Release Date: October 29, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- OMV AG (OMVJF, Financial) reported strong cash flow from operations at EUR4.4 billion for the first nine months, only slightly below the previous year.
- The Chemicals segment showed substantial growth, with a EUR146 million increase in clean operating results compared to the previous year.
- Polyolefin sales volumes, including joint ventures, grew by 9% year-on-year, indicating strong demand in the market.
- OMV Petrom completed significant renewable energy acquisitions, positioning the company well for future growth in renewable power production.
- The company successfully diversified its gas supply sources, eliminating dependency on Russian gas, enhancing energy security.
Negative Points
- The Clean CCS operating result declined by 21% compared to the previous year, primarily due to lower refining margins and oil and gas sales.
- Oil and gas production decreased by 9% year-on-year, impacted by unplanned outages in Libya and natural declines in other regions.
- The refining indicator margin for Europe declined significantly, negatively impacting the Fuels & Feedstock segment.
- Cash flow from operating activities decreased by EUR280 million compared to the strong third quarter of the previous year.
- The Clean CCS earnings per share declined by 20%, reflecting the challenges faced in the current macroeconomic environment.
Q & A Highlights
Q: Can you discuss the path to profitability for Baystar and when it might break even at the net income level? Also, what is OMV's appetite for M&A in the current environment?
A: (Alfred Stern, CEO) We are in ongoing negotiations with ADNOC regarding the potential combination of Borouge and Borealis. We have closed two renewable power deals in Romania and remain open to inorganic CapEx if it aligns with our strategy and financial criteria. (Reinhard Florey, CFO) Baystar has made progress, achieving positive EBIT. We expect stable production by the second half of 2025, aiming for breakeven and positive net profit.
Q: How have chemical margins evolved since the quarter end, and what are your expectations for 2025? Also, what are your thoughts on the working capital cycle and cash flow stability?
A: (Alfred Stern, CEO) The chemicals market fundamentals haven't changed much, but we've seen improvements in sales volumes and margins. In October, polyethylene and polypropylene margins strengthened slightly. (Reinhard Florey, CFO) We expect positive net working capital effects in Q4, with potential inventory outflows due to seasonal factors.
Q: Are you seeing any impact from China's stimulus on the polyolefin market, and what is your outlook for biofuel regulations in Europe?
A: (Alfred Stern, CEO) While Borouge had record sales, it's unclear if this is due to China's stimulus. We expect demand in segments like energy transition and infrastructure. For biofuels, we aim for 1.5 million tons of renewable fuels by 2030, with a focus on sustainable aviation fuels. We anticipate regulations aligning with our investment timeline.
Q: Can you elaborate on the refining margin outlook and the expected increase in polyethylene sales volumes?
A: (Alfred Stern, CEO) Refining margins were volatile, with a low in August but improvement in October. We adjusted our full-year forecast to $7 per barrel. For polyethylene, we expect a strong Q4 performance, building on a 12% increase in Q3 sales volumes.
Q: What are your expectations for dividends given the cash flow performance, and why has the Malaysian asset sale been delayed?
A: (Reinhard Florey, CFO) We aim to maintain our dividend policy, including a special dividend, based on stable cash flows. The Malaysian sale delay is due to procedural reasons, but the financial impact remains unchanged as we operate under a locked box system.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
