Oil Refineries Announces Results for Second Quarter & First Half 2011
Net Income for the First Half of 2011 Totaled $24 Million Compared With $29 Million in the Same Period Last Year
HAIFA, Israel, August 15, 2011 /PRNewswire/ --
- Net income for the quarter totaled $18 million compared with $32 million in the second quarter last year.
- Adjusted consolidated EBITDA of $83 million for the first half of 2011, compared with $113 million in the same period last year.
- Adjusted consolidated EBITDA of $28 million in the second quarter of 2011, compared with $80 million in the first quarter of 2010
- EBITDA in Petrochemical segment of $47 million in the second quarter of 2011, similar with the second quarter of 2010
- Adjusted refining margin in the first half of 2011 at USD/bbl 2.6, compared with USD/bbl 1.1 average Reuter's quoted Mediterranean Ural Cracking Margin
Oil Refineries Ltd. (TASE: ORL.TA) (hereinafter "the Company,""ORL"), Israel's largest integrated refining and petrochemical group, announced today its financial results for the second quarter and first half ending June 30, 2011. Results are reported in US Dollars and under International Financial Reporting Standards (IFRS).
Mr. Pinhas Buchris, CEO of Oil Refineries: "The sharp rise in crude oil prices in international markets, which reached record levels not seen since the global crash in 2008, eroded ORL's refining margins during the quarter. Despite this, our first half margins outperformed the benchmark margin for the same period, which has been the case for the past 12 months. In the petrochemical segment we saw a significant increase in polymer sales, which can be attributed to the Company's ability to swiftly identify the potential demand in this market and its decision to merge with CAOL. The agreement with "Tethys Sea" Group for additional natural gas supplies has also proven itself as a sound economic and environmental step. This additional supply agreement allowed the company to quickly switch over to natural gas with a continuous and reliable supply, thus enabling the Company to meet the requirement of reducing emissions. This step also enabled ORL to save on its energy expenditures, having previously used fuel oil to power its facilities, and savings were already demonstrated towards the end of the second quarter."
Mr. Yossi Rosen, Chairman of the Board of Oil Refineries: "As a result of our completing our goal to create company-wide synergies, we have currently set the refinery's utilization and the product slate at its most profitable configuration, maximizing benefits across all the sectors of the Company. Likewise, the Company is continuing with the construction of the hydrocracker, which is expected to start commissioning by mid-2012, and which will contribute significantly to improving our refining margins, bettering our facilities' capabilities and flexibility, and reducing the impact of the oil price volatility on the Company. Indeed, the instability in the global economy and frequent oil price fluctuations cause instability in refining margins. ORL is working to create conditions to reduce production costs in order to better cope with the continuing fall of refining margins, at least until the operation of hydrocracker, which is expected to improve the Company's results and balance out the volatility and declining refining margins."
Note: The start of 2011 saw a wave of political instability and riots in various Middle Eastern countries, including Libya, which is one of the world's major oil producers. This unrest caused world crude oil prices to reach a record high of over $125 a barrel in April of this year. Later, in May, prices began to fall due to weak macroeconomic data from the U.S. and Europe, declining oil demand in OECD countries, as well as the strengthening dollar. In June, the decline continued, following the U.S. decision to release about 60 million barrels of crude oil and petroleum products from its strategic stock. In July, after the reporting period, crude oil prices returned to the price level seen before the U.S. strategic stock release, while the lack of supplies from Libya supporting the high prices. Throughout this period political instability continued in the Arab countries thus hindering, to some extent, any additional decline. Another event that affected world markets was the earthquake and tsunami in Japan. This event paralyzed refining capacity by over 1 million barrels per day and significantly impacted the petrochemical products production in the region. As noted, this reporting period was marked by a further increase in crude oil prices reaching its highest levels in April of this year since the collapse in late 2008. Brent crude oil traded at the end of the reporting period at a cost of about $111 a barrel. Since the end of the reporting period, and particularly during August, fluctuations in crude oil prices have continued. Brent crude oil prices dipped and then increased to, as of today, to $108 a barrel, not far off its end June levels, despite the market fluctuations.
