Hellenic Petroleum Holdings S.A.

Earnings Release • May 27, 2021

National Storage Mechanism | Additional information

RNS Number : 0907A

Hellenic Petroleum S.A.

27 May 2021

27 May 2021

First quarter 2021 financial results
Positive operating results, amid a negative refining environment that affects core Group business Significant recovery of Reported profitability to the highest level in the last few years

HELLENIC PETROLEUM Group announced its 1Q21 financial results, with Reported EBITDA at €176m and Reported Net Income amounting to €90m. Adjusted EBITDA came in at €60m, with corresponding Net Income at €2m.

Reported Net Income was strong, mainly driven by the international oil prices recovery and their impact on inventory valuation, offsetting a significant part of the losses recorded in 2020, when the pandemic led to a sharp price decline.

In terms of operating profitability, which excludes the impact of international crude and oil product prices, international refining performance continues to be affected by reduced transport fuels demand and especially aviation fuel, due to travel restrictions. This market segment accounts for a significant part of production and sales, prolonging a period of particularly weak refining margins.

Regarding the Greek fuels market demand, 1Q21  was the lowest on record, as restrictions on travelling were in place throughout the quarter.

In addition, following the introduction of the new EU Emissions Trading System (EU ETS), the volume of rights sourced by the market has increased materially, which, combined with their large price increase, adds significant burden on the operating costs of European refineries and their competitiveness vs non-EU countries.

In this environment, the Group maintained its good operating performance; refining utilisation, supply optimization, options on higher domestic market share and the introduction of new premium fuels in retail, as well as the highest profitability on record for Petchems, partially offset the adverse business environment.

Strategy update - Main developments

In April 2021, the Group updated its strategy, considering the accelerating energy transition, clarifying its objectives regarding Environment - Society - Governance (ESG), as well as the levers to achieve them. The new "Vision 2025" strategy is based on 5 main pillars:

§ Setting clear environmental targets, including a 50% improvement in GHG emissions by 2030, with a commitment to net zero by 2050

§ Adjusting the strategy to develop an additional line of business in clean energy

§ Establishment of a fit-for-purpose Group structure that supports this strategy

§ Upgrading corporate governance, in line with the new legal framework and international best practices

§ Relaunching of corporate identity, which will highlight the new Group strategy

In the context of creating a balanced portfolio, the Group intends to drastically decarbonise its activities in the oil products value chain, through energy efficiency projects and use of cleaner forms of energy, transition to cleaner fuels and adoption of blue / green hydrogen technologies. In addition, it aims to develop a significant RES portfolio, targeting 600 MW by 2025 and 2 GW by 2030, initially in PV and onshore wind, with future expansion in offshore wind and storage applications, investing in both organically as well as through acquisitions, both in Greece and internationally. It is noted that the construction works of the 204 MW PV project in Kozani are progressing as scheduled, with approximately 40% completed.

Regarding Petchems, an investment of €35m has already been approved for the capacity increase of the PP production unit at Thessaloniki to 300k MT, targeting implementation in the next two and a half years. This investment increases the vertical integration with refining, increases Group exports and contributes to the Group's environmental footprint improvement.  

Concerning the sale process by the HRADF of the companies DEPA Infrastructure and DEPA Commercial (65% HRADF - 35% HELPE), in which the Group participates as a joint seller in DEPA Infrastructure and as a potential buyer through a joint venture with EDISON in DEPA Commercial, the submission of binding bids is scheduled for July 2021 for DEPA Infrastructure, while for DEPA Commercial the HRADF announced the suspension of the tender process until at least the end of 3Q21.

Andreas Shiamishis, Group CEO, commented on results:

«The operating environment we faced in the last 14 months has been the most difficult for years. All businesses, that operating in an economy and society that have been challenged by the pandemic and its impact, were affected and had to adapt their operations and strategy accordingly. The oil industry has been among the hardest hit, as travel restrictions continue to affect demand for our products.

