Release Date: November 14, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Orlen SA (PSKOF, Financial) reported a strong performance in the energy distribution segment, contributing significantly to the company's EB day with stable cash flow generation.
- The retail segment showed solid performance driven by both inorganic growth through expansion in Austria and Hungary, and organic improvements in fuel margins.
- The upstream business saw a 22% increase in hydrocarbon production volumes, supported by acquired assets in Norway.
- Orlen SA (PSKOF) secured a 15-year debt instrument from the European Investment Bank to finance energy grid modernization, enhancing financial stability.
- The company is actively working on eliminating non-operating charges from the EB day line to improve result comparability in the future.
Negative Points
- The petrochemical segment faces challenges due to weaker demand and oversupply, making it difficult for European producers to compete.
- Regulatory changes led to a significant negative impact on the EB day of the energy sales business, with allowances compensation not covering costs.
- The IRS Baltic Power financing resulted in a negative impact of 270 million, contrasting with a positive impact in the same quarter last year.
- The gas trading segment experienced lower margins and tightening spreads, affecting profitability.
- Orlen SA (PSKOF) is facing challenges with the Olefin III project, with significant CapEx already spent and uncertainty about the project's future.
Q & A Highlights
Q: What is the total CapEx spent on the Olefin III project, and what are the potential costs if the project is stopped?
A: The total CapEx spent on the Olefin III project is PLN 12.5 billion, with almost PLN 9 billion written off. The management is still analyzing the project, and specific numbers related to a potential shutdown or continuation are not yet available. Scenarios include ceasing or resizing the project, which would involve settlements and funding. More details will be provided after the analysis is complete. - Bartos Magdalena, Vice President of the Management Board - Finance
Q: Are you considering purchasing a stake in the JV from LyondellBasell, given the challenging environment for Nafta-based installations in Europe?
A: Orlen has a JV with LyondellBasell, but the structural negatives of Nafta-based products make it difficult to justify further investment in such assets in Europe. The market is shifting towards gas-based products, and the economics of Nafta-based products remain challenging. - Bartos Magdalena, Vice President of the Management Board - Finance
Q: Is there room for a higher dividend next year due to better CapEx discipline?
A: The management prioritizes a transparent and attractive dividend policy. While the current policy provides a floor, the strategy review may lead to more attractive returns for shareholders. It is too early to comment on next year's dividend, but any updates will be announced in December. - Bartos Magdalena, Vice President of the Management Board - Finance
Q: What is the reason for the CapEx reduction, and is it permanent or a delay?
A: The CapEx reduction includes a PLN 1 billion drop in growth CapEx, mainly in petrochemicals, and a PLN 1 billion drop in maintenance CapEx, which is mostly permanent. The decision on the Olefin project will influence whether the reduction is permanent or delayed. - Bartos Magdalena, Vice President of the Management Board - Finance
Q: What is the status of the LNG cargo from Venture Global, and what is the timeline for the arbitrage proceedings?
A: Orlen has not yet received any LNG cargo from Venture Global. The first cargo is expected in the first half of next year. The arbitrage proceedings are ongoing, with arbitrators assigned, but no further details are available at this time. - Bartos Magdalena, Vice President of the Management Board - Finance
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
