Oil Refineries Announces Results for Third Quarter & First Nine Months 2011
HAIFA, Israel, November 21, 2011 /PRNewswire/ --
Adjusted refining margin for the third quarter totaled USD/bbl 3.0, compared with benchmark average of USD/bbl 1.2
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- Adjusted consolidated EBITDA of $33 million for the third quarter of 2011, compared with $50 million in the same period last year.
- Net loss of $25 million for the third quarter of 2011, compared with a net income of $23 million in the same period last year.
- Net loss of $9 million for the first nine months of 2011, compared with a net income of $50 million in the same period last year.
- Adjusted refining margin in the third quarter of 2011 at USD/bbl 3.0, compared with USD/bbl 1.2 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 third quarter and first nine months ending September 30, 2011. Results are reported in US Dollars and under International Financial Reporting Standards (IFRS). Results of operations and comparisons presented in this release reflect the financial restatement correction, as reported on November 18, 2011.
Mr. Pinhas Buchris, CEO of Oil Refineries: "Despite the lack of correlation between the changes that occurred in crude oil prices with the changes that occurred in the prices of petroleum products, which are expected to continue into the fourth quarter, ORL continues to maintain a significantly higher refining margin compared with the benchmark margin. Our ability to keep higher refining margins as compared with other refineries in the region, is a testament to ORL's capability to determine the optimal configuration of quantity refined and product slate, across all of its production lines. The Company is showing stable margins in aromatics, along with record production stemming from operational improvements made ??as a result of recent renovations. The establishment of the hydrocracker is continuing on schedule with the commissioning of this facility, designated to produce cleaner fuels expected by the end of the second quarter of 2012."
Mr. Yossi Rosen, Chairman of the Board of Oil Refineries: "The continued volatility in the markets, along with the trend of falling oil prices in recent months resulting from the publication of weak macroeconomic data from the U.S. and Europe, and the drop in oil demand from OECD countries, led to a decrease, compared with the same period last year, in quantity refined in order to maintain optimization in the Company. ORL has so far invested about $ 283 million, as part of its strategic plan, for the establishment of the hydrocracker. Once it starts commissioning, the facility is expected to 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. The transition to natural gas significantly decreased our refinery emissions demonstrating that our transition was the correct course of action from an environmental perspective."
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, along with the earthquake in Japan in March, 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 $105 a barrel. Lack of correlation between changes in crude oil prices with changes in the prices of petroleum products during the reporting period resulted in a severe volatility of refining margins. The average Reuters quoted Mediterranean Ural Cracking margin during the nine month reporting period ranged from about USD/bbl (4) to USD/bbl 7.0 a barrel and averaged USD/bbl 1.1 in this period. In the same period last year, the average Reuters quoted Mediterranean Ural Cracking margin totaled USD/bbl 2.9.
FIRST NINE MONTHS 2011 ($ millions)
Operating Profit EBITDA
Q1-3/11 Q1-3/10 Q1-3/11 Q1-3/10
Refining Segment
Adjusted (29) 24 8 55
Petrochemicals
Segment - Polymers 40 57 75 91
Petrochemicals
Segment - Aromatics 35 20 40 24
Petrochemicals
Segment - Lube-Oils 10 8 11 9
Trade Segment (19) (13) (19) (3)
Adjustments (1) (5) - (5)
Total adjusted
consolidated 36 91 115 161
Quantity refined declined in the first nine months of 2011 by about 424 thousand tons, compared with the same period last year. The utilization rate during the reporting period stood at 87.8%, 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 this reporting period of 2011 totaled USD/bbl 2.7, compared with the average Mediterranean Ural Cracking Margin quoted by Reuters of USD/bbl 1.1. Adjusted refining margin for the first nine months of 2010 totaled USD/bbl 3.1, compared with the average margin of USD/bbl 2.9.
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, while in fact 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 this reporting period totaled $115 million, compared with $161 million in the same period last year.
Financing expenses in the first nine months of 2011 totaled $69 million, compared with $28 million in the same period last year. The rise is attributed to fluctuations in hedging activities and an increase in bond and interest rates.
Consolidated net loss for the first nine months of 2011 totaled $9 million, compared with a net income of $50 million in the same period last year.
THIRD QUARTER 2011 ($ millions)
Operating Profit EBITDA
Q3/11 Q3/10 Q3/11 Q3/10
Refining Segment
Adjusted (3) (3) 9 8
Petrochemicals
Segment - Polymers (9) 27 3 37
Petrochemicals
Segment - Aromatics 23 7 27 8
Petrochemicals
Segment - Lube-Oils 3 2 4 3
Trade Segment (7) (4) (7) (4)
Adjustments (1) (2) (2) (2)
Total adjusted
consolidated 6 27 33 50
Adjusted refining margin in Q3 2011 totaled USD/bbl 3.0, compared with the average Mediterranean Ural Cracking Margin quoted by Reuters of USD/bbl 1.2. Adjusted refining margin for the third quarter of 2010 totaled USD/bbl 1.7, similar to the average margin.
Adjusted consolidated EBITDA in Q3 2011 totaled $33 million, compared with $50 million in the same quarter last year.
Financing expenses in the third quarter of 2011 totaled $21 million, compared with $20 million in the same quarter last year.
Consolidated net loss for the third quarter of 2011 totaled $25 million, compared with an income of $23 million in the same quarter last year.
Key Developments in the First Nine Months 2011
- As part of the strategic plan regarding the establishment of the hydrocracker, the Company has executed up to the end of the reporting period: an investment amounting to about $283 million (of a total investment of $500 million) and took on additional commitments for its implementation, totaling approximately $127 million. The project's progress is in line with the planned schedule with its commissioning expected towards the end of the second quarter of 2012