Oil Refineries Announces Results for Second Quarter 2012
HAIFA, Israel, August 13, 2012 /PRNewswire/ --
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 ending June 30, 2012. Results are reported in US Dollars and under International Financial Reporting Standards (IFRS).
Key 2012 Second Quarter Highlights
- ORL generated operational cash flow of $634 million.
- Net financing debt decline by $627 million.
- Revenues totaled $2.45 billion.
- Net loss totals $99 million.
- Consolidated EBITDA totaled a loss of $73 million.
- Adjusted Consolidated EBITDA totaled a loss of $2 million (as a result of timing difference and accounting effects in the refining sector).
- Adjusted refining margin totaled $6.1 per barrel, as compared with the average Reuter’s quoted Mediterranean Ural Cracking Margin of $5.6 per barrel for the second quarter of this year. The Company continues to generate refining margins higher than the benchmark average.
- The establishment of a hydrogen facility of the hydrocracker and the emergency torch tower were completed before expected and were operated successfully. Likewise, operation of equipment and pipelines began in all the sectors of the facility. The full running and activation of the facility is expected to begin at the end of the third quarter of 2012.
- On June 24, 2012 the partners of the Noa North natural gas reservoir announced that the development of the reservoir was completed and that it had commenced the flow of natural gas to its customers, including the Company. The Company thus began to receive natural gas form this production field.
- The utilization rate during the quarter rose to 91%, and increase over the same quarter in the previous year.
Mr. Yossi Rosen, Chairman of the Board of Oil Refineries: "Frequent changes in oil prices and refining margins continue to influence the results of ORL as we see in the second quarter of 2012. However, if take out these changes, we see that ORL succeeded in achieving its operating and strategic targets, carrying out managerial measures in order to introduce a number of very strong operational parameters.
"I am pleased that we will conclude, in the coming quarter, one of the most important and complex projects this Company, and the Israeli industry, has ever undertaken, the hydrocracker. This project represents the transformation of the Company in terms of its position, profitability and contribution to its shareholders. Asides from this project, we continued with our extensive investments in environmental protection and we are now functioning as fully merged Company, both operationally and managerially."
Mr. Pinhas Buchris, CEO of Oil Refineries: “The second quarter of 2012 reflects some extensive administrative organizational restructuring, which we have made. The Company generated a total cash flow of $634 million from its operations this past quarter and reduced its net financial debt by $627 million. This can be attributed to diversifying our sources of financing through availability inventory deals and by extending payment terms to suppliers, both which we carried out in recent months and helped us gain financial flexibility.
In contrast, the business environment in which we operate continues to be very volatile and difficult to predict and is compounded by a weakening petrochemical field and widely fluctuating refining environment. ORL completed the second quarter of 2012 with a loss of $99 million, almost all of it attributable to inventory losses caused by the sharp volatility in crude oil prices and petrochemical products and gas shortages.
This volatility was evident this quarter in all of our business sectors. The refining benchmark average ranged between $2-$10 a barrel over the quarter, while our refining margin averaged $5.6 dollars a barrel, which enabled us to generate an adjusted operating profit about $31 million in our key refining sector. We saw global weakening of the polymer market this quarter which was characterized by sharp declines in product prices, due to falling raw material prices and a sharp drop in demand. Likewise, aromatic margins reached lows not seen in the industry for many years.
The completion and expansion of our strategic plan, entails great significant value for the Company and will enable it to become more effective, competitive, profitable and technologically advanced. The company's management, together with its employees, are working together in cooperation to complete and implement these broad and ambitious measures while applying new business processes in order to push ORL forward in the coming years. These measures, which initially included an extensive organizational restructuring, are currently focusing on recruiting personnel at all levels - junior, intermediate, and senior. In addition, we re-examined all contracts with suppliers and others and we implemented new policies and standards across the group including improving the interface between our various sectors.
Looking forward to the remainder of the year and the third quarter, improving gas supply and the successful and timely activation of the hydrocracker will provide the Company with a significant milestone given the complexity and innovation of this project. This will have broad implications for the profitability of the Group and will significantly elevate our business position and technological capabilities.
Additional Key Points for Second Quarter 2012
- Shareholders' equity as of June 30, 2012 totaled $922 million, 20% of the balance sheet.
- Continuation of the strategy to increase profitability and turn ORL into a globally competitive organization, including carrying out an investment program, implementing the new organizational structure and improving the interface between the different business units.
- ORL generated operational cash flow of $634 million.
- Investments program:
- Hydrocracker: up to the end of the quarter the Company had invested $410 million. Running and activation is expected towards the end of third quarter of 2012.
