	2,348	-12%	7,341	6,805	-7%
EBITDA	258	141	-45%	731	464	-37%
Adjusted EBITDA 1	237	201	-15%	574	453	-21%
Net Income	135	46	-66%	360	167	-53%
Adjusted Net Income 1	111	90	-19%	239	160	-33%
Balance Sheet Items
Capital Employed				4,421	3,916	-11%
Net Debt				1,773	1,509	-15%
Debt Gearing (ND/ND+E)				40%	39%	-

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	30 September 2019	31 December 2018
ASSETS
Non-current assets
Property, plant and equipment	10	3.252.412	3.268.928
Right-of-use assets	2,11	225.633	-
Intangible assets	12	109.774	105.617
Investments in associates and joint ventures		383.207	390.091
Deferred income tax assets		61.600	64.109
Investment in equity instruments	3	1.455	634
Loans, advances and long term assets	2	56.254	73.922
		4.090.335	3.903.301
Current assets
Inventories	13	1.088.501	993.031
Trade and other receivables	2,14	830.989	822.805
Assets held for sale		2.581	3.133
Cash and cash equivalents	15	902.663	1.275.159
		2.824.734	3.094.128
Total assets		6.915.069	6.997.429
EQUITY
Share capital and share premium	16	1.020.081	1.020.081
Reserves	17	258.536	258.527
Retained Earnings		1.063.258	1.052.164
Equity attributable to equity holders of  the parent		2.341.875	2.330.772
Non-controlling  interests		63.514	63.959
Total equity		2.405.389	2.394.731
LIABILITIES
Non-current liabilities
Interest bearing loans & borrowings	18	1.615.278	1.627.171
Lease liabilities	2	163.947	-
Deferred income tax liabilities		209.272	185.744
Retirement benefit obligations		177.552	163.514
Provisions		30.455	42.038
Other non-current liabilities		29.066	28.852
		2.225.570	2.047.319
Current liabilities
Trade and other payables	19	1.402.867	1.349.153
Derivative financial instruments		10.133	16.387
Income tax payable		46.214	80.171
Interest bearing loans & borrowings	18	797.665	1.108.785
Lease liabilities	2	26.140	-
Dividends payable		1.091	883
		2.284.110	2.555.379
Total liabilities		4.509.680	4.602.698
Total equity and liabilities		6.915.069	6.997.429

Group Consolidated statement of comprehensive income

		For the 9 month period ended		For the 3 month period ended
	Note	30 September 2019	30 September 2018	30 September 2019	30 September 2018
Revenue from contracts with customers	4	6.804.877	7.341.129	2.348.248	2.674.220
Cost of sales		(6.186.569)	(6.420.913)	(2.149.345)	(2.349.606)
Gross profit		618.308	920.216	198.903	324.614
Selling and distribution expenses		(238.828)	(234.407)	(81.394)	(79.945)
Administrative expenses		(102.154)	(104.294)	(36.494)	(37.899)
Exploration and development expenses		(624)	(660)	1.087	(631)
Other operating income and other gains-net	5	14.545	7.176	1.465	2.529
Operating profit		291.247	588.031	83.567	208.668
Finance income		4.427	2.783	1.471	1.034
Finance expense		(94.185)	(114.569)	(27.741)	(36.804)
Fiunance expense - lease finance cost		(7.320)	-	(2.615)	-
Currency exchange gain/(loss)	6	833	2.540	90	(1.988)
Share of profit of investments in associates and joint ventures	7	15.012	28.484	567	13.402
Profit  before income tax		210.014	507.269	55.339	184.312
Income tax expense	8	(42.577)	(147.341)	(9.264)	(49.556)
Profit for the period		167.437	359.928	46.075	134.756
Profit attributable to:
Equity holders of the parent		165.690	356.936	44.367	133.325
Non-controlling interests		1.747	2.992	1.708	1.431
		167.437	359.928	46.075	134.756
Other comprehensive income:
Other comprehensive income that will not be reclassified to profit or loss (net of tax):
Actuarial losses on defined benefit pension plans	17	(6.494)	(7.579)	(6.438)	(7.579)
Share of other comprehensive income of associates	17	(41)	-	-	-
Changes in the fair value of equity instruments	17	626	(524)	(74)	(82)
Net other comprehensive income that will not be reclassified to profit or loss (net of tax):		(5.909)	(8.103)	(6.512)	(7.661)
Other comprehensive income that may be reclassified subsequently to profit or loss (net of tax):
Recycling of (gains)/losses on hedges through comprehensive income	17	1.501	(14.920)	-	-
Fair value gains/(losses) on cash flow hedges	17	4.149	21.537	(1.037)	5.281
Currency translation differences and other movements	17	288	(481)	222	(355)
Net other comprehensive income that may be reclassified subsequently to profit or loss (net of tax):		5.938	6.136	(815)	4.926
Other comprehensive income  for the period, net of tax		29	(1.967)	(7.327)	(2.735)
Total comprehensive income for the period		167.466	357.961	38.748	132.021
Total comprehensive income attributable to:
Equity holders of the parent		165.699	354.967	37.021	130.651
Non-controlling interests		1.767	2.994	1.727	1.371
		167.466	357.961	38.748	132.021
Basic and diluted earnings per share (expressed in Euro per share)	9	0,54	1,17	0,15	0,44

