Oil Refineries Announces Results for Fourth Quarter and Full Year 2010
HAIFA, Israel, March 21, 2011 /PRNewswire/ --
- 2010 Net Income Totals $77 Million
- 2010 Adjusted Consolidated EBITDA Totals $170 Million
- Adjusted consolidated EBITDA of $170 million in 2010, compared with $188 million in 2009
- Adjusted consolidated EBITDA in Petrochemical segment- Polymers (CAOL) of $109 million in 2010, compared with $36 million in 2009[1]
- Adjusted refining margin USD/bbl 3.2, compared to USD/bbl 2.9 average Reuter's quoted Mediterranean Ural Cracking Margin
- Facility shutdown in fourth quarter resulted in a relatively lower refining quantity of 7,603 thousand tons and a utilization rate of 78.2% for 2010, compared with 7,534 thousand tons and a utilization rate of 81.8% in 2009.
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, 2010. Results are reported in US Dollars and under International Financial Reporting Standards (IFRS).
- Consolidated net income totaled $24 million for the fourth quarter 2010, compared with $182 million in the same quarter in the previous year.
- EBITDA in the Petrochemicals (CAOL Polymers) segment totaled $18 million for the fourth quarter 2010, compared with $8 million in the same quarter in the previous year. In 2009, 50% of CAOL's results were consolidated.
- Adjusted EBITDA for the Refining & Trade segments totaled $29 million in 2010, compared with $120 million in 2009. For the fourth quarter 2010 EBITDA totaled a loss of $15 million, compared with a profit of $25 million in the same quarter in the previous year.
Note: Volatility in crude oil prices continued during the reporting period, with April seeing the highest prices since the collapse at the end of 2008, during which Brent crude oil traded at a price of about $85 a barrel.
The rise in oil prices was supported by the expectation that growth would return as well strong demand for crude oil futures contracts, which are also used as an investment instrument. In May 2010, with the development of the debt crisis in the Euro-Zone and decline in the financial markets, crude oil prices were sharply pushed down to a level of $68/barrel. Prices rose again towards the end of 2010, reaching about $92/barrel. Meanwhile, the global demand for crude oil has increased reaching 87 million barrels a day, with an increase in demand also coming from developed countries (OECD) for the first time since 2004.
As accepted by major leading international refiners and marketers of oil and its products, the results are presented as reported as well as net of the accounting provision for inventory gains or write offs, in addition to buying and selling timing and derivative accounting methods under IFRS. This is in order to enable a common base for comparison of the Company's ongoing operations.
YEAR END RESULTS 2010 ($ millions)
Operating Profit EBITDA
2010 2009 2010 2009
Refining Segment 6 82 47 127
Adjusted
Trade Segment (18) (7) (18) (7)
Petrochemicals 65 8 109 36
Segment - Polymers
Petrochemicals 23 27 27 34
Segment - Aromatics
Petrochemicals 7 - 8 -
Segment - Lube-Oils
The utilization rate in 2010 was 78.2% compared with 81.8% in 2009. Quantity refined totaled 7,603 thousand tons, compared with 7,534 thousand tons in 2009. Quantity refined for the fourth quarter totaled 800 thousand tons with a utilization rate of 32.7%, compared with 1,998 thousand tons and a utilization rate of 81.6% in the same quarter last year. The Company shut down some its facilities in the fourth quarter of 2010 in order to carry out periodic maintenance and this impacted the Company's operations and profitability during this reporting period. The Company went back to full production during the first quarter of 2011.
Adjusted refining margin for 2010 totaled USD/bbl 3.2, compared with the average Mediterranean Ural Cracking Margin quoted by Reuters of USD/bbl 2.9. Adjusted refining margin for 2009 totaled USD/bbl 4.9, compared with the average margin of USD/bbl 1.9.
Adjusted consolidated EBITDA for 2010 totaled $170 million, compared with $188 million in 2009.
Financing expenses totaled $51 million, compared with $26 million in 2009.
Consolidated net income for 2010 was $77 million, compared with $349 million in 2009.
Key Developments in 2010
- In June 2010, the company activated the second and final stage of upgrading the HVGO desulphurization plant. Activation of Stage 2 is expected to increase the Company's production of diesel fuel by an additional 3-4%.