- Synergy projects: CCR gas utilization facility will yield optimal extraction of existing streams in the refinery and began in January 2012. $45 million were invested with an estimated cash flow of $30 million a year expected. Increasing propylene production capacity brings an investment of $90 million and will bring in an estimated cash flow of $55 million a year. In order to continue with this investment project, the Company is currently waiting for the granting of the necessary permits in order to establish it.
- The Company continues to invest in the area of environmental protection. ORL invested up to $144 million to meet the most advanced international standards in environmental protection. In this area the Company has, for some time, been working vigorously for the evacuation of sludge from its premises and as part of this effort the Company is establishing a sludge treatment facility, a unique project in Israel. Its construction, for which the Company invested $7.5 million, is expected to be complete in the coming days.
- During the quarter the Company continued its commitment to the community, with an emphasis on the advancement of education and youth projects. The company sponsored a tennis center in Haifa and also adopted the "Hatmar" military unit as part of the “Adopt a Soldier project,” part of the Friends of the IDF organization.
SECOND QUARTER RESULTS 2012 ($ millions)
Operating profit EBITDA
Q2 12 Q2 11 Q2 12 Q2 11
Refining 31 (26) 47 (14)
Polymers (CAOL) (50) 20 (41) 32
Aromatics (GADIV) (17) 7 (15) 9
Lube oils (HBO) (1) 4 (1) 4
Trade (1) (4) (1) (4)
Adjustments 9 4 9 4
Total consolidated (with
adjustments) (29) 5 (2) 31
Total consolidated
(without adjustments) (100) 101 (73) 127
The adjusted refining margin for the second quarter of 2012 was $6.1 per barrel compared with the average Mediterranean Ural Cracking Margin quoted by Reuters of $5.6 per barrel. This is in comparison with the adjusted refining margin for the second quarter of 2011, which was $1.5 per barrel as compared with the benchmark margin of $1.6 per barrel.
Adjusted consolidated EBITDA in the second quarter of 2012 totaled $2 million, compared with $31 million in the corresponding period last year. The decline can be primarily attributed to a weakening polymer market as well as a decrease in inventory value due to timing differences in light crude oil prices during second quarter of 2012.
Cash flow from current operations for the reporting period totaled $634 million, as compared with $161 million in the corresponding period last year. The increase is mainly due to the decline in crude oil prices as well as the extension of payment terms for suppliers and inventory availability.
Net consolidated financing expenses amounted to $26 million in the reporting period compared with $24 million in the corresponding period last year.
Consolidated loss in the reporting period totaled $99 million, compared with a profit of $50 million in the corresponding period last year.
FIRST HALF RESULTS 2012 ($ millions)
Operating profit EBITDA
H1 12 H1 11 H1 12 H1 11
Refining 42 (30) 73 (5)
Polymers (CAOL) (53) 49 (32) 72
Aromatics (GADIV) (5) 12 (1) 16
Lube oils (HBO) (2) 7 (2) 8
Trade (2) (12) (2) (12)
Adjustments 1 1 1 1
Total consolidated (with
adjustments) (19) 27 37 78
Total consolidated
(without adjustments) (52) 119 4 170
The adjusted refining margin for the first half of 2012 was $5.1 per barrel compared with the average Mediterranean Ural Cracking Margin quoted by Reuters of $4.3 per barrel. This is in comparison with the adjusted refining margin for the first half of 2011, which was $2.4 per barrel as compared with the benchmark margin of $1.1 per barrel.
Adjusted consolidated EBITDA in the first half of 2012 totaled $37 million, compared with $78 million in the corresponding period last year. The decline can be primarily attributed to a weakening polymer market as well as a decrease in inventory value due to timing differences in light crude oil prices during second quarter of 2012.
Cash flow from current operations for the reporting period totaled $518 million, as compared with $161 million in the corresponding period last year. The increase is mainly due to the decline in crude oil prices as well as the extension of payment terms for suppliers and inventory availability.
Net consolidated financing expenses amounted to $67 million in the reporting period compared with $48 million in the corresponding period last year.
Consolidated loss in the reporting period totaled $105 million, compared with a profit of $37 million in the corresponding period last year.
Conference Call
The Company will also be hosting a conference call today, August 14, 2012, at 14:00 UK time, 9:00 ET, 6:00 PT and 16:00 Israeli Time.
On the call, management will present a presentation reviewing the second quarter and first half 2012 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: 03-918-0610
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.