Group Consolidated statement of cash flows

		For the 9 month period ended
	Note	30 September 2019	30 September 2018
Cash flows from operating activities
Cash generated from operations	20	398.880	296.902
Income tax paid		(63.874)	(2.571)
Net cash generated from operating activities		335.006	294.331
Cash flows from investing activities
Purchase of property, plant and equipment & intangible assets	10,12	(135.382)	(94.985)
Proceeds from disposal of property, plant and equipment & intangible assets		1.048	227
Participation in share capital increase of associates		(10.292)	-
Purchase of subsidiary, net of cash acquired	25	(5.341)	(1.298)
Settlement of consideration of acquisition of further equity interest in subsidiary		-	(16.000)
Sale of subsidiary, net of cash owned		-	-
Grants received		274	80
Interest received		4.427	2.783
Prepayments for right-of-use assets		(432)	-
Dividends received		30.490	24.023
Proceeds from disposal of assets held for sale		1.334	-
Proceeds from disposal of investments in equity instruments		18	263
Net cash used in investing activities		(113.856)	(84.907)
Cash flows from financing activities
Interest paid		(87.938)	(99.981)
Dividends paid to shareholders of the Company		(150.077)	(74.480)
Dividends paid to non-controlling interests		(2.246)	(2.061)
Movement in restricted cash	15	-	144.445
Acquisition of treasury shares	17	-	(561)
Participation of minority shareholders in share capital increase of subsidiary		34	17
Proceeds from borrowings		12.808	408.089
Repayments of borrowings		(346.543)	(409.724)
Payment of lease liabilities		(29.132)	-
Net cash used in financing activities		(603.094)	(34.256)
Net (decrease)/increase in cash and cash equivalents		(381.944)	175.168
Cash and cash equivalents at the beginning of the period	15	1.275.159	873.261
Exchange gain on cash and cash equivalents		9.448	3.813
Net (decrease)/increase in cash and cash equivalents		(381.944)	175.168
Cash and cash equivalents at end of the period	15	902.663	1.052.242

Parent Company Statement of Financial Position

		As at
	Note	30 September 2019	31 December 2018
ASSETS
Non-current assets
Property, plant and equipment	9	2.667.587	2.684.237
Right of use assets	2,10	21.458	-
Intangible assets	11	6.291	4.799
Investments in subsidiaries, associates and joint ventures		1.048.135	1.032.372
Investment in equity instruments	3	1.053	318
Loans, advances and long-term assets		22.865	8.887
		3.767.389	3.730.613
Current assets
Inventories	12	985.738	893.859
Trade and other receivables	13	675.129	681.555
Cash and cash equivalents	14	718.412	1.070.377
		2.379.279	2.645.791
Total assets		6.146.668	6.376.404
EQUITY
Share capital and share premium	15	1.020.081	1.020.081
Reserves	16	262.265	262.263
Retained Earnings		858.314	864.333
Total equity		2.140.660	2.146.677
LIABILITIES
Non-current liabilities
Interest bearing loans and borrowings	17	1.642.845	1.657.598
Lease liabilities	2	14.952	-
Deferred income tax liabilities		176.751	151.873
Retirement benefit obligations		145.648	132.539
Provisions		24.179	37.858
Other non-current liabilities		14.416	14.810
		2.018.791	1.994.678
Current liabilities
Trade and other payables	18	1.282.423	1.226.107
Derivative financial instruments	3	10.133	16.387
Income tax payable		40.165	76.322
Interest bearing loans and borrowings	17	646.727	915.350
Lease liabilities	2	6.679	-
Dividends payable		1.090	883
		1.987.217	2.235.049
Total liabilities		4.006.008	4.229.727
Total equity and liabilities		6.146.668	6.376.404

