Oil Refineries Announces Results for Fourth Quarter & Full Year 2011
HAIFA, Israel, March 26, 2012 /PRNewswire/ --
- 2011 net loss of $87 million, compared with net income of $73 million in 2010 - Positive cash flow from operating activities totaled $117 million
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 fourth quarter and full year ending December 31, 2011. Results are reported in US Dollars and under International Financial Reporting Standards (IFRS).
Key 2011 and Fourth Quarter Highlights
- 2011 Adjusted consolidated EBITDA of $92 million
- Positive cash flow from operating activities totaled $117 million
- Refining margins:
- Adjusted refining margin in 2011 totaled USD/bbl 2.7, compared with the average Mediterranean Ural Cracking Margin quoted by Reuters of USD/bbl 1.2.
- Adjusted refining margin in Q4 2011 totaled USD/bbl 2.6, compared with the average Mediterranean Ural Cracking Margin quoted by Reuters of USD/bbl 1.4.
- 2011 revenues totaled $9.6 billion; Fourth quarter 2011 revenues totaled $2.1 billion.
- Consolidated net loss for 2011 totaled $87 million; Consolidated net loss for the fourth quarter of 2011 totaled $78 million.
- Shareholder's capital as of December 31, 2011 totaled $1.02 billion, making up 23% of total assets.
- Quantity refined in 2011 totaled 8,226 thousand tons, increasing by about 623 thousand tons, compared with 2010. The utilization rate during 2011 increased to 84.7%, compared with 78.2% in 2010.
- Petrochemicals Segment Production: Polymers (CAOL) increased by 47 thousand tons, totaling 695 thousand tons; Aromatics (Gadiv) increased by 157 thousand tons totaling 588 thousand tons; Lube oils and aromatics (HBO) increased by 12 thousand tons totaling 72 thousand tons.
- Investments:
- Hydrocracker: As of December 31, 2011, the Company invested $326 million.
- As part of its strategic plan, the company invested, in the areas of environment, safety and security as well as increasing operational reliability, $144 million until the end of, 2011.
- ORL invested about $1.5 million in community activities, in line with the policies outlined in the Board's Community Involvement Committee, whereby thousands of volunteer hours were invested by employees in various projects within their local communities.
Key Points for 2012
- The Implementation of a new organizational structure transforms the Company into a more advanced and competitive international organization, while significantly streamlining, optimizing and maximizing the group's value chain.
- Implementation of strategy to increase profitability:
- The completion of the transition to natural gas reduces emissions and is a cheaper energy source, with respect to fuel oil. This, together with the continuous supply of natural gas, are necessary to meet environmental obligations.
- Hydrocracker: Commissioning is expected by the end of the second quarter, and its running and activation are expected during the third quarter of 2012. This move will, based on the continuity and supplying of natural gas, improve margins by increasing the production of products with higher profitability.
- CCR gas utilization facility will yield optimal extraction of existing streams in the refinery from January 2012. Estimated cash flow expected: $30 million a year.
- Increasing propylene production capacity is expected to be operational in early 2013 and will bring in an estimated cash flow of $55 million a year.
Mr. Yossi Rosen, Chairman of the Board of Oil Refineries: "2011 was a very uncharacteristic and unstable year for the Company. The range of events and challenges we faced were very irregular. Given the current circumstances, the decision undertaken by the company's shareholders, along with the Board of Directors, becomes even more significant in directing the long-term strategic plan of creating a business environment that will reduce the Company's exposure and make it more profitable. During 2011 Mr. Pinhas Buchris was appointed CEO and, with the backing of the board, led the implementation of a strategy to re-organize the Group by leveraging synergies, growth and efficiency. This strategy consisted of many components, among them the merger of the Groups' companies; CAOL, Gadiv and HBO, where the emphasis is to leverage synergies between the companies and transition to production based on economic viability. We have invested in an upgrade of our equipment and are in the final phases of the Hydrocracker construction for the production of clean fuels, and its activation is expected in third quarter of this year. ORL also recently completed an organizational restructuring, which made each business segment its own profit center.