FIRST HALF 2011 ($ millions)
Operating Profit EBITDA
H1/11 H1/10 H1/11 H1/10
Refining Segment Adjusted (26) 28 (1) 47
Petrochemicals Segment - Polymers 49 31 72 55
Petrochemicals Segment - Aromatics 12 13 16 16
Petrochemicals Segment - Lube-Oils 7 5 8 6
Trade Segment (12) (8) (12) (8)
Adjustments 1 (3) 1 (3)
Total 31 66 83 113
Quantity refined declined in the first half of 2011 by about 353 thousand tons, compared with the same period last year. In the fourth quarter of 2010, the Company shut down some its facilities in order to carry out periodic maintenance and the Company went back to full production during the first quarter of 2011. The utilization rate during the reporting period stood at 86%, compared with a higher rate in the same period last year. This can be attributed to the decision to optimize production capacity taking current market conditions into consideration.
Adjusted refining margin in H1 2011 totaled USD/bbl 2.6, compared with the average Mediterranean Ural Cracking Margin quoted by Reuters of USD/bbl 1.1. Adjusted refining margin for the first half of 2010 totaled USD/bbl 3.9, compared with the average margin of USD/bbl 3.5.
It should be noted that there are differences between the Company's refining margin and the benchmark margin, including the crude oil composition (with the Company also refining crude oil types that are not Urals), the composition and quality of products produced by ORL, and the difference caused by the fact that the quoted margin takes into account same day buying and selling, in which there is a time gap in between the purchase date of raw materials and the sale date of the finished products. So while comparing the Benchmark margin with the Company's margin may provide some understanding about the development of the Company's margins, it does not constitute an accurate measure in evaluate the Company's margins in the short term.
Adjusted consolidated EBITDA in H1 2011 totaled $83 million, compared with $113 million in the same period last year.
Financing expenses in the first half of 2011 totaled $48 million, compared with $8 million in the same period last year. The rise is attributed to an increase in debt and interest rates along with a decline in income from traded securities.
Consolidated net income for the first half of 2011 totaled $24 million, compared with $29 million in the same period last year.
SECOND QUARTER 2011 ($ millions)
Adjusted refining margin in Q2 2011 totaled USD/bbl 1.3, compared with the average Mediterranean Ural Cracking Margin quoted by Reuters of USD/bbl 1.6. Adjusted refining margin for the second quarter of 2010 totaled USD/bbl 4.6, compared with the average margin of USD/bbl 3.5.
Adjusted consolidated EBITDA in Q2 2011 totaled $28 million, compared with $80 million in the same quarter last year.
Financing expenses in the second quarter of 2011 totaled $24 million, compared with $4 million in the same quarter last year.
Consolidated net income for the second quarter of 2011 totaled $18 million, compared with $32 million in the same quarter last year.
Key Developments in the First Half 2011
- During the reporting period, the Company completed its connection to the national natural gas system, and has started using natural gas in its facilities. Oil Refineries signed an agreement with "Tethys Sea" Group for the purchase of natural gas totaling about 1.2 BCM for itself and ORL's subsidiaries. This was signed in addition to the gas supply agreement with Egypt and done so in light of the repeated sabotage of gas lines in the Egyptian natural gas transmission system, which supplies gas to, among others, EMG, and this continuously harmed EMG's ability to supply natural gas.
- In order to leverage potential synergies, the Company decided to invest about $45 million for the production of polymers using existing raw materials already available in the refinery. The expected return of this investment is estimated at $ 30 million per year. Likewise, the Company decided also to invest $60 million for expanding the production capacity of propylene, which is expected to yield a return of about $50 million a year.
- The Company's Board of Directors announced the appointment of Brigadier General (res.) Pinhas Buchris as CEO of the new ORL, replacing Yashar Ben Mordechai who decided to resign from his post. Mr. Buchris assumed his post on May 1, 2011 after completing and overlapping period with the outgoing CEO.
- The Company's Board of Directors announced the appointment of Ido Rosolio as Deputy CEO and CEO of the Refining Segment, replacing Hanan Kalchuk who resigned from his post. Mr. Rosolio assumed his post on July1, 2011.
Additional Announcements
The Company announced its decision regarding two non-extraordinary transaction in which a controlling shareholder of the Company has a personal interest, as follows:
- Agreement with ZIM Integrated Shipping Services for the sale of fuel oil.
- Agreement with OPC Rotem regarding the purchase of electricity.
A convenience translation of the announcement will be available on the Company's website the week of August 22, 2011.