Parent Company Statement of Comprehensive Income

		For the 9month period ended			For the 3month period ended
	Note	30 September 2019	30 September 2018		30 September 2019	30 September 2018
Revenue from contracts with customers	4	6.172.545	6.734.332		2.085.130	2.411.682
Cost of sales		(5.814.449)	(6.068.484)		(1.987.544)	(2.191.231)
Gross profit		358.096	665.848		97.586	220.451
Selling and distribution expenses		(75.320)	(71.742)		(25.683)	(23.610)
Administrative expenses		(62.763)	(64.675)		(23.653)	(24.533)
Exploration and development expenses		(79)	(834)		(27)	(672)
Other operating income/(expenses) & other gains/(losses)-net	5	1.215	3.963		1.700	2.919
Operating profit		221.149	532.560		49.923	174.555
Finance income		8.141	7.026		2.632	2.412
Finance expense		(86.707)	(105.089)		(26.102)	(33.505)
Lease finance cost		(669)	-		(205)	-
Dividend income		38.416	35.083		30.499	-
Currency exchange gains/(losses)	6	1.175	2.721		143	(1.522)
Profit before income tax		181.505	472.301		56.890	141.940
Income tax expense	7	(34.706)	(139.575)		(6.040)	(42.941)
Profit for the period		146.799	332.726		50.850	98.999
Other comprehensive income/(loss):
Other comprehensive income/(loss), that will not be reclassified to profit or loss (net of tax):
Acruarial losses on defined benefit pension plans	16	(6.188)	(6.200)		(6.188)	(6.200)
Changes in the fair value of equity instruments	16	540	(565)		(111)	(97)
		(5.648)	(6.765)		(6.299)	(6.297)
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	4.149	(8.303)		(1.037)	(24.559)
Recycling of losses / (gains) on hedges through comprehensive income	16	1.501	14.920		-	29.840
		5.650	6.617		(1.037)	5.281
Other Comprehensive income/(loss) for the period, net of tax		2	(148)		(7.336)	(1.016)
Total comprehensive income for the period		146.801	332.578		43.514	97.983
Basic and diluted earnings per share (expressed in Euro per share)	8	0,48	1,09		0,17	0,32

Parent Company Statement of Cash flows

		For the 9month period ended
	Note	30 September 2019	30 September 2018
Cash flows from operating activities
Cash generated from operations	19	296.793	404.490
Income tax (paid)/received		(59.292)	2.224
Net cash generated from/(used in) operations		237.501	406.714
Cash flows from investing activities
Purchase of property, plant and equipment & intangible assets	9,11	(92.176)	(63.368)
Proceeds from disposal of property, plant and equipment & intangible assets		1.074	35.083
Dividends received		38.416	-
Interest received		8.141	7.026
Settlement of consideration of acquisition of further equity interest in subsidiary		-	(16.000)
Participation in share capital increase of subsidiaries & associates		(22.702)	(21.054)
Net cash used in investing activities		(67.247)	(58.313)
Cash flows from financing activities
Interest paid		(80.672)	(92.376)
Dividends paid		(150.078)	(74.480)
Loans to affiliated companies		-	(2.925)
Acquisition of treasury stock		-	(561)
Proceeds from borrowings		11.577	436.284
Repayments of borrowings		(306.946)	(406.857)
Payment of lease liabilities		(5.366)	-
Net cash (used in)/generated from financing activities		(531.485)	(140.915)
Net (decrease)/increase in cash and cash equivalents		(361.231)	207.486
Cash and cash equivalents at the beginning of the period	14	1.070.377	667.599
Exchange losses on cash and cash equivalents		9.266	3.815
Net (decrease)/increase in cash and cash equivalents		(361.231)	207.486
Cash and cash equivalents at end of the period	14	718.412	878.900

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