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KN Energies AB

Earnings Release May 29, 2015

2252_ir_2015-05-29_92fb2aea-3b6a-4410-b487-336dde86f51d.pdf

Earnings Release

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SC KLAIPĖDOS NAFTA RESULTS FOR THE 3 MONTH PERIOD OF 2015

Main activities of SC Klaipedos nafta (herinafter the Company)

Details about the company

Company name SC Klaipedos
nafta
Company code 110648893
Authorized share capital EUR 110,231,170
Registered address Buriu
street 19, P.O. Box
81,
91003
Klaipeda-C, Lithuania
Telephone +370 46 391772
Fax +370 46 311399
E-mail [email protected]
Webside www.oil.lt, www.sgd.lt
Legal –
organisational
form
Stock company
Date and place of registration 27 September 1994, State Enterprise
Centre of Registers

The mission of the Company is to be a reliable import and export terminal of oil products and LNG for Lithuania and neighbor regions, to enable the region's oil refineries to export on a continuous basis their production by tankers through the Company's terminal to the Western European and further markets also to ensure alternative gas supply for the users in Lithuania and other neighbor countries.

The vision of the Company is to be a financially sustainable terminal for transhipment of oil products and LNG, implement projects in time and invest in initiatives that will increase economic returns for the investors.

SC Klaipėdos Nafta is a strategic company of the Lithuanian national security and energy sector.

The strategic objectives of AB Klaipėdos nafta:

To increase the effectiveness of the Company, Improvement of the internal processes, Assurance of the safety requirements and environmental protection, To diversify activity of the Company, To become the main centre of oil and gas in

  • Lithuania.

The authorized capital is divided into 380,606,184 ordinary shares with a nominal value of 0.29 EUR.

Main shareholder is The Republic of Lithuania, represented by the Ministry of Energy of the Republic of Lithuania, holding 72.31 % of shares (275,241,290 unit).

The significant events in the 1st Quarter of 2015

  • On 12th of January, 2015, the Ministry of Finance of the Republic of Lithuania signed a state guarantee agreement with the Nordic Investment Bank (NIB) regarding the loan of EUR 34,754 thousand to be given by the NIB to Company. The state guarantee agreement secures the obligations of the Company to the NIB according to the credit agreement entered for a term up to 20 years on 27th of November, 2014 for partial financing of the LNGT project.
  • On 9 th of March, 2015 the Company concluded the LNG terminal jetty usage agreement with the Klaipeda State Seaport Authority.
  • On 24th of April, 2015 the Company has announced the annual LNGT capacities allocation procedure and an invitation for the potential users of the LNGT to submit their requests for allocation of LNGT capacities for the upcoming Gas Year, lasting from the 1 st of October, 2015 to the 1 st of October, 2016. The total volume of the LNG terminal capacity being allocated is 1.45 bcm per annum.

Results for the 3 month period of 2015 4

On 30th of April, 2015 the General Meeting of Shareholders of the Company was held during which:

• the set of the audited financial statements of 2014 was approved and adduced Annual Report of the Company for the year 2014 to the shareholders.;

• The Company's distributable profit was distributed, part of which was allocated for dividends – EUR 93 thousand or 0.0002432210 per share;

• Audit firm JSC Ernst & Young Baltic was appointed to audit financial statements of the year 2015-2016.

On 21th of May, 2015 the Company announced the invitation for the interested investors to acquire shares controlled by the Company of JSC LITGAS (total 1/3 of shares). The sales of shares is executed in order to implement unbundling of the activities in the natural gas sector according to the recommendations of European Commission.

Oil terminal characteristics

2 Jetties

Results for the 3 month period of 2015

Railway

  • 2 tracks for light oil products LFO (total 60 tank-cars)
  • 2 tracks for heavy oil products HFO (total 64 tank-cars)
  • One of the track is universal: can load both HFO and LFO
  • simultaneously.

Two four-track railway trestles provide a possibility to discharge or load 124 tank-cars

Storage tank farm

  • Total 28 tanks

450 cub. m thousand total volume (plus in Subacius FS 340 cub. m thousand )

Biological Waste Water Treatment Facilities

Waste water collected and treated annually up to 400 cub. m thousand (160 m3/h)

Depth: 14 m Harbour entrance depth: 14.5 m Length: 270 each Tanker batch: up to 100,000 t with 12.5 m allowable

  • draught.