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 report
The following table presents selected information of the Group for the six months period (USD millions)
Petrochemicals
Fuels Trade Polymers Aromatics
Six months ended June 30
2012 2011 2012 2011 2012 2011 2012 2011
Revenues 3,888 3,586 6 129 554 615 407 328
Inter-company
operations 715 663 -- -- -- -- 25 22
Total sales 4,603 4,249 6 129 554 615 432 350
Cost of sales 4,535 4,134 8 138 284 214 32 7
Inter-company
operations 25 22 -- -- 298 326 387 317
Total cost of
sales 4,560 4,156 8 138 582 540 419 324
Gross profit
(loss) 43 93 (2) (9) (28) 75 13 26
Selling, general
and
administrative
expenses (34) (31) -- (3) (27) (26) (18) (14)
Other revenue -- -- -- -- 2 -- -- --
(34) (31) -- (3) (25) (26) (18) (14)
Operating profit
(loss) for
segments 9 62 (2) (12) (53) 49 (5) 12
Amortization of
excess cost
arising on
acquisition of
investees
Operating profit
(loss)
Financing expenses,
net
Company's share in
losses of investees
Profit (loss) before
taxes on income
Tax benefits (income
tax)
Profit (loss) for
the period
- TABLE CONTINUED -
Petrochemicals
Adjustments to
Oils consolidated Consolidated
2012 2011 2012 2011 2012 2011
Revenues 46 53 -- -- 4,901 4,711
Inter-company operations 2 -- (742) (685) -- --
Total sales 48 53 (742) (685) 4,901 4,711
Cost of sales 12 24 -- -- 4,871 4,517
Inter-company operations 35 20 (745) (685) -- --
Total cost of sales 47 44 (745) (685) 4,871 4,517
Gross profit (loss) 1 9 3 -- 30 194
Selling, general and
administrative expenses (3) (2) -- 1 (82) (75)
Other revenue -- -- (2) -- -- --
(3) (2) (2) 1 (82) (75)
Operating profit (loss)
for segments (2) 7 1 1 (52) 119
Amortization of excess
cost arising on
acquisition of investees (13) (14)
Operating profit (loss) (65) 105
Financing expenses, net
Company's share in
losses of investees (67) (48)
Profit (loss) before
taxes on income
(3) (3)
Tax benefits (income
tax) (135) 54
Profit (loss) for the
period
30 (17)
(105) 37
The following table presents selected information of the Group for the three months period (USD millions)
Petrochemicals
Fuels Trade Polymers Aromatics
Three months ended June 30
2012 2011 2012 2011 2012 2011 2012 2011
Revenues 1,967 2,014 4 76 253 313 200 221
Inter-company
operations 343 365 -- -- -- -- 14 12
Total sales 2,310 2,379 4 76 253 313 214 233
Cost of sales 2,322 2,279 5 79 147 107 30 32
Inter-company
operations 14 12 -- -- 141 172 192 185
Total cost of
sales 2,336 2,291 5 79 288 279 222 217
Gross profit
(loss) (26) 88 (1) (3) (35) 34 (8) 16
Selling,
general and
administrative
expenses 14 18 -- 1 14 14 9 9
Operating
profit (loss)
for segments (40) 70 (1) (4) (49) 20 (17) 7
Amortization
of excess cost
arising on
acquisition of
investees
Operating
profit (loss)
Financing expenses,
net
Company's share in
losses of investees
Profit (loss)
before taxes on
income
Tax benefits
(income tax)
Profit (loss) for
the period
- TABLE CONTINUED -
Adjustments to
Oils consolidated Consolidated
Three months ended June 30
2012 2011 2012 2011 2012 2011
Revenues 29 29 -- -- 2,453 2,653
Inter-company
operations 1 -- (358) (377) -- --
Total sales 30 29 (358) (377) 2,453 2,653
Cost of sales 10 12 -- -- 2,514 2,509
Inter-company
operations 19 12 (366) (381) -- --
Total cost of
sales 29 24 (366) (381) 2,514 2,509
Gross profit
(loss) 1 5 8 4 (61) 144
Selling,
general and
administrative
expenses 2 1 -- -- 39 43
Operating
profit (loss)
for segments (1) 4 8 4 (100) 101
Amortization
of excess cost
arising on
acquisition of
investees (7) (7)
Operating
profit (loss) (107) 94
Financing expenses,
net (26) (24)
Company's share in
losses of investees (1) (4)
Profit (loss)
before taxes on
income (134) 66
Tax benefits
(income tax) 35 (16)
Profit (loss) for
the period (99) 50
Condensed Consolidated Interim Statement of Financial Position
USD thousands
June 30, June 30, December
2012 2011 31, 2011
(Unaudited) (Audited)
Current assets
Cash and cash equivalents 205,421 14,419 20,465
Deposits 31,674 45,746 21,821
Trade receivables 724,586 673,541 561,403
Other receivables 121,927 106,664 147,328
Financial derivatives 46,504 36,716 45,958
Investments in financial assets at
fair value through profit or loss 3,281 111,851 73,680