Also a convenience translation of the State of Corporation's Liabilities by Due Date as at June 30, 2011 will be available on the Company's website the week of August 22, 2011.
Conference Call
The Company will also be hosting a conference call today, August 15, 2011, at 14:00 UK time, 9:00 ET, 6:00 PST and 16:00 Israeli Time.
On the call, management will present a presentation reviewing the second quarter and second half 2011 highlights and industry trends. The presentation is available for download from the Company's website http://www.orl.co.il: Investor Relations > Financial Reports.
To participate, please call one of the following teleconferencing numbers. Please begin placing your calls at least 10 minutes before the conference call commences. If you are unable to connect using the toll-free numbers, please try the international dial-in number.
US Dial-in Numbers: 1-888-407-2553 UK Dial-in Number: 0-800-917-5108 Israel Dial-in Number: 03-918-0610 International Dial-in Number: +972-3-918-0610
at: 14:00 UK Time, 9:00 ET, 6:00 PT, 16:00 Israel time. A replay of the call will be available after the call on the Company's website at http://www.orl.co.il.
The conference call will be accompanied by a presentation available for download from the Company's website,http://www.orl.co.il, under investor relations.
About Oil Refineries Ltd.
Oil Refineries Ltd. (ORL), located in the bay area of the city of Haifa, operates Israel's largest integrated refining and petrochemical group. It is one of the leading refineries in the Eastern Mediterranean area and integrates, on-site, petrochemical businesses. ORL runs sophisticated and state-of-the-art industrial facilities with a refining capacity of 9.8 million tons of crude oil per year and a Nelson Complexity Index of 7.4, providing a variety of quality products used in industrial operation, transportation, private consumption, agriculture and infrastructure. The Company's petrochemical sector produces Polymers (through its ownership of Carmel Olefins Ltd), Aromatics (through its ownership of Gadiv Petrochemical Industries Ltd), and Lube-Oils (through its ownership of Haifa Basic Oils Ltd). The Company's shares are listed on the Tel Aviv Stock Exchange under the ticker ORL. For additional information please visit http://www.orl.co.il.
ORL is controlled by the Israel Corporation Ltd. and Israel Petrochemical Enterprises Ltd., both public companies whose shares are traded on the Tel Aviv Stock Exchange.
The above noted in this release includes forward-looking statements based on Company data, as well as Company plans and estimations based on this data. The activity, results and other data may be substantially different in reality given uncertainty and various risks, including those discussed under risk factors in the Company's financial statements and Director's reports.
Condensed Consolidated Interim Statement of Financial Position
USD thousands
June 30, June 30, December
2011 2010 31, 2010
(Unaudited) (Audited)
Current assets
Cash and cash equivalents 14,419 19,272 6,704
Deposits 45,746 65,060 126,991
Trade receivables 673,541 471,971 366,227
Other receivables 106,664 68,863 98,241
Financial derivatives 36,716 34,862 27,577
Investments in financial assets at fair
value through comprehensive income 111,851 96,532 106,895
Inventory 1,184,532 1,004,515 1,200,922
Current tax assets 1,714 8,006 1,819
Total current assets 2,175,183 1,769,081 1,935,376
Non-current assets
Investments in equity-accounted
investees 14,054 16,322 16,455
Financial assets at fair value through
other comprehensive income 12,289 9,130 17,701
Loan to Haifa Early Pensions Ltd. 74,672 70,133 77,014
Long term loans and debit balances 1,739 3,479 3,501
Financial derivatives 217,659 118,176 192,990
Employee benefit plan assets 7,488 9,682 7,922
Deferred tax assets 338 -- 307
Property, plant and equipment 2,142,504 1,900,585 2,030,414
Deferred costs 11,943 8,434 12,535
Intangible assets 73,624 86,782 78,950
Total non-current assets 2,556,310 2,222,723 2,437,789
Total assets 4,731,493 3,991,804 4,373,165
The accompanying notes are an integral part of the condensed consolidated interim financial statements.