Road tanker loading

A service to import gasoline and diesel by tankers for the Lithuanian market needs

  • 4 loading points at the same time

LNG terminal infrastructure

Results for the 3 month period of 2015 6

LNG terminal: the first LNG terminal in the Baltic states, which comprise of the LNG floating storage and regasification unit – FSRU (170,000 thousand m3 ), jetty (450 m length) and pipeline (18 km.). LNG to the terminal are delivered by the vessels - LNG carriers.

Results for the 3 month period of 2015 7

294 m

12.6 m

45 m

Storage capacity 170,000 m3

Regas capacity 11 mln.m 3/d

LNG terminal floating storage regasification unit (FSRU) technical parameters

SC Klaipėdos nafta transshipment of oil products in 2001 – 2015 (million tones)

Key operating figures

Import and other

Transit (Belorussian and Russian refineries petroleum products)

Export (AB "Orlen Lietuva")

In 2015 the transhipment volume has increased by 31%. The main reasons:

  • Due to the change in macroeconomics conditions the oil refinery margins has increased that made SC Orlen Lietuva (OL) to increase refinery volume and transhipment in the Company's terminal. Total transhipment increased by 27.7%.
  • The Company has expanded its cooperation and attracted additional petroleum products from Belorussia refineries that increased transhipment volume of transit cargos (most of them light petroleum products).

Key financial results

1) The Company's managers include: General Manager, Deputy Manager, Heads of Divisions and their deputies, Heads of Divisions.

Results for the 3 month period of 2015

2015 m. 2014 m. Pokytis
3
mėn.
3
mėn.
+/- %
Sales revenue thousand EUR 26,614 8,944 17,670 197.6%
Gross profit thousand EUR 6,565 3,348 3,217 96.1%
EBITDA thousand EUR 9,061 4,173 4,888 117.1%
EBIT thousand EUR 5,874 2,343 3,531 150.7%
EBITDA margin % 34.0% 46.7% -12.7% -27.2%
EBIT margin % 22.1% 26.2% -4.1% -15.6%
Financial and investment activities result thousand EUR -724 16 -740 -4625.0%
Profit before taxation thousand EUR 5,150 2,359 2,791 118.3%
Net profit thousand EUR 4,473 1,997 2,476 124.0%
Net profit margin % 16.8% 22.3% -5.5% -24.7%
Transhipment of oil products by type: thousand tons 1,490 1,137 353 31.0%
-
HFO -
heavy oil products
thousand tons 773 710 63 8.9%
-
LFO -
light oil products
thousand tons 717 427 290 67.9%
Average number of employees in
categories
369 384 -15 -3.9%
Managers 1) 37 34 3 8.8%
Specialists 133 126 7 5.6%
Workers 199 224 -25 -11.2%
Average monthly salary (gross) EUR/month 1,276 1,210 66 5.5%
Managers 1) EUR/month 3,339 3,324 15 0.5%
Specialists EUR/month 1,578 1,580 -2 -0.1%
Workers EUR/month 1,071 1,002 69 6.9%

SC Klaipedos nafta sales revenues for the Q1 of 2015 has almost doubled comparing to the Q1 of 2014 and comprised EUR 26.6 million.

The activity of the LNG terminal which commenced in the end the year 2014 is the main reason for the increase in Company's revenues. Total recognized revenues for the first quarter of 2015 comprise EUR 16.2 million. The revenues of the oil terminal also has increased – by 16.4% or by EUR 1.4 million.

The net profit of the Company for the 3 month period of 2015 has increased more than double to EUR 4.5 million (for 3 month of 2014 – EUR 2.0 million). EBITDA for the 3 month comprise 9.1 EUR million and is higher almost 2.2 times comparing to the 3 month of 2014. Net profit to sales ratio has reduced to 19%.

The profitability of the Company for the Q1 2015 has significantly increased due to the two main reasons:

  • The expenses of the LNG terminal project implementation in 2014 has been replaced by the activity profit as terminal has started its operations (total impact EUR 1.0 million).
  • The significantly increased (+31%) transhipment volume of the oil terminal has positively affected sales income and profit (total impact for the net profit – EUR 1.4 million).

