PKN ORLEN Improves Performance - further effects of the restructuring
The third quarter of 2003 proves that PKN ORLEN is on the path of quick and steady value growth. The restructuring programmes implemented at ORLEN are bringing about the desired effects, which confirms that the development concept proposed by the Executive Board has been correct.
PKN ORLEN Improves Performance - further effects of the restructuring
14-11-2003
The third quarter of 2003 proves that PKN ORLEN is on the path of quick and steady value growth. The restructuring programmes implemented at ORLEN are bringing about the desired effects, which confirms that the development concept proposed by the Executive Board has been correct.
In Q3 2003, ORLEN's net profit calculated in accordance with the International Financial Reporting Standards amounted to PLN 253m, which represents an 48.3% increase over the corresponding period in 2002. Moreover, the net profit calculated on the LIFO basis rose by as much as 190% over the Q3 2002 figure. This strong performance follows from e.g. a fall in the balance of stocks and accounts receivable. Higher profitability is also attributable to the execution of the cost reduction programme, margin optimisation throughout the Company, and reorganisation of the retail network, supported by training of ORLEN employees at the service stations.
In the retail segment, the profit rose by PLN 75m compared with Q3 2002. Such a good performance was achieved as a result of higher product margins on diesel oil and LPG in the retail segment (the share of these two products in the sales structure is growing, offsetting the falling consumption of gasoline), and an 18% increase in the margin on non-fuel products (strong sales dynamics). It should be emphasised that a steady growth is being recorded in the volume of fuel retail sales under the FLOTA programme - in Q3 2003 the increase was 38.9% above Q3 2002.
ORLEN Deutschland's operating profit was PLN 8.9m, which - given the dynamic implementation of the rebranding process - comes as a promise of strong performance in the quarters to come. Out of 456 service stations selected for rebranding, almost 300 have already been rebranded. The visualisation programme has been completed in 80% for the ORLEN brand and 59% for the STAR brand. This progress implies that the rebranding process will be completed as projected, that is by the end of 2003.
PKN ORLEN is now taking back some of the market lost in the first half of the year; the loss was evidenced by a decline in the volumes of crude oil throughput and fuel sales. In the quarter under review, sales of refinery products rose 4%, which - given ORLEN's efforts to optimise the total margin, whose material component is the inland premium (PLN 115m in Q3 2003) - puts this figure among the year's most significant results. Further stages of the restructuring, that is margin optimisation and the first steps in execution of the cost reduction programme, contributed to an almost PLN 100m increase (over the analogous 2002 figure) in the refining result computed with the LIFO method.
ORLEN's performance was also favourably affected by a strong growth in the sales of monomers and fertilisers. In Q3 2003, the net profit of the Company's chemical segment improved by 42.1% as compared to the corresponding period in 2003. This improvement is attributable to the JV with Basell, favourable market conditions in Europe (a fall in imports, a rise in exports) as well as replenishing of stocks by Polish wholesalers; Anwil, a member of the ORLEN Capital Group, took advantage of these developments.
As for the cost savings programme, in Q3 the savings reached PLN 49m out of the amount of PLN 100m planned for the year. Depending on the area, 33% to 64% of the initiatives implemented have begun to produce effects. The largest portion of the savings planned for this year is seen in logistics. The second most important area is production and technology. It should also be emphasised that virtually all of the cost-saving initiatives have already been commenced, and the programme's implementation risk is somewhat diversified by the large number of the initiatives. All activities under the programme have been conducted as planned. Moreover, the first results of the restructuring, not only at PKN ORLEN but also throughout the ORLEN Capital Group, are to be seen in the reduction of employment by over 2,000 personnel as compared to Q3 2002. The Value-Based Management (VBM) programme and the Risk Management Programme have been also carried out in accordance with the schedule.
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