- The Company also worked in the past year to create synergies through its merger with CAOL by consolidating the headquarters and operational activities of CAOL with ORL and is pursuing a rapid achievement of the merger benefits between the companies. The Company estimates that leveraging the integration and synergy of the Company's various segments results in greater total margins and reduces the overall volatility impacting the Company's profitability over time, particularly as the Company's subsidiaries do not necessarily overlap. Likewise, the single management team creates efficiencies by optimizing operations and reducing costs.
- 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.
- Construction began this year on the hydrocracker and is going as planned, according to the established timetable. The facility, whose main products are diesel and jet fuel, is expected to be completed by mid 2012.
- Significant progress was made during the period in completing the natural gas pipeline connection to the Company's facilities. In anticipation of this project's completion in first quarter of 2011, the Company entered into in an agreement in December 2010 with EMG to supply natural gas to the Company's plants for a period of 20 years, starting from the first delivery. Accordingly, this will enable all of the Company's production facilities to run on natural gas instead of oil. The Company's management expects this transition to yield operational efficiencies, while playing an essential role in enabling the Group plants to meet future environmental requirements.
- According to reports issued by the gas supplier EMG and Ampal, the latter of which holds 12.5% of the former, an explosion occurred on February 5, 2011 on the gas line leading to Jordan, and consequently, this line was damaged and closed in order to carry out inspections and repairs. On March 15th, 2011, the gas flow was renewed by EMG to its Israeli customers and will gradually be returned to its expected flow.
- The Company shut down one of its facilities in the fourth quarter of 2010 in order to carry out periodic maintenance, as required every five years, and this impacted the Company's operations and profitability during this reporting period. The Company went back to full production during the first quarter of 2011.
- During the shutdown, a work accident occurred, resulting in an investigation for which the Company is still waiting to receive results.
- The company completed a financing agreement designated to provide for the credit needs of the company until the end of 2012 with a consortium of local financial institutions led by Bank Hapoalim (totaling up to $600 million) and an American financial institution, with financing guaranteed by the U.S. Export Credit Agency (totaling up to $300 million). The Company has drawn $207 million of this credit towards during 2010 for investments.
FOURTH QUARTER 2010 RESULTS ($ millions)
Operating Profit EBITDA
Q4/10 Q4/09 Q4/10 Q4/09
Refining Segment (19) 19 (10) 32
Adjusted
Trade Segment (5) (7) (5) (7)
Petrochemicals 8 1 18 8
Segment - Polymers
Petrochemicals 3 5 3 7
Segment - Aromatics
Petrochemicals - - - -
Segment - Lube-Oils
Adjusted refining margin for Q4 2010 totaled USD/bbl 3.6, compared with the average Mediterranean Ural Cracking quoted by Reuters of USD/bbl 2.8. Adjusted refining margin for Q4 2009 totaled USD/bbl 3.1, compared with the average margin of USD/bbl 2.9.
Adjusted consolidated EBITDA totaled $8 million for the fourth quarter 2010, compared with $39 million in the same quarter in 2009.
Financing expenses totaled $23 million in Q4 2010, compared with $18 million in Q4 2009.
Consolidated net income for Q4 2010 was $24 million, compared $182 million in Q4 2009.
Mr. Yashar Ben Mordechai, CEO of Oil Refineries: "During the course of 2010, ORL outperformed Reuter's average Mediterranean Ural Cracking margin. However, the increase in world crude oil prices accompanied by the tighter petroleum product prices, reduced the Company's refining margin and eroded our profitability. Despite the weakness in the fuel markets, there is an impressive strengthening of the petrochemical markets, particularly in the area of polymers. As such, the Company decided this past year to make two related investments in the amount of $105 million with expected combined returns of about $80 million a year. The first is a $45 million investment 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 facility shutdown in the fourth quarter also impacted the Company's operations and profitability during this reporting period, though the Company went back to full production during the first quarter of 2011. During the course of 2010, ORL merged CAOL's and the Company's headquarters, operations and sales team, creating a management system that could realize a rapid achievement of the merger benefits between the companies. Maximizing this value has led to improved combined margins, resulting in the more efficient management of the Company's subsidiaries and the elimination of overlapping expenses."