Sales revenues

Main financial ratios

Main financial ratios - segments

Assets, equity and liabilities

  • Cash and cash equivalents amounted 6.6% of total assets
  • Trade and other receivables increased to EUR 24.5 million (2.3 times) because of not collected security supplement to the natural gas price (SC Achema overdue); total debt as of 31-03-2015 comprise EUR 18.2 million
  • Assets turnover ratio: 0.12 (31-03-2014 0.05)

Total equity amounted to 74.9 % of the total assets (31-03-2015). Non-current liabilities amounted EUR 31.2 million, including European Investment Bank loan comprising EUR 29.8 million. Debt to assets ratio– 0.25 (0.20 – 31-12-2014) Gross liquidity ratio – 1.78.

Investments

Results for the 3 month period of 2015 15

  • To increase the oil terminal's flexibility in accepting different types of oil products;
  • To ensure the compliance with environmental and fire safety requirements;
  • The implementation of the LNGT Project.
  • Implementation of the onshore LNG reloading station

Total investments into the noncurrent assets during the first quarter of 2015 comprise EUR 1.8 million. The major part of investments were allocated to the finalizing works of the construction of the LNG terminal infrastructure.

As of 1st January 2015, Klaipedos Nafta has successfully started commercial operations of its floating storage and regasification unit (FSRU) named Independence, providing LNG regasification and reloading services on a third-party-access basis.

The Company intends to construct an on-shore small-scale LNG reloading station in the port of Klaipeda. With this station the Company will be able to offer small scale LNG services, e.g. loading services for trucks, serving the increasing demand for LNG in the Baltic States and Poland.

Bomin Linde LNG, Germany based LNG provider of LNG as marine fuel, intends to become the user of the Klaipeda LNG terminal and to book regulated LNG reloading capacities in order to use the facility as the regional break-bulking hub for the Baltic Sea. The companies also agreed to jointly explore the possibilities to develop a bunkering vessel.

The Company and French company Sofregas in March 2015 have started the LNG reloading station Front-end Engineering Design (FEED) preparation and environment impact assessment. This is a second step in order to start the construction of the reloading station. At the first stage of analysis the technological study and concepts were made, i.e. made deep analysis of the LNG reloading station location and technological concept (see the following two pages for more).

After preparation of the FEED the construction are free to commence. As it was during the construction of the first LNG terminal in the Baltics, the same is followed now, expanding the infrastructure of the LNG, - all legal, environmental and other regulatory requirements are followed step by step very responsibly and all the required procedures are made. At the same time the negotiations are in progress with the potential clients/users of the LNG reloading station. In the nearest future the first preliminary contracts for the LNG capacities usage are to be signed.

LNG onshore reloading station project The main directions of the investments of the Company:

Technological concept BOG management unit

LNG onshore reloading station project (1)

LNG onshore reloading station project (2)

LNG loading and

bunkering location

Synergies with the oil terminal

  • Boil off would feed existing boilers
  • Existing jetty sufficient to hold required equipment
  • Existing firefighting systems
  • Instrument air and electrical systems
  • Qualified staff
  • Existing sufficient security measures
  • Truck loading performed already (light oil products)
  • Safe distance from neighbors

After evaluation it has been confirmed that from the point of safety and the optimal usage of the existing infrastructure the optimal location for the LNG reloading station is the territory of SC Klaipedos nafta (oil terminal) next to the Jetty no. 2. According to the study analysts this location is mostly appropriate as the safe distance requirements from neighbor companies and urban buildings are met and fire protection systems are in place.

Achievements and awards

During the Transport Week, one of the most important transport events in Central and Eastern Europe, took place on March 17-19th 2015 in Gdańsk, Poland, the Company was awarded the Baltic Trendsetters Club Certificate for developing the floating LNG terminal Independence and rearranging the Baltic's gas market through one ship call.

Results for the 3 month period of 2015 18On the 22th of the January 2015 in the annual Baltic Market Awards (BMA), organized by the Nasdaq, Klaipėdos nafta became the winner in the category "The Most Visible Improvement over the Year" and was invited to ring the Opening Bell at Nasdaq Market Site in Times Square, New York by Bob Greifeld, CEO of Nasdaq.