Condensed Consolidated Interim Statement of Financial Position
USD thousands
June 30, June 30, December 31,
2011 2010 2010
(Unaudited) (Audited)
Current liabilities
Loans and borrowings 603,408 866,475 773,792
Trade payables 1,053,631 553,725 619,037
Other payables 87,491 122,267 102,099
Current tax liabilities 24,990 -- 24,278
Financial derivatives 13,718 6,826 63,292
Other liabilities -- 13,350 --
Provisions 8,905 13,427 9,231
Total current liabilities 1,792,143 1,576,070 1,591,729
Non-current liabilities
Bank loans 801,866 290,039 624,468
Debentures 872,333 820,791 872,421
Liabilities for finance lease 10,053 8,591 9,491
Financial derivatives 4,871 6,700 5,195
Employee benefits 71,613 61,822 70,537
Deferred tax liabilities 63,679 141,402 58,579
Total non-current liabilities 1,824,415 1,329,345 1,640,691
Total liabilities 3,616,558 2,905,415 3,232,420
Capital
Share capital 586,390 586,390 586,390
Share premium 100,242 100,242 100,242
Reserves 62,697 33,636 45,516
Retained earnings 365,606 366,121 408,597
Total capital 1,114,935 1,086,389 1,140,745
Total liabilities and capital 4,731,493 3,991,804 4,373,165
The accompanying notes are an integral part of the condensed consolidated interim financial statements
Condensed Consolidated Interim Statement of Comprehensive Income
USD thousands
Year
Six months ended Three months ended ended
June 30, June 30, June 30, June 30, December
2011 2010 2011 2010 31, 2010
(Unaudited) (Unaudited) (Audited)
Revenue 4,710,677 3,582,810 2,653,171 1,878,039 6,791,809
Cost of sales,
refining and
services 4,600,687 3,492,699 2,618,718 1,829,162 6,561,599
Revaluation of
open positions in
derivatives on
prices of goods and
margins, net (59,300) (38,032) (64,121) (42,676) 27,179
Total cost
of sales 4,541,387 3,454,667 2,554,597 1,786,486 6,588,778
Gross profit 169,290 128,143 98,574 91,553 203,031
Selling and marketing
expenses 50,286 55,995 28,774 29,868 99,282
General and
administrative
expenses 30,895 33,283 16,247 18,615 57,955
Operating profit 88,109 38,865 53,553 43,070 45,794
Financing income 35,304 59,277 28,140 29,694 89,330
Financing expenses (82,955) (67,716) (52,571) (26,026) (140,439)
Financing income
(expenses), net (47,651) (8,439) (24,431) 3,668 (51,109)
Company's share in
profits (losses) of
equity accounted
investees, net of tax (3,538) 342 (3,808) 163 476
Profit (loss) before
taxes on income 36,920 30,768 25,314 46,901 (4,839)
Tax benefits
(income tax) (12,540) (2,084) (7,063) (14,630) 81,619
Profit for
the period 24,380 28,684 18,251 32,271 76,780
Items of other
comprehensive income
(loss)
Actuarial gains (losses)
from a defined benefit
plan, net of tax 82 (104) (192) (232) (5,724)
Foreign currency
translation differences
for foreign operations 819 (818) 93 (494) (309)
Effective share of
the change in fair
value of cash flow
hedging, net of tax (981) -- (1,908) -- 3,529
Change in fair value
of financial assets
at fair value through
other comprehensive
income, net of tax (4,763) (1,459) (5,095) (6,892) 6,143
Net change in fair
value of debentures
designated at fair
value through other
comprehensive income,
attributable to
change in credit
risk, net of tax 1,976 -- 23,250 -- --
Other comprehensive
income (loss) for the
period, net of tax (2,867) (2,381) 16,148 (7,618) 3,639
Comprehensive income
for the period 21,513 26,303 34,399 24,653 80,419
Earnings per share (USD)
Basic and diluted
earnings per ordinary
share 0.010 0.012 0.008 0.013 0.032
The accompanying notes are an integral part of the condensed consolidated interim financial statements.
