ORLEN Group consolidated results for Q2 2024

“In the second quarter of 2024, we demonstrated that strengthened management competencies can pretty soon support the delivery of solid results, even in an adverse macroeconomic climate. Amid year-on-year declines across key indicators – including refining and petrochemical margins, the Urals-Brent differential and energy prices – we booked over PLN 11 billion in adjusted LIFO-based EBITDA. As announced, we have fast-tracked our efforts. We are building an entirely new governance framework based on transparent principles. In the first half of this year, we adopted a uniform management policy for occupational safety at almost all Group companies, which has already translated into a quarter-on-quarter reduction in incident rates. We are pursuing a strategy to increase our renewable energy capacities, set not only to strengthen our energy segment, but also gradually improve the carbon emissions profile of our future production. In August, we signed a preliminary agreement to purchase solar PV farms and a wind farm from Portugal’s EDPR Group. With the single decision, we expanded the ORLEN Group’s renewable energy portfolio by a third,” says Ireneusz Fąfara, CEO and President of the ORLEN Management Board.

In the second quarter of 2024, the ORLEN Group generated:

• Revenue of PLN 69.5 billion
• LIFO-based EBITDA, adjusted for the effects of regulations, of PLN 11.3 billion
• Operating cash flows of PLN 6 billion

In the three months ended 30 June 2024, the refining segment generated close to PLN 2.6 billion in LIFO-based EBITDA. The effects of lower refining margins and Urals-Brent differential in the period were offset by the appreciation of the złoty against the US dollar. The Group maintained a high degree of refining capacity utilisation, reaching 90%. During the period, the Group’s refineries in Poland, the Czech Republic and Lithuania processed a combined total of 9.4 million tonnes of crude oil. Both Poland and the Czech Republic saw y/y rises in fuel yields, with a comparable level reported by Lithuania.

The upstream segment posted a loss of PLN 3.9 billion, due primarily to regulatory measures designed to support consumers (contribution to the Price Difference Compensation Fund of PLN 7.7 billion for the second quarter of 2024), combined with an approximately 12% decline in gas prices. Having consolidated the assets of the newly acquired Norway-based company KUFPEC, the Group improved its hydrocarbon production by 27% y/y, to some 208 thousand boe/d, which helped minimise the impact of adverse macroeconomic conditions on the segment.

In the second quarter, the gas segment recorded EBITDA of PLN 4.1 billion. This result was delivered amid lower (y/y) sales margins and an adverse macro impact. Factors boosting the segment’s performance included higher volumes of gas sold and lower (y/y) prices of gas withdrawals from storage. Gas imports grew over the period by 10% y/y, with LNG accounting for 48% of the total. At the end of June, the ORLEN Group’s gas storage inventory at home and abroad totalled 17 TWh.

As a result of continuing macroeconomic headwinds, including strong pressure to lower margins on all petrochemical products, the petrochemical segment’s LIFO-based EBITDA came in at PLN (-)180 million. Concurrently, sales volumes of petrochemical products rose by 8% y/y.

The energy segment delivered EBITDA of ca. PLN 2 billion for the three months ended 30 June 2024. The ORLEN Group’s installed capacity totalled 5.6 GWe. Its electricity output over the period was 3 TWh, down by 17% y/y due to scheduled shutdowns of cogeneration assets and lower demand for energy from the Ostrołęka Power Plant. Today, nearly 70% of the Group’s electricity output is already generated from renewable sources and gas-fired units.

In the three months ended 30 June 2024, the retail segment’s EBITDA came in at PLN 893 million. This solid performance was driven by an 18% increase in sales, of which growth recorded in Poland was in excess of 10%. 348 modern fuel stations were added to ORLEN’s retail network, bringing the total to 3,505 locations across seven European countries. ORLEN is also consistent in expanding its alternative fuel infrastructure, adding 144 new stations (y/y), to reach 816. Additionally, the number of non-fuel outlets grew to 2,681.

“What the past quarter primarily proved was that we have delivered on our promise to strengthen the corporate governance, communicate with the market and tighten financial discipline for the benefit of our shareholders. We continue to advance all areas of our business, while reinforcing ORLEN's position as a dividend paying company, sharing profits with shareholders for the 12th consecutive year. By reviewing and optimising our plans, we successfully rationalised this year’s capital expenditure, which we now expect to total PLN 35.3 billion, approximately 9% less than initially projected. This does not mean that we are scaling down our growth plans – quite the contrary. But we can see optimisation potential in our existing investments and business activities, especially on improved financial discipline in project planning and execution,” says Magdalena Bartoś, CFO and Vice President of the ORLEN Management Board.

Under the General Meeting’s resolution, the dividend record date has been set for 20 September, while the payment date will be 20 December 2024.

In the second quarter, the ORLEN Group generated PLN 6 billion in operating cash flows, reporting a net debt to EBITDA ratio of 0.07x at the end of the second quarter. ORLEN’s highest ever credit ratings were reaffirmed at A3 by Moody’s Investors Service and BBB+ by Fitch Ratings.