1,201,076 1,083,037
Inventory 949,138 (*) (*)
Current tax assets 3,158 1,714 3,528
Total current assets 2,085,689 2,191,727 1,957,220
Non-current assets
Investments in equity-accounted
investees 4,648 14,054 4,238
Investments in financial assets at
fair value through other
comprehensive income 5,905 12,289 5,460
Loan to Haifa Early Pensions Ltd. 63,417 74,672 69,130
Long term loans and debit balances 32,942 1,739 1,993
Financial derivatives 108,315 217,659 139,687
Employee benefit plan assets, net 5,920 7,488 6,111
Deferred tax assets 4,699 3,930 2,893
Property, plant and equipment 2,341,641 2,142,504 2,245,194
Intangible assets 58,257 73,624 65,145
Deferred costs 4,137 11,943 11,267
Total non-current assets 2,629,881 2,559,902 2,551,118
Total assets 4,715,570 4,751,629 4,508,338
(*) Retrospective application of accounting policy - see Note 3
Condensed Consolidated Interim Statement of Financial Position
USD thousands
At
June 30, June 30, December 31,
2012 2011 2011
Note (Unaudited) (Audited)
Current liabilities
Loans and borrowings 8 900,112 603,408 844,349
Trade payables 1,281,389 1,053,631 780,458
Other payables 121,463 87,491 73,490
Current tax liability 21,199 24,990 21,663
Financial derivatives 37,733 46,430 42,990
Provisions 13,981 8,905 9,121
Total current liabilities 2,375,877 1,824,855 1,772,071
Non-current liabilities
Bank loans 8 769,272 801,866 915,359
Debentures 542,667 872,333 665,147
Liabilities for finance lease 8,891 10,053 8,991
Financial derivatives 12,134 4,871 12,198
Employee benefits, net 71,343 71,613 78,413
Deferred tax liabilities 13,000 64,056 (*) 36,328 (*)
Total non-current liabilities 1,417,307 1,824,792 1,716,436
Total liabilities 3,793,184 3,649,647 3,488,507
Capital
Share capital 586,390 586,390 586,390
Share premium 100,242 100,242 100,242
Reserves 108,357 62,697 101,078
Retained earnings 127,397 352,653 (*) 232,121 (*)
Total capital 922,386 1,101,982 1,019,831
Total liabilities and capital 4,715,570 4,751,629 4,508,338
(*) Retrospective application of accounting policy - see Note 3
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
2012 2011 2012 2011 31, 2011
(Unaudited) (Unaudited) (Audited)
Revenues 4,899,934 4,710,677 2,452,406 2,653,171 9,561,601
Cost of sales 4,877,844 4,524,542(*) 2,517,773 2,514,028(*) 9,389,677 (*)
Gross profit
(loss) 22,090 186,135 (65,367) 139,143 171,924
Selling and
marketing expenses 52,904 50,286 27,833 28,774 104,493
General and
administrative
expenses 34,604 30,895 13,861 16,247 53,534
Operating profit
(loss) (65,418) 104,954 (107,061) 94,122 13,897
Financing income 12,170 35,304 7,189 28,140 34,574
Financing expenses (78,935) (82,955) (32,687) (52,571) (123,692)
Financing
expenses, net (66,765) (47,651) (25,498) (24,431) (89,118)
Company's share in
losses of equity
accounted
investees, net of
tax, including
impairment losses (2,546) (3,538) (1,544) (3,808) (21,932)
Profit (loss)
before taxes on
income (134,729) 53,765 (134,103) 65,883 (97,153)
Tax benefits
(income tax) 30,005 (17,003) (*) 35,298 (15,737) (*) 20,687 (*)
Profit (loss) for
the period (104,724) 36,762 (98,805) 50,146 (76,466)
Items of other
comprehensive
income (loss)
Actuarial gains
(losses) from a
defined benefit
plan, net of tax -- 82 -- (192) (7,222)
Foreign currency
translation
differences for
foreign operations 213 819 115 93 238
Effective share of
the change in fair
value of cash flow
hedging, net of
tax (104) (981) -- (1,908) (3,425)
Net change in fair
value of
debentures at fair
value through
profit or loss,
attributable to
change in credit
risk, net of tax 5,646 (4,763) 30,752 (5,095) 48,871
Change in fair
value of financial
assets at fair
value through
other
comprehensive
income, net of tax 391 1,976 (1,764) 23,250 (10,772)
Other
comprehensive
income (loss) for
the period, net of
tax 6,146 (2,867) 29,103 16,148 27,690
Comprehensive
income(loss) for
the period (98,578) 33,895 (69,702) 66,294 (48,776)
Earnings (loss)
per share (USD)
Basic and diluted
earnings (loss)
per ordinary share (0.043) 0.015 (*) (0.041) 0.021 (*) (0.031) (*)
(*) Retrospective application of accounting policy - see Note 3
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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