Mr. Ben Mordechai added: "The Company has completed this past year a number of facility upgrades which have already contribute to improved utilization rates and increased quantities refined. Likewise, construction began on the hydrocracker and is going as planned, according to the established timetable. The facility, whose main products are diesel and jet fuel, is expected to be completed by mid 2012. This project will strengthen ORL's position as the leading refinery in the area. At the start of this year, the gas pipeline connection to the Company's facilities was completed and we are at present waiting for authorization from the gas authorities to transition to the use of natural gas."
Mr. Yossi Rosen, Chairman of the Board of Oil Refineries: "This year, the Company implemented its strategic plan which included, among others, the consolidation of headquarters, raising the flexibility and diversity among the various production facilities centers, increasing the production volumes of high value products such as petrochemicals (i.e.; polymers and aromatics), and leveraging company synergies following our merger. These measures, along with reducing the volume of fuel oil production, reduced our exposure to oil price fluctuations throughout the year, and allowed us to maximize the benefits of other revenue drivers. Since the beginning of 2011, the Company changed its hedging policy for crude oil prices by reducing the exposure of un-hedged inventory from 600 thousand tons to 350 thousand tons. This is expected to protect the Company from such fluctuations in the long term. The Company also entered into in an agreement with EMG to supply natural gas to the Company's plants for a period of 20 years, starting from the first delivery. Accordingly, this will enable all of the Company's production facilities to run on natural gas instead of oil. The Company's management expects this transition to yield operational efficiencies while playing an essential role in enabling the Group plants to meet future environmental requirements. This will make ORL one of the more environmentally responsible oil refinery and petrochemical companies in the Mediterranean basin.
Mr. Rosen further added: "In addition to the investment activities undertaken to strengthen the Company, ORL is making many efforts to improve its environmental footprint such as the transition to natural gas, as well as other day-to-day operational activities. The completion of the hydrocracker will allow us to begin the production and sale of vastly improved diesel fuel which will result in decreased pollutant emissions from vehicles throughout the country. This process is compatible with company policies, which is to continually strive to improve the fuel quality it produces. The Israeli government's decision to permit tax breaks and grants to encourage export is a welcome step in helping to strengthen the competitive standing of Israeli industries on a global level. "
Conference Call
The Company will also be hosting a conference call today, March 21, 2011, at 13:30 GMT, 9:30 ET, 6:30 PST and 15:30 Israeli Time.
On the call, management will present a presentation reviewing the fourth quarter and full year 2010 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 in the conference call, 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 number.
US Dial-in Numbers: 1-888-407-2553
UK Dial-in Number: 0-800-917-5108
Israel Dial-in Number: 03-918-0644
International Dial-in Number: +972-3-918-0644
at: 13:30 GMT, 9:30 ET, 6:30 PT, 15:30 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, www.orl.co.il, under investor relations on March 21, 2011.
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.
