ORLEN Group consolidated results for Q1 2024
In the three months ended 31 March 2024, the ORLEN Group generated LIFO-based EBITDA* of PLN 8.4 billion and net profit of PLN 2.8 billion. The stable financial results were delivered with a PLN 1 billion q/q reduction in net debt. Over the period, the Group invested nearly PLN 6.4 billion across all its business lines. The retail segment saw a 20% y/y increase in sales reflecting growing demand in Poland and the Group’s entry into a new market with the acquisition of over 260 fuel stations in Austria. The energy segment’s performance remained stable, its electricity output from renewable and low-carbon sources upped to nearly 70%.
“We’re gathering momentum. Energy transition represents one of the most compelling business opportunities in history. It must be seized and capitalised on by ORLEN. This is why we’re prioritising the most promising projects and technologies, with a keener focus on efficiency. The goals outlined in the ORLEN Group’s 2030 strategy are aligned with the market development directions, but their implementation has fallen significantly behind schedule. We need to accelerate progress in many areas, and where that isn’t feasible or lacks a business rationale we will revise our previous plans. To meet our strategic goals, some investment projects need to be considerably fast-tracked. We know how to achieve this. The specifics of our revised strategic directions will be unveiled by the end of this year,” says Ireneusz Fąfara, CEO and President of the ORLEN Management Board.
In the three months ended 31 March 2024, the ORLEN Group generated:
· Revenue of PLN 82.3 billion
· LIFO-based EBITDA of PLN 8.4 billion*
· Net profit of PLN 2.8 billion
* Earnings before impairment losses on non-current assets of PLN (-)0.7 billion.
In the three months ended 31 March 2024, the refining segment generated PLN 2.3 billion in LIFO-based EBITDA. This earnings level was achieved against a backdrop of normalising refining margins as the segment maintained a high capacity utilisation rate of up to 90%. During the period, the Group’s refineries in Poland, the Czech Republic and Lithuania processed a combined total of 9.5 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 4.1 billion, due primarily to regulatory measures designed to support consumers, combined with an approximately 48% decline in gas prices. In the first quarter of 2024, the Group’s production grew by nearly 14% y/y, to reach some 215 thousand boe/d, driven largely by the consolidation of assets of the recently acquired KUFPEC in Norway.
In the three months to 31 March 2024, the gas segment recorded EBITDA of PLN 7.9 billion. This result was delivered amid lower (y/y) sales margins and an adverse macro impact. Positive drivers of the segment's performance included lower (y/y) prices of gas withdrawals from storage and falling import costs. Gas delivered to Poland over the period amounted to 28.1 TWh, with LNG accounting for 46% of the total. At the end of March, the ORLEN Group’s gas storage inventory at home and abroad totalled 8.6 TWh.
As a result of lower margins on all petrochemical products and the Polish currency’s strengthening against the euro, the petrochemical segment’s LIFO-based EBITDA came in at PLN 4 million. At the same time, sales volumes increased by 9% y/y overall, with notable rises recorded for olefins (up by 9%), fertilizers (up by 40%), and PTA (up by 37%). In Poland, sales grew by 13%.
The energy segment delivered EBITDA of PLN 2.4 billion for the three months ended 31 March 2024. The ORLEN Group’s total installed capacity reached 5.6 GWe, generating 5.5 TWh of electricity, which marked a 12% y/y increase. The growth in the generation volume was attributable, among other factors, to the acquisition of new wind farms. Today, nearly 70% of the Group’s electricity output is already generated from renewable sources and gas-fired units.
The retail segment’s EBITDA for the three months ended 31 March 2024 came in at PLN 511 million. The result was largely driven by a 20% increase in sales, including a 13% rise in Poland and 21% growth on the Czech market. For the first time, the segment reported contributions from the fuel station chain in Austria acquired in January 2024, which now accounts for 8% of total sales. As a result of this acquisition and other developments, 361 modern fuel stations were added to ORLEN’s retail network, bringing the total to 3,483 locations across seven European countries. ORLEN is also consistent in expanding its network of alternative fuel stations, adding 137 over the past year to reach 787, primarily in Poland (541) and the Czech Republic (142). Additionally, the number of non-fuel outlets grew to 2,666, with more than 70% located in Poland.
“Developing all areas of its business, ORLEN remains on a sound and stable financial footing. Our robust financial fundamentals allowed the Management Board, in line with our current dividend policy, to recommend a dividend payment of PLN 4.15 per share for 2023. We are recommitting to the core values that should guide a listed company. Our aim is to restore exemplary governance standards and adopt uniform reporting methods across the Group,” says Magdalena Bartoś, CFO and Vice President of the ORLEN Management Board.
At the end of March 2024, ORLEN generated PLN 11.7 billion in operating cash flows, keeping net debt at a secure level of PLN 0.8 billion. The ratio of net debt to EBITDA stood at (-)0.01x. This was well received by the financial market, with ORLEN’s highest ever credit ratings reaffirmed at A3 by Moody’s Investors Service and BBB+ by Fitch Ratings.