The following table presents selected information of the Group for the six months period (USD millions)
Petrochemicals
Refining Trade Polymers Aromatics
Six months ended June 30
2011 2010 2011 2010 2011 2010 2011 2010
Revenue 3,586 2,645 129 96 615 535 328 268
Inter-company
operations 663 488 -- -- -- -- 22 22
Total sales 4,249 3,133 129 96 615 535 350 290
Cost of sales 4,151 3,053 138 101 214 250 7 23
Inter-company
operations 22 22 -- -- 326 224 317 237
Total cost
of sales 4,173 3,075 138 101 540 474 324 260
Gross profit (loss) 76 58 (9) (5) 75 61 26 30
Selling, general
and administrative
expenses 31 35 3 3 26 29 14 16
Inter-company
operations -- -- -- -- -- 1 -- 1
31 35 3 3 26 30 14 17
Operating profit
(loss) for segments 45 23 (12) (8) 49 31 12 13
Amortization of
excess cost arising
from acquisition of
investees
Operating profit
Financing expenses, net
Company's share in
losses of equity
accounted investees,
net of tax
Profit before income tax
Income tax
Profit for the period
(Table cont'd.)
Petrochemicals
Adjustments to
Oils consolidated Consolidated
Six months ended June 30
2011 2010 2011 2010 2011 2010
Revenue 53 39 -- -- 4,711 3,583
Inter-company
operations -- -- (685) (510) -- --
Total sales 53 39 (685) (510) 4,711 3,583
Cost of sales 24 11 -- -- 4,534 3,438
Inter-company
operations 20 22 (685) (505) -- --
Total cost of sales 44 33 (685) (505) 4,534 3,438
Gross profit (loss) 9 6 -- (5) 177 145
Selling, general and
administrative
expenses 2 1 (1) -- 75 84
Inter-company
operations -- -- -- (2) -- --
2 1 (1) (2) 75 84
Operating profit
(loss) for segments 7 5 1 (3) 102 61
Amortization of
excess cost arising
from acquisition of
investees (14) (22)
Operating profit 88 39
Financing expenses, net (48) (8)
Company's share in
losses of equity
accounted investees,
net of tax (3) --
Profit before income tax 37 31
Income tax (13) (2)
Profit for the period 24 29
The following table presents selected information of the Group for the three months period (USD millions)
Petrochemicals
Refining Trade Polymers Aromatics
Three months ended June 30
2011 2010 2011 2010 2011 2010 2011 2010
Revenue 2,014 1,412 76 29 313 274 221 141
Inter-company
operations 365 242 -- -- -- -- 12 11
Total sales 2,379 1,654 76 29 313 274 233 152
Cost of sales 2,320 1,599 79 33 107 123 32 18
Inter-company
operations 12 11 -- -- 172 110 185 120
Total cost of
sales 2,332 1,610 79 33 279 233 217 138
Gross profit
(loss) 47 44 (3) (4) 34 41 16 14
Selling, general
and administrative
expenses 18 21 1 1 14 14 9 9
Inter-company
operations -- -- -- -- -- 1 -- --
18 21 1 1 14 15 9 9
Operating profit
(loss) for segments 29 23 (4) (5) 20 26 7 5
Amortization of
excess cost arising
from acquisition of
investees
Operating profit
Financing income
(expenses), net
Company's share in
losses of equity
accounted investees,
net of tax
Profit before income tax
Income tax
Profit for the period
(Table cont'd.)
Petrochemicals
Adjustments to
Oils consolidated Consolidated
Three months ended June 30
2011 2010 2011 2010 2011 2010
Revenue 29 22 -- -- 2,653 1,878
Inter-company
operations -- -- (377) (253) -- --
Total sales 29 22 (377) (253) 2,653 1,878
Cost of sales 12 8 -- -- 2,550 1,781
Inter-company
operations 12 11 (381) (252) -- --
Total cost of sales 24 19 (381) (252) 2,550 1,781
Gross profit (loss) 5 3 4 (1) 103 97
Selling, general and
administrative
expenses 1 1 -- 1 43 47
Inter-company
operations -- -- -- (1) -- --
1 1 -- -- 43 47
Operating profit
(loss) for segments 4 2 4 (1) 60 50
Amortization of
excess cost arising
from acquisition of
investees (7) (7)
Operating profit 53 43
Financing income
(expenses), net (24) 4
Company's share in
losses of equity
accounted investees,
net of tax (4) --
Profit before income tax 25 47
Income tax (7) (15)
Profit for the period 18 32
Company Contact:
Rony Solonicof
Chief Economist and Head of Investor Relations
Tel. +972-4-878-8152
Contact [email protected]
Investor Relations Contact:
Ehud Helft / Porat Saar
CCG Israel
Tel. (US) +1-646-233-2161 / (Int.) +972-52-776-3687
[email protected]
SOURCE Oil Refineries Ltd
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