Consolidated Statements of Financial Position
USD thousands
December 31
2010 2009
Current assets
Cash and cash equivalents 6,704 34,961
Deposits 126,991 77,637
Trade receivables 366,227 360,876
Other receivables 98,241 61,107
Financial derivatives 27,577 21,095
Investments in financial assets at
fair value through comprehensive
income 106,895 107,034
Inventories 1,200,922 1,016,453
Current tax assets 1,819 3,957
Total current assets 1,935,376 1,683,120
Non-current assets
Investments in equity-accounted
investees 16,455 13,673
Investments in available-for-sale
financial assets 17,701 10,909
Loan to Haifa Early Pensions Ltd. 77,014 76,053
Long term loans and debit balances 3,501 3,951
Financial derivatives 192,990 104,510
Employee benefit plan assets 7,922 9,993
Deferred tax assets 307 --
Property, plant and equipment 2,030,414 1,891,659
Deferred costs 12,535 1,366
Intangible assets 78,950 93,187
Total non-current assets 2,437,789 2,205,301
Total assets 4,373,165 3,888,421
December 31
2010 2009
Current liabilities
Loans and borrowings 773,792 603,685
Trade payables 619,037 542,025
Other payables 102,099 105,903
Current tax liability 24,278 --
Financial derivatives 63,292 34,708
Provisions 9,231 11,582
Total current liabilities 1,591,729 1,297,903
Non-current liabilities
Bank loans 624,468 358,310
Debentures 872,421 853,205
Liabilities for finance lease 9,491 8,768
Other long-term liabilities -- 15,973
Financial derivatives 5,195 --
Employee benefits 70,537 63,871
Deferred tax liabilities 58,579 138,464
Total non-current liabilities 1,640,691 1,438,591
Total liabilities 3,232,420 2,736,494
Capital
Non-controlling interests -- 17,183
Share capital 586,390 586,390
Share premium 100,242 100,242
Reserves 45,516 35,571
Retained earnings 408,597 412,541
Total equity attributed to 1,140,745 1,134,744
shareholders of the Company
Total capital 1,140,745 1,151,927
Total liabilities and capital 4,373,165 3,888,421
Consolidated Statements of Comprehensive Income
USD thousands
For the year ended December 31,
2010 2009 2008
Revenue 6,791,809 5,141,480 8,257,458
Cost of sales, refinery and
services 6,561,599 4,840,325 8,303,889
Revaluation of open positions in
derivatives on prices of goods and
margins, net 27,179 38,606 (7,465)
Total cost of sales 6,588,778 4,878,931 8,296,424
Gross profit (loss) 203,031 262,549 (38,966)
Selling and marketing expenses (99,282) (74,169) (75,749)
General and administrative expenses (57,955) (38,553) (52,154)
Negative goodwill arising on a
business combination -- 137,000 14,535
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 (loss) 45,794 357,297 (152,334)
Finance revenues 89,330 61,223 64,979
Financing expenses (140,439) (86,866) (126,034)
Financing expenses, net (51,109) (25,643) (61,055)
Company's share in profits of
equity accounted investees, net of
tax 476 4,892 (3,111)
Profit (loss) before taxes on
income (4,839) 336,546 (216,500)
Tax benefit 81,619 12,698 107,292
Profit (loss) for the period 76,780 349,244 (109,208)
Items of other comprehensive income
(loss)
Actuarial gains (losses) from a
defined benefit plan, net (5,724) 4,859 (9,318)
Foreign currency translation
differences for foreign operations (309) 77 (1,078)
Group's share of other
comprehensive income (loss) of a
former equity-accounted investee,
net of tax -- 10,433 (10,433)
Effective share of the change in
fair value of cash flow hedging,
net of tax 3,529 -- --
Change in fair value of
available-for-sale financial
assets, net of tax 6,143 2,270 --
Other comprehensive income (loss),
net of tax 3,639 17,639 (20,829)
Comprehensive income(loss) for the
period 80,419 366,883 (130,037)
Earnings (loss) per share (USD)
Basic and diluted earnings (loss)
per ordinary share 0.032 0.175 (0.055)
Results of the Group's operations
The following table presents selected information compared to last year
(USD millions)
Petrochemicals
Refining Trade Polymers Aromatics Oils
Year ended December 31
2010 2009 2010 2009 2010 2009 2010 2009 2010 2009
Revenue 5,034 3,859 215 506 1,012 414 451 362 80 --
Inter-company
operations 836 468 -- 40 -- -- 33 40 -- --
Total sales 5,870 4,327 215 546 1,012 414 484 402 80 --
--
Cost of sales 5,768 4,105 228 549 484 210 56 15 28 --