"Another important step we completed was the transition to natural gas. During the year we signed natural gas supply agreements, a step which demonstrated both economic and environmental advantages. The agreement enables us to transition to natural gas while assuring the reliability and continuity of this supply. It should yield significant savings in energy costs, starting from the second half of 2011. Due to the repeated interruption of natural gas supplies from Egypt, along with the reduction in the amount of natural gas supplied by the Tethys Sea to the Israeli economy and specifically to ORL, our estimates are not being fulfilled in their entirety and this disrupts our plans as it relates to natural gas.
"The Group, as of end 2011, invested about $144 million in Corporate Social responsibility projects, as determined by the board of directors. In addition, the Group also invested approximately $1.5 million for the promotion of education and welfare within local communities in Northern Israel. As part of this effort, thousands of volunteer hours were invested by the Company's employees.
"I would like to thank the management team and all of ORL's employees for their great contributions this year."
Mr. Pinhas Buchris, CEO of Oil Refineries: "ORL finished up 2011 in what was a very challenging and eventful year in the global and domestic business environment in which it operates. Unrest in the world market, crude oil prices increases of up to $125 a barrel, and wide fluctuations and significant price levels throughout the year have impacted the Company's financial results in 2011, and the fourth quarter in particular. Despite this being one of the most difficult business environments we have ever operated in, the Company succeeded in demonstrating relatively higher profits compared with other refineries as well as refining margins consistently better than the benchmark average. ORL generated an operating cash flow of about $117 million in 2011, compared with $6.5 million in 2010 - an accomplishment which does not reflect the bottom line. The reduction of refining margins resulting from the different global events in 2011 led to a significant erosion in profitability.
"2011 was also a year in which the Company was very active in strategic planning, continuing to build out its infrastructure in order to become more efficient, competitive and profitable. In recent months, and since I took office, we have been working vigorously to complete our strategic plans, creating changes in our organization and structure, while streamlining the work processes. These measures will enable the Company to be more efficient, resulting in synergies in many areas which will improve the results of the Company's activities along with reducing costs. In our latest development, as we announced two weeks ago, we have restructured the Company into three units in order to focus on the business and create separate profit centers, which will reduce redundancies and create efficiencies and savings for the production and development needs of the Company, and in particular, this will maximize the value chain of the entire group
FULL YEAR & FOURTH QUARTER RESULTS 2011 ($ millions)
Operating Profit 2011 2010 Q4/11 Q4/10
Refining Segment (9) 3 (45) (28)
Trade Segment (19) (18) - (5)
Polymers Segment -
CAOL 6 65 (34) 8
Aromatics Segment -
Gadiv 39 23 4 3
Lube-Oils Segment -
HBO 9 7 - -
Adjustments 1 (3) - 1
Cons. Operating
Income (Loss) 27 77 (75) (21)
Amortization of excess
cost arising from
acquisition of investees (27) (36) (7) (6)
Financing Costs (89) (51) (20) (23)
Losses of Investees (22) - (14) -
Tax Benefit 24 83 38 74
Net Income (Loss) (87) 73 (78) 24
Cons. EBITDA 136 167 (45) -
Adj. Cons. EBITDA 92 170 (23) 9
Adjusted refining margin in this reporting period of 2011 totaled USD/bbl 2.7, compared with the average Mediterranean Ural Cracking Margin quoted by Reuters of USD/bbl 1.2. Adjusted refining margin in Q4 2011 totaled USD/bbl 2.6, compared with the average Mediterranean Ural Cracking Margin quoted by Reuters of USD/bbl 1.4. Adjusted refining margin for 2010 totaled USD/bbl 3.2, compared with the average margin of USD/bbl 2.9. Adjusted refining margin for the fourth quarter of 2010 totaled USD/bbl 3.6, compared with an average margin of USD/bbl 2.8.
