Release Date: August 22, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Orlen SA (PSKOF, Financial) reported a strong LIFO-based EBITDA of PLN7.7 billion in the second quarter and over PLN15 billion for the first half of 2024, indicating solid financial performance despite challenging macroeconomic conditions.
- The company successfully increased its retail sales, driven by a successful promotional campaign, which helped offset the negative effects of declining refining and petrochemical margins.
- Orlen SA (PSKOF) has rationalized its investment spending, reducing planned expenditures by 9% to over PLN35 billion, focusing on upgrades, modernization, and maintenance CapEx.
- The energy segment reported strong operational performance with an EBITDA of close to PLN2 billion, benefiting from favorable macro and regulatory environments.
- The company has expanded its renewable energy resources portfolio, strengthening its market position with new contracts for solar PV and wind farms, totaling over 300 megawatts capacity.
Negative Points
- Orlen SA (PSKOF) faced a challenging macro environment with refining margins down by over 9% and petrochemical margins also declining, impacting overall profitability.
- The petchem segment continues to operate in a very challenging environment, reporting a slight loss despite higher production volumes and demand.
- The upstream segment reported an operational loss of PLN3.9 billion due to the gas windfall charge, significantly affecting the company's financial results.
- The company experienced a negative net result in the second quarter, down PLN6 billion year-on-year, primarily due to higher costs and lower compensation related to regulatory charges.
- Orlen SA (PSKOF) is facing strategic challenges with the Olefin III project, which is considered ill-prepared and requires a major decision on its future, potentially impacting financial resources and strategic focus.
Q & A Highlights
Q: What is the outlook for Orlen's cooperation with Saudi Aramco, and are there any plans for auctions or reductions in coal consumption?
A: Ireneusz Fafara, President of the Management Board, stated that there are no current plans for auctions. Regarding coal consumption, Orlen has declared a phase-out by 2035. Discussions with Saudi Aramco are ongoing, with a meeting planned to outline future cooperation in Poland and Europe.
Q: What is the status of the Olefins III project, and what are the potential outcomes?
A: The construction process is ongoing, and a decision on the project's future will be made by December. Options include stopping the project, optimizing it, or continuing as planned. The project has been described as ill-prepared, and a decision will be taken before a new strategy is announced in December.
Q: Has Orlen considered appealing against the windfall charge regulations deemed unconstitutional by the Polish Senate?
A: Ireneusz Fafara mentioned that there were no attempts to appeal against these regulations by the previous management. The focus is now on cooperation with Saudi Aramco in the petrochemical business, with discussions ongoing.
Q: What is the reason behind Orlen's negative net results in the second quarter?
A: Magdalena Bartos, Member of the Management Board, explained that the negative net result was primarily due to write-downs related to compensation for sensitive gas and electricity customers. Higher costs and lower compensation revenue were significant factors.
Q: What is Orlen's strategy regarding its retail network and potential acquisitions?
A: Orlen considers its current number of stations, 3,500, as final and does not plan further acquisitions unless a compelling opportunity arises. Rebranding is underway in Hungary and Slovakia, with plans for Austria in the future.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