Inter-company
operations 33 40 -- -- 410 169 378 333 41 --
Total cost of
sales 5,801 4,145 228 549 894 379 434 348 69 --
Gross profit
(loss) 69 182 (13) (3) 118 35 50 54 11 --
Selling, general
and
administrative
expenses 61 58 5 4 51 25 25 25 4 --
Inter-company
operations -- -- -- -- 2 2 2 2 -- --
61 58 5 4 53 27 27 27 4 --
Operating profit
(loss) for
segments 8 124 (18) (7) 65 8 23 27 7 --
Negative
goodwill arising
on acquisition
Profit from
revaluation of a
former holding
following
increase of
control
Loss from loss
of material
impact in an
equity-accounted
investee
Amortization of
the excess cost
arising from
acquisition of
investees
Operating profit
Financing
expenses, net
Share in profits
(losses) of
investees, net
of tax
Profit (loss)
before taxes on
income
Tax benefit
Profit for the
period
Table Continued below
Adjustments
to
consolidated Consolidated
Year ended December 31
2010 2009 2010 2009
Revenue -- -- 6,792 5,141
Inter-company
operations (869) (548) -- --
Total sales (869) (548) 6,792 5,141
Cost of sales -- -- 6,564 4,879
Inter-company
operations (862) (542) -- --
Total cost of
sales (862) (542) 6,564 4,879
Gross profit
(loss) (7) (6) 228 262
Selling, general
and
administrative
expenses -- -- 146 112
Inter-company
operations (4) (4) -- --
(4) (4) 146 112
Operating profit
(loss) for
segments (3) (2) 82 150
Negative
goodwill arising
on acquisition -- 137
Profit from
revaluation of a
former holding
following
increase of
control -- 77
Loss from loss
of material
impact in an
equity-accounted
investee -- (7)
Amortization of
the excess cost
arising from
acquisition of
investees (36) --
Operating profit 46 357
Financing
expenses, net (51) (26)
Share in profits
(losses) of
investees, net
of tax -- 5
Profit (loss)
before taxes on
income (5) 336
Tax benefit 82 13
Profit for the 77 349
period
The following table presents selected information of the Group for the last three months period (USD millions)
Petrochemicals
Refining Trade Polymers Aromatics Oils
Three months ended December 31
2010 2009 2010 2009 2010 2009 2010 2009 2010 2009
Revenue 1,082 1,177 84 84 240 125 69 108 21 --
Inter-company
operations 101 144 - 11 -- -- 1 10 -- --
Total sales 1,183 1,321 84 95 240 125 70 118 21 --
Cost of sales 1,197 1,319 88 100 164 64 30 6 10 --
Inter-company
operations 2 10 - - 58 53 35 99 9 --
Total cost of
sales 1,199 1,329 88 100 222 117 65 105 19 --
Gross profit
(loss) (16) (8) (4) (5) 18 8 5 13 2 --
Selling,
general and
administrative
expenses 12 13 1 2 7 6 2 8 2 --
Inter-company
operations - - - - 3 1 - - - --
12 13 1 2 10 7 2 8 2 --
Operating
profit (loss)
for segments (28) (21) (5) (7) 8 1 3 5 -- --
Negative
goodwill
arising on
acquisition
Profit from
revaluation of
a former
holding
following
increase of
control
Amortization
of the excess
cost arising
from
acquisition of
investees
Operating
profit
Financing
expenses, net
Share in
profits
(losses) of
investees, net
of tax
Profit (loss)
before taxes
on income
Tax benefit
Profit for the
period
Adjustments
to
consolidated Consolidated
Three months ended December 31
2010 2009 2010 2009
Revenue -- -- 1,496 1,494
Inter-company
operations (102) (165) -- --
Total sales (102) (165) 1,496 1,494
Cost of sales -- -- 1,489 1,489
Inter-company
operations (104) (162) -- --
Total cost of
sales (104) (162) 1,489 1,489
Gross profit
(loss) 2 (3) 7 5
Selling,
general and
administrative
expenses 4 - 28 29
Inter-company
operations (3) (1) -- --
1 (1) 28 29
Operating
profit (loss)
for segments 1 (2) (21) (24)
Negative
goodwill
arising on
acquisition - 137
Profit from
revaluation of
a former
holding
following
increase of
control - 77
Amortization
of the excess
cost arising
from
acquisition of
investees (6) -
Operating
profit (27) 190
Financing
expenses, net (23) (18)
Share in
profits
(losses) of
investees, net
of tax - 1
Profit (loss)
before taxes
on income (50) 173
Tax benefit 74 9
Profit for the
period 24 182
---------------------------------
[1] In 2009, 50% of CAOL's results were consolidated
Company Contact:
Rony Solonicof
Chief Economist and Head of Investor Relations
Tel. +972-4-878-8152
Contact 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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