Adjusted consolidated EBITDA in 2011 totaled $92 million, compared with $170 million in the same period last year. The decrease is attributable to a decrease in refining margins, a decrease in petrochemical margins, and an increase in operating expenses, which was partially offset by an increase in sales. In the fourth quarter of 2011, adjusted consolidated EBITDA totaled negative $23 million, compared with an EBITDA of $9 million in the fourth quarter of 2010.
Cash flow from operating activities in 2011 totaled $117 million, compared with $6.5 million in 2010.
Financing expenses in 2011 totaled $89 million, compared with $51 million in 2010. The rise is attributed to fluctuations in hedging activities and an increase in bond and interest rates. In the fourth quarter of 2011 financing expenses netted $20 million, compared with $23 million in the fourth quarter of 2010.
Consolidated net loss for 2011 totaled $87 million, compared with a net income of $73 million in 2010. Consolidated net loss for the fourth quarter of 2011 totaled $78 million, compared with $24 million in the fourth quarter of 2010.
Business Environment and Group Profitability - 2011
The start of 2011 saw a wave of political instability and riots in various Eastern Mediterranean countries, including Libya, which is one of the world's major oil producers. This unrest, along with the earthquake in Japan in March (an event which paralyzed refining capacity by over 1 million barrels per day as well as the ability in this region to manufacture petrochemical products a significant scale), caused global market unrest and world crude oil prices to reach a record high of over $125 a barrel in April of this year. From May until the publication of this report, the market was characterized by significant fluctuations along with falling oil prices 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. At the same time, the end of the period was characterized by a lack of financial stability of banks and countries in the Eurozone.
Brent crude oil traded at the end of the reporting period at a cost of about $106 a barrel. Following the reporting period of this release, crude oil prices rose significantly due to heightened tensions with Iran and the imposition of a ban on Iranian crude oil. The price of Brent crude oil reached a level of about $125 a barrel in late February 2012.
Brent Crude Oil Prices 2010-2011 (USD/bbl)
Lack of correlation between changes in crude oil prices with changes in the prices of petroleum products during the reporting period resulted in a severe volatility of refining margins.
The event in Japan, which paralyzed refining capacity significantly, affected the spreads in East Asia and the West Coast but had no effect on the margins in the Mediterranean where refineries "suffered" high oil prices and lack of recovery in oil demand. The average Reuters quoted Mediterranean Ural Cracking margin during the year ranged from about USD/bbl (4) to USD/bbl 7.0 a barrel and averaged USD/bbl 1.2 in this period. In the same period last year, the average Reuters quoted Mediterranean Ural Cracking margin totaled USD/bbl 2.9.
In January 2012, after the reporting period, refining margins increased following the closure of refineries in Europe (Petroplus) and the east coast of the United States (Hovensa), to $7 a barrel. In February 2012, with the rise in crude oil prices, refining margins fell again to a level comparable to 2011.
Conference Call
The Company will also be hosting a conference call today, March 26, 2012, at 14:00 UK time, 9:00 ET, 6:00 PST and 15:00 Israeli Time.
On the call, management will present a presentation reviewing the fourth quarter and full year 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: 1-888-668-9141
UK Dial-in Number: 0-800-917-5108
Israel Dial-in Number: 03-918-0609
International Dial-in Number: +972-3-918-0609
at: 14:00 UK Time, 9:00 ET, 6:00 PT, 15:00 Israel time. A replay of the call will be available after the call on the Company's website at http://www.orl.co.il.
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. Besides production of fuels, the company produces in its wholly owned subsidiaries Polymers (through Carmel Olefins Ltd), Aromatics (through Gadiv Petrochemical Industries Ltd), and Lube-Oils (through 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.
Consolidated Statement of Financial Position
USD thousands
December 31,
2011 2010
Current assets
Cash and cash equivalents 20,465 6,704
Deposits 21,821 126,991
Trade receivables 561,403 366,227
Other receivables 147,328 98,241
Financial derivatives 45,958 27,577
Investments in financial assets
at fair value through profit or
loss 73,680 106,895
Inventory 1,080,129 1,200,922
Current tax assets 3,528 1,819
Total current assets 1,954,312 1,935,376
Non-current assets
Investments in equity-accounted
investees 4,238 16,455
Investments in financial assets
at fair value through other
comprehensive income 5,460 17,701
Loan to Haifa Early Pensions Ltd. 69,130 77,014
Long term loans and debit
balances 1,993 3,501
Financial derivatives 139,687 192,990
Employee benefit plan assets, net 6,111 7,922
Deferred tax assets 2,893 688
Property, plant and equipment 2,245,194 2,030,414
Intangible assets 65,145 78,950
Deferred costs 11,267 12,535
Total non-current assets 2,551,118 2,438,170
Total assets 4,505,430 4,373,546
Consolidated Statement of Financial Position
USD thousands
December 31
2011 2010
Current liabilities
Loans and borrowings 844,349 773,792
Trade payables 780,458 619,037
Other payables 73,490 102,099
Current tax liability 21,663 24,278
Financial derivatives 42,990 85,443
Provisions 9,121 9,231
Total current liabilities 1,772,071 1,613,880
Non-current liabilities
Bank loans 915,359 624,468
Debentures 665,147 872,421
Liabilities for finance lease 8,991 9,491
Financial derivatives, net 12,198 5,195
Employee benefits, net 78,413 70,537
Deferred tax liabilities 35,694 53,808
Total non-current liabilities 1,715,802 1,635,920
Total liabilities 3,487,873 3,249,800
Capital
Share capital 586,390 586,390
Share premium 100,242 100,242
Reserves 101,078 45,516
Retained earnings 229,847 391,598
Total capital attributed to
shareholders of the Company 1,017,557 1,123,746
Total liabilities and capital 4,505,430 4,373,546
Consolidated Statement of Comprehensive Income
USD thousands
Year ended December 31,
2011 2010 2009
Revenue 9,561,601 6,791,809 5,141,480
Cost of sales, refining and
services 9,355,281 6,561,599 4,840,325
Revaluation of open positions in
derivatives on prices of goods
and margins, net 48,166 32,052 41,157
Total cost of sales 9,403,447 6,593,651 4,881,482
Gross profit 158,154 198,158 259,998
Selling and marketing expenses (104,493) (99,282) (74,169)
General and administrative
expenses (53,534) (57,955) (38,553)
Negative goodwill arising on a
business combination -- -- 137,000
Profit from revaluation of a
prior holding due to increase in
control -- -- 77,561
Loss from the loss of material
impact in a former
equity-accounted investee, net of
tax -- -- (7,091)
Operating profit 127 40,921 354,746
Financing income 34,574 89,330 61,223
Financing expenses (123,692) (140,439) (86,866)
Financing expenses, net (89,118) (51,109) (25,643)
Company's share in earnings
(losses) of equity accounted
investees, net of tax, including
impairment losses (21,932) 476 4,892
Profit (loss) before taxes on
income (110,923) (9,712) 333,995
Tax benefit 23,847 82,781 13,006
Profit (loss) for the period (87,076) 73,069 347,001
Selected information compared to last year (USD millions)
Petrochemicals
Refining Trade Polymers Aromatics
Year ended December 31
2011 2010 2011 2010 2011 2010 2011
Revenue 7,244 5,034 253 215 1,219 1,012 743
Inter-company
operations 1,355 836 -- -- -- -- 44
Total sales 8,599 5,870 253 215 1,219 1,012 787
Cost of sales 8,509 5,773 267 228 537 484 48
Inter-company
operations 44 33 1 -- 622 410 671