As a result, despite oil prices returning to pre-crisis levels, the international refining environment records, for the fourth quarter in a row, very weak margins, while fuels demand in our key markets remains lower than normal levels. Over the coming months, we expect a substantial improvement, as the progress in vaccinations will increase domestic traffic and air travel in an important period for tourism especially for our country.

The 1Q21 results reflect this environment with low refining profitability, which due to its significant importance, outweighs improvements achieved in other Group business units. Turning on the quarter's positive highlights, the strong IFRS profitability due to the prices' recovery, offsets a material part of the losses recorded last year, while the continued financing costs reduction, allows the planning of a more ambitious growth plan.

In terms of strategy, there is a growing necessity to transform the Group and transition to New Energy, with investments that complement our traditional activities. The Group operates a business model set up during the '90s and although it has proven successful to-date, it has to adopt to changes in environmental goals, as well as expected prevailing conditions in the energy market and the economy in the coming years.

"VISION 2025" aims to position the Group as a key player in this new market, through a holistic improvement and development program, which defines our strategy in all ESG activities, investment strategy, organisational structure, corporate governance and the Group's identity. "VISION 2025" is an ambitious roadmap, which despite the implementation challenges, is a must for the Group's further development and will benefit all stakeholders and the Greek economy».

Crude oil prices increase and volatility of refining margins. Further increase in CO2 emission allowance prices

International crude oil prices continued to recover in the first quarter, as global demand increased and the OPEC+ crude oil production cut agreement was extended, with Brent prices averaging at $61/bbl in 1Q21, reaching $66/bbl in March, at pre-COVID-19 crisis levels.

The US dollar continued weakening vs the euro, at the lowest quarterly average of the last two years, mainly reflecting monetary policy; euro came in at 1.20 in 1Q21.

CO2 emission allowance prices were significantly higher, exceeding €40/MT at the end of 1Q21, at a multiple compared to the last 3 years. This increase, combined with the reduction of allowances for European manufacturing, is a competitive disadvantage for the European refiners, with operational and strategic implications.

Gasoline cracks increased slightly due to demand recovery, while middle distillates remained at multi-year lows as aviation demand is still weak. Brent-Urals margin strengthened against the lows of the previous three quarters; as a result, FCC margins averaged at $2/bbl, with Hydrocracking margins at $-0.1/bbl. 

Weak domestic market demand

Domestic fuel demand in 1Q21 was 14% lower, at 1.5m MT, with auto-fuels consumption recording an even higher decline of 16%, due to the mobility restrictions in the first quarter of the year. Heating gasoil demand also decreased by 10% due to mild weather. Bunkering fuels demand amounted to 575k MT (-4%), with significant drop in aviation (-69%).

Strong balance sheet, financing cost reduction 

Following the successful refinancing of €900m credit facilities, the Group significantly improved its financing mix, increasing the percentage of committed credit lines and expanding their maturity profile. In addition, the financing cost in 1Q21 amounted to €24m, the lowest level in recent years, falling below €100m on an annual basis. Regarding the refinancing of bonds maturing in October '21, amounting to €200m, the Group is reviewing its options, considering the "2025 Vision" strategy program.

Net Debt came in at €2.2bn, mainly due to the increase of international prices and higher working capital.

Key highlights and contribution for each of the main business units in 1Q21 were:

REFINING, SUPPLY & TRADING

-  Refining, Supply & Trading 1Q21 Adjusted EBITDA at €6m.

-  Production at 3.4m MT (-13%), with respective sales which came in at 3.4m MT (-12%).

-  HELPE's system flexibility allowed the materialisation of opportunities in the IMO fuel trading and production optimization at Aspropyrgos refinery.

PETROCHEMICALS

-  Petrochemicals achieved its highest performance historically, capturing strong PP margins, with Adjusted EBITDA amounting to €36m (+ 84%) in 1Q21.

-  HELPE's BoD approved the investment of €35m to increase the capacity of the polypropylene plant in Thessaloniki, by 25%, to 300k MT.

MARKETING

-  In domestic marketing, cost control efforts and improved operational performance with the introduction of the new 98-octane gasoline in the EKO petrol station network, mitigated the impact of weak demand for auto and aviation fuels, with the 1Q21 Adjusted EBITDA at €11m.

-  In international marketing, the results were mainly affected by the significant sales volumes decline due to travel restrictions which led 1Q21 Adjusted EBITDA to €10m.

ASSOCIATE COMPANIES

-  DEPA Group contribution to 1Q21 consolidated Net Income came in at €11m.

-  ELPEDISON 1Q21 EBITDA was 37% higher, at €23m, due to due to improved performance of the upgraded Thessaloniki plant and exploitation of gas trading opportunities.

HELLENIC PETROLEUM GROUP

Key consolidated financial indicators (prepared in accordance with IFRS) for 1Q21 are shown below:

€ million	1Q20	1Q21	% Δ
P&L figures
Refining Sales Volumes ('000 ΜΤ)	3,883	3,410	-12%
Sales	1,919	1,722	-10%
EBITDA	-416	176	-
Adjusted EBITDA 1	128	60	-53%
Net Income	-341	90	-
Adjusted Net Income 1	44	2	-
Balance Sheet Items
Capital Employed	3,866	4,183	8%
Net Debt	1,906	2,244	18%
Debt Gearing (ND/ND+E)	49%	54%	-

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 2021	31 December 2020
ASSETS
Non-current assets
Property, plant and equipment	10	3.368.517	3.379.813
Right-of-use assets	11	225.750	235.541
Intangible assets	12	104.804	105.841
Investments in associates and joint ventures	7	436.253	416.542
Deferred income tax assets		75.779	72.161
Investment in equity instruments	3	905	959
Loans, advances and long term assets		68.859	71.676
		4.280.867	4.282.533
Current assets
Inventories	13	1.086.847	694.410
Trade and other receivables	14	593.043	544.795
Income tax receivables		36.893	37.699
Assets held for sale		2.674	2.466
Derivative financial instruments	3	9.875	9.945
Cash and cash equivalents	15	683.332	1.202.900
		2.412.664	2.492.215
Total assets		6.693.531	6.774.748
EQUITY
Share capital and share premium	16	1.020.081	1.020.081
Reserves	17	274.651	273.959
Retained Earnings		582.482	492.457
Equity attributable to equity holders of  the parent		1.877.214	1.786.497
Non-controlling  interests		62.028	62.340
Total equity		1.939.242	1.848.837
LIABILITIES
Non-current liabilities
Interest bearing loans & borrowings	18	2.128.387	2.131.371
Lease liabilities		162.943	170.896
Deferred income tax liabilities		56.887	32.572
Retirement benefit obligations		195.634	194.887
Provisions		38.247	39.022
Other non-current liabilities		27.771	27.957
		2.609.869	2.596.705
Current liabilities
Trade and other payables	19	1.306.312	1.546.844
Derivative financial instruments		6.992	4.635
Income tax payable		2.179	1.673
Interest bearing loans & borrowings	18	799.359	744.561
Lease liabilities		28.330	30.240
Dividends payable		1.248	1.253
		2.144.420	2.329.206
Total liabilities		4.754.289	4.925.911
Total equity and liabilities		6.693.531	6.774.748

Group Consolidated statement of comprehensive income

		For the three month period ended
	Note	31 March 2021	31 March 2020
Revenue from contracts with customers	4	1.722.327	1.918.964
Cost of sales		(1.507.622)	(2.287.093)
Gross profit / (loss)		214.705	(368.129)
Selling and distribution expenses		(70.691)	(80.846)
Administrative expenses		(31.459)	(34.437)
Exploration and development expenses		(861)	(1.305)
Other operating income and other gains	5	5.861	8.629
Other operating expense and other losses	5	(3.844)	(2.960)
Operating profit /(loss)		113.711	(479.048)
Finance income		723	1.062
Finance expense		(24.904)	(26.707)
Finance expense - lease finance cost		(2.550)	(2.748)
Currency exchange gain / (loss)	6	5.162	2.262
Share of profit / (loss) of investments in associates and joint ventures	7	19.687	45.407
Profit / (loss)  before income tax		111.829	(459.772)
Income tax credit / (expense)	8	(21.452)	119.074
Profit / (loss) for the period		90.377	(340.698)
Profit / (loss) attributable to:
Equity holders of the parent		90.067	(339.809)
Non-controlling interests		310	(889)
		90.377	(340.698)
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	24	(224)
Changes in the fair value of equity instruments	17	(41)	(436)
Net other comprehensive income / (loss) that will not be reclassified to profit or loss (net of tax):		(17)	(660)
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	649	(25.474)
Currency translation differences and other movements	17	75	(216)
Net other comprehensive income / (loss) that may be reclassified subsequently to profit or loss (net of tax):		724	(25.690)
Other comprehensive income / (loss)  for the period, net of tax		707	(26.350)
Total comprehensive income / (loss) for the period		91.084	(367.048)
Total comprehensive income / (loss) attributable to:
Equity holders of the parent		90.759	(366.098)
Non-controlling interests		325	(949)
		91.084	(367.048)
Basic and diluted earnings / (losses) per share (expressed in Euro per share)	9	0,29	(1,11)

Group Consolidated statement of cash flows

		For the three month period ended
	Note	31 March 2021	31 March 2020
Cash flows from operating activities
Cash generated from / (used in) operations	20	(518.426)	(221.655)
Income tax received / (paid)		390	(3.590)
Net cash generated from / (used in) operating activities		(518.037)	(225.245)
Cash flows from investing activities
Purchase of property, plant and equipment & intangible assets	10,12	(39.830)	(35.532)
Proceeds from disposal of property, plant and equipment & intangible assets		133	665
Share capital issue expenses		(4)	-
Grants received		21	43
Interest received		723	1.062
Prepayments for right-of-use assets		(234)	(215)
Net cash generated from / (used in) investing activities		(39.193)	(33.977)
Cash flows from financing activities
Interest paid		(8.765)	(15.659)
Dividends paid to shareholders of the Company		(5)	(76.215)
Proceeds from borrowings		55.148	239.681
Repayments of borrowings		(1.089)	68
Payment of lease liabilities - principal, net		(10.134)	(10.015)
Payment of lease liabilities - interest		(2.550)	(2.748)
Net cash generated from / (used in) financing activities		32.605	135.112
Net increase / (decrease) in cash and cash equivalents		(524.625)	(124.110)
Cash and cash equivalents at the beginning of the period	15	1.202.900	1.088.198
Exchange gain / (loss) on cash and cash equivalents		5.056	6.564
Net increase / (decrease) in cash and cash equivalents		(524.625)	(124.110)
Cash and cash equivalents at end of the period	15	683.332	970.652

Parent Company Statement of Financial Position

		As at
	Note	31 March 2021	31 December 2020
ASSETS
Non-current assets
Property, plant and equipment	9	2.752.646	2.766.635
Right-of-use assets	10	29.892	32.157
Intangible assets	11	7.558	8.094
Investments in subsidiaries, associates and joint ventures		1.066.366	1.064.566
Investment in equity instruments	3	535	587
Loans, advances and long-term assets		41.605	42.956
		3.898.602	3.914.995
Current assets
Inventories	12	988.426	599.613
Trade and other receivables	13	516.941	489.979
Income tax receivables		33.830	33.830
Derivative financial instruments	3	9.875	9.945
Cash and cash equivalents	14	493.793	992.748
		2.042.865	2.126.115
Total assets		5.941.467	6.041.110
EQUITY
Share capital and share premium	15	1.020.081	1.020.081
Reserves	16	280.186	279.576
Retained Earnings		594.480	520.475
Total equity		1.894.747	1.820.132
LIABILITIES
Non-current liabilities
Interest bearing loans and borrowings	17	1.929.658	2.064.808
Lease liabilities		19.842	21.279
Deferred income tax liabilities		27.410	2.773
Retirement benefit obligations		160.338	159.782
Provisions		22.287	22.287
Other non-current liabilities		12.558	12.685
		2.172.093	2.283.614
Current liabilities
Trade and other payables	18	1.185.239	1.427.067
Derivative financial instruments	3	6.992	4.635
Income tax payable		450	450
Interest bearing loans and borrowings	17	672.855	494.675
Lease liabilities		7.843	9.284
Dividends payable		1.248	1.253
		1.874.627	1.937.364
Total liabilities		4.046.720	4.220.978
Total equity and liabilities		5.941.467	6.041.110

Parent Company Statement of Comprehensive Income

		For the three-month period ended
	Note	31 March 2021	31 March 2020
Revenue from contracts with customers	4	1.572.464	1.740.600
Cost of sales		(1.419.307)	(2.173.932)
Gross profit / (loss)		153.157	(433.332)
Selling and distribution expenses		(20.780)	(27.553)
Administrative expenses		(18.653)	(20.612)
Exploration and development expenses		(30)	(1.017)
Other operating income and other gains	5	3.838	5.014
Other operating expense and other losses	5	(2.599)	(550)
Operating profit/(loss)		114.933	(478.050)
Finance income		1.511	2.220
Finance expense		(22.788)	(25.392)
Finance expense - Lease finance cost		(305)	(358)
Currency exchange gains/(losses)	6	5.098	2.295
Profit/(Loss) before income tax		98.449	(499.285)
Income tax	7	(24.444)	118.642
Profit/(Loss) for the period		74.005	(380.643)
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	(39)	(338)
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	649	(25.474)
Other Comprehensive income/(loss) for the period, net of tax		610	(25.812)
Total comprehensive income/(loss) for the period		74.615	(406.455)
Basic and diluted earnings/(losses) per share (expressed in Euro per share)	8	0,24	(1,25)

Parent Company Statement of Cash flows

		For the three-month period ended
	Note	31 March 2021	31 March 2020
Cash flows from operating activities
Cash generated from / (used in) operations	19	(501.338)	(246.288)
Income tax received / (paid)		-	(795)
Net cash generated from / (used in) operating activities		(501.338)	(247.083)
Cash flows from investing activities
Purchase of property, plant and equipment & intangible assets	9,11	(24.732)	(24.360)
Proceeds from disposal of property, plant and equipment & intangible assets		29	-
Dividends received		-	150.000
Interest received		1.511	2.220
Participation in share capital increase of subsidiaries, associates and joint ventures		(1.799)	(10.000)
Net cash generated from / (used in) investing activities		(24.991)	117.860
Cash flows from financing activities
Interest paid		(15.956)	(14.237)
Dividends paid		(5)	(76.215)
Proceeds from borrowings		51.040	218.120
Repayments of borrowings		(9.540)	(152.002)
Payment of lease liabilities - principal		(2.958)	(2.759)
Payment of lease liabilities - interest		(305)	(358)
Net cash generated from /(used in) financing activities		22.276	(27.451)
Net increase / (decrease) in cash and cash equivalents		(504.053)	(156.674)
Cash and cash equivalents at the beginning of the period	14	992.748	888.564
Exchange gains / (losses) on cash and cash equivalents		5.098	6.498
Net increase / (decrease) in cash and cash equivalents		(504.053)	(156.674)
Cash and cash equivalents at end of the period	14	493.793	738.388

This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.

RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our Privacy Policy.

END

QRFDZGZKDNDGMZM