Refining
margins remained weak during the year with FCC cracking benchmark margin at
$2.86/bbl ($4.37/bbl in 2010), with record
historical
lows in 4Q driven by weak demand and lower gasoline and naphtha cracks. Simple
refining margins were also lower, albeit without significant impact on Group’s
performance as Elefsina and
Thessaloniki
remained closed for most of the year due to the upgrade projects.
International
concerns over crude oil supply chain issues, at first due to
Libya
and lately due to
Iran
supported high prices with Brent averaging $111/bbl, leading to an increase in working
capital requirements.
Greek
crisis and the full year impact of higher consumption taxes imposed in 2010,
led to further demand decline in the domestic market. Auto fuels and C&I
sales recorded an estimated 11% drop while heating gasoil increase was driven
mainly by weather conditions. At the same time, retail margins remain under
pressure as domestic market
ing
companies focused
on maintenance of sales volumes.
Positive results despite difficult
conditions:
Hellenic
Petroleum reported a positive set of results, despite the challenging
conditions for European refiners,
a difficult
Greek market and shut-downs for maintenance and upgrades. Group Adjusted EBITDA
was
€363m (-23% vs FY10) with Adjusted Net Income at €137m
(-33% vs FY10). Negative impact of lower margins and volumes was partly offset by
positive performance from Supply and Trading and cost control; International Marketing
recorded market share gains. The results of DEPA and ELPEDISON were supported
by increased natural gas-fired units participation in power generation.
Focus
remained on improving competitiveness with 2011 consolidated operating costs 8%
down vs last year. An additional 4% like for like reduction will be reported in
2012, following reorganisation of head office functions and domestic marketing
operations implemented in December 2011 with a €40m one-off effect on 4Q11
results. Continuous reorganisation, along with other transformation initiatives
in marketing, such as the s
upply
chain optimisation with the closure of 4 terminals in 4Q,
operational
improvements in refining and procurement savings led to annual
i
sed
cash benefits of
€165m to date
as well as improved
safety and environmental performance.
In 2011 the Group continued its portfolio
optimisation strategy with the sale of its non-core activities in
Georgia
, while t
he farm-out
of the
West Obayed
upstream
concession received final regulatory approval by the Egyptian Authorities.
Strong
balance sheet, proactive cash flow planning and working capital management
supported the significant progress on our investment plan with the completion of
the upgrade and start-up of Thessaloniki refinery, while the Elefsina refinery
upgrade is at 97% completion.
Based
on 2011 results and the Group’s performance forecast for 2012, the Board has
proposed to maintain the full year dividend at
€0.45 per
share.
Key highlights and contribution for each of the main
business units were:
REFINING, SUPPLY & TRADING
Upgrade
projects affected production and weak domestic demand resulted in lower sales
volume.
Domestic
Refining Adjusted EBITDA at €249m (-24%); weak refining margins in 2H were
partly mitigated by strong Supply & Trading performance.
Cost
control efforts and reduced bad debt provisions due to tight credit management
also supported profitability.
DOMESTIC MARKETING
Lower
volumes and weaker margins reflected market conditions, leading to an Adjusted
EBITDA of
€21m (-68%).
Ground
fuels business particularly affected by Greek recession; Aviation fuels
provided some support.
Successful
new product launches (“Ekonomy 95” and “BP Ultimate 95”) and enhanced marketing
and sales efforts increased customer value proposition and improved market
shares.
INTERNATIONAL MARKETING
Despite
deteriorating macro environment affecting demand in most markets, profitability
was sustained, with Adjusted
EBITDA at
€45m (vs €48m FY10); Improved margins and cost control
drove performance.
Cyprus
performance resilient despite adverse macro environment, while JPK, despite
retail market share gains
,
reported a drop in profits due to reduced demand in
the wholesale business.
Profitability
increase in
Serbia
on strong margins and volumes.
Bulgaria
gained market share, however profitability slowed on
weak margins which prevailed until late in the year.
PETROCHEMICALS
Polypropylene
sales volumes were affected by maintenance and upgrades. Margins and
international prices receded in 2H reflecting a decline in international
demand, resulting to a FY11 Adjusted EBITDA of €44m (FY10: €50m).
ASSOCIATED COMPANIES
DEPA
contribution to Group results reached €67m (vs €32m in FY10) reflecting higher
sales volumes due to increased gas-fired energy production and improved
performance of local supply and distribution subsidiaries.
Weather
conditions and higher natural gas electricity generation supported ELPEDISON
profitability despite a drop in GDP; FY11 EBITDA at €61m (vs €18m in FY10) with
Net Income contribution to ELPE at
€2
m.
Commenting on the results, Hellenic Petroleum’s CEO,
John Costopoulos, stated:
“2011 was a challenging year due to the weak international refining
environment and the on-going recession in
Greece
. Within
this background our performance remains positive. Our focus on strengthening
competitiveness through reorganisation, cost control, optimisation, risk management
and asset upgrades is yielding substantial benefits to the business, that will
become more visible in 2H12 as our refineries upgrade execution is on track.
2012 will be a positive turning point for the Group’s earnings generation capability
and shareholder value creation. Timely and flawless start–up of the upgraded Elefsina
refinery remains our top priority for the next few months.”