Total cost of sales 8,553 5,806 268 228 1,159 894 719
Gross profit (loss) 46 64 (15) (13) 60 118 68
Selling, general and
administrative
expenses 55 61 4 5 54 51 29
Inter-company
operations -- -- -- -- -- 2 --
55 61 4 5 54 53 29
Operating profit
(loss) for segments (9) 3 (19) (18) 6 65 39
Amortization of
excess cost arising
from acquisition of
investees
Operating profit
Financing expenses,
net
Share in losses of
investees, net of tax
Loss before income
tax
Tax benefit
Net profit (loss) for
the year
- TABLE CONTINUED -
Petrochemicals
Adjustments
to
Aromatics Oils consolidated Consolidated
Year ended December 31
2010 2011 2010 2011 2010 2011 2010
Revenue 451 102 80 -- -- 9,561 6,792
Inter-company
operations 33 1 -- (1,400) (869) -- --
Total sales 484 103 80 (1,400) (869) 9,561 6,792
Cost of sales 56 27 28 -- -- 9,388 6,569
Inter-company
operations 378 63 41 (1,401) (862) -- --
Total cost of
sales 434 90 69 (1,401) (862) 9,388 6,569
Gross profit
(loss) 50 13 11 1 (7) 173 223
Selling,
general and
administrative
expenses 25 4 4 -- -- 146 146
Inter-company
operations 2 -- -- -- (4) -- --
27 4 4 -- (4) 146 146
Operating
profit (loss)
for segments 23 9 7 1 (3) 27 77
Amortization
of excess cost
arising from
acquisition of
investees (27) (36)
Operating
profit -- 41
Financing
expenses, net (89) (51)
Share in losses of
investees, net of tax (22) --
Loss before
income tax (111) (10)
Tax benefit 24 83
Net profit
(loss) for the
year (87) 73
Selected information of the Group for the three months period (USD millions)
Petrochemicals
Refining Trade Polymers Aromatics
Three months ended December 31
2011 2010 2011 2010 2011 2010 2011
Revenue 1,504 1,082 87 84 289 240 194
Inter-company
operations 321 101 -- -- -- -- 11
Total sales 1,825 1,183 87 84 289 240 205
Cost of sales 1,845 1,197 87 88 164 162 30
Inter-company
operations 13 2 -- -- 143 58 164
Total cost of
sales 1,858 1,199 87 88 307 220 194
Gross profit
(loss) (33) (16) -- (4) (18) 20 11
Selling, general
and administrative
expenses 12 12 -- 1 16 11 8
Inter-company
operations -- -- -- -- -- 1 (1)
12 12 -- 1 16 12 7
Operating profit
(loss) for
segments (45) (28) -- (5) (34) 8 4
Amortization of
excess cost
arising from
acquisition of
investees
Operating loss
Financing
expenses, net
Share in losses of
investees, net of
tax
Loss before income
tax
Tax benefit
Profit (loss) for
the period
- TABLE CONTINUED -
Petrochemicals
Adjustments
to
Aromatics Oils consolidated Consolidated
Three months ended December 31
2010 2011 2010 2011 2010 2011 2010
Revenue 69 19 21 -- -- 2,093 1,496
Inter-company
operations 1 1 -- (333) (102) -- --
Total sales 70 20 21 (333) (102) 2,093 1,496
Cost of sales 29 5 10 -- -- 2,131 1,486
Inter-company
operations 35 15 9 (335) (104) -- --
Total cost of
sales 64 20 19 (335) (104) 2,131 1,486
Gross profit
(loss) 6 -- 2 2 2 (38) 10
Selling,
general and
administrative
expenses 3 1 2 -- 2 37 31
Inter-company
operations -- -- -- 1 (1) -- --
3 1 2 1 1 37 31
Operating
profit (loss)
for segments 3 (1) -- 1 1 (75) (21)
Amortization
of excess cost
arising from
acquisition of
investees (7) (6)
Operating loss (82) (27)
Financing
expenses, net (20) (23)
Share in
losses of
investees, net
of tax (14) --
Loss before
income tax (116) (50)
Tax benefit 38 74
Profit (loss)
for the period (78) 24
Company Contact:
Rony Solonicof
Chief Economist and Head of Investor Relations
Tel: +972-4-878-8152
IREn@orl.co.il
Investor Relations Contact:
Ehud Helft / Porat Saar
CCG Israel
Tel: (US) +1-646-233-2161 / (Int.) +972-52-776-3687
info@ccgisrael.com
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