On the 28th of January, 2015 At the 8th annual European Gas Conference 2015, in Vienna, Klaipedos nafta won the Project of the Year award for the implementation of the Liquefied Natural Gas (LNG) Terminal project. Company was one of four nominees among such wellknown companies like Shell and Total Gas & Power.

Shareholders and share prices

DYNAMICS OF THE SHARE PRICE AT NASDAQ OMX VILNIUS DURING JANURY-MARCH MONTHS OF 2015

Since 2003 the shares of the Company are listed on NASDAQ OMX Vilnius stock exchange:

  • ISIN code LT0000111650
  • Abbreviation KNF1L
  • Share emission (pcs.) 380,606,184

Turnover in Vilnius stock exchange during January - March months of 2015 was EUR 0.7 million.

As of 31 March 2015 the Company's market capitalization was EUR 143.5 million.

  • As at 24 March 2015 all the shares of the Company were owned by 1,838 shareholders. Main shareholder is The Republic of Lithuania, represented by the Ministry of Energy of the Republic of Lithuania, holding 72.31 % of shares (275,241,290 unit).
  • On 30th of April, 2014 the general meeting of shareholders distributed the Company's profit of 2014 in the total sum - EUR 9,257 thousand, available for appropriation and approved the payment of dividends for the shareholders amounting EUR 0.0002432210 per share (total amount allocated for the dividends comprise 92,571 EUR).
Highest share price Lowest share price Share price at the end of
period
Average share
price
Turnover, unit Turnover, EUR
EUR 0.415 0.318 0.377 0.363 1,251,533 744,351

Turnover, EUR thousand KNF1L Share price, EUR NASDAQ OMX Vilnius index, EUR thousand

Results for the 3 month period of 2015

Dynamics of KNF1L share price, turnover and NASDAQ OMX Vilnius index during January – March of 2015

Management of the Company

Results for the 3 month period of 2015 21

30 April 2015 the General Meeting of Shareholders of the Company appointed Audit firm –"Ernst & Young Baltic" UAB to audit financial statements of the years 2015-2016.

The Supervisory Board comprise of 3 (three) members.

The Audit Committee comprise of 2 (two) members (after 26 -01-2015).

The Board comprise of 4 (four) members.

The Supervisory Board by the decision taken on 26 th of January, 2015, approved the resignation of an independent member of the Audit Committee, as well as the Chairman of the Audit committee - Mr. Simonas Rimašauskas as from 31 rd of January, 2015, due to the other business position held.

Members of the Board of the Company

Rytis Ambrazevičius

Independent Member of the Board of the Company. Elected as the Board member by the Supervisory Board on 24 October 2011. The Supervisory renewed the mandate on 29 April 2014 for 4 years or until the time, when the new Board is elected ant starts acting.

Mindaugas Jusius Independent Member of the Board of the Company. Elected as the Board member by the Supervisory Board on 24 October 2011. The Supervisory renewed the mandate on 29 April 2014 for 4 years or until the time, when the new Board is elected ant starts acting.

Dainius Bražiūnas

Member of the Board of the Company. Elected as the Board member by the Supervisory Board on 25 August 2014 until the term of office of the acting Board of Company.

Mantas Bartuška

Member of the Board of the Company, General Manager. Elected as the Board member by the Supervisory Board on 25 September 2014 until the term of office of the acting Board of Company.

There is no permanent Chairman of the Board elected, therefore, the Chairman of the Board is elected from the Board members every meeting by ad hoc principle.

The Directors of the Company

Mantas Bartuška General Manager

Gediminas Vitkauskas Director of Oil terminal department

Osvaldas Sabaliauskas Deputy General Manager of the Company

Tadas Matulionis Director of the LNG terminal department

Marius Pulkauninkas Director of Finance and Administration Department

Darius Turčinskis

Acting Director of Commerce department

From the 17th of February, 2015 Director of the LNGT department - Tadas Matulionis (previously deputy Director of the LNGT Department).

THANK YOU FOR YOUR ATTENTION!

Stock company Klaipedos nafta

Company code 1106488893

VAT payer code LT06488917

Buriu street 19, P.O. Box 81, 91003 Klaipeda-C, Republic of Lithuania

Tel. +370 46 391772

Fax +370 46 311399

[email protected]

www.oil.lt, www.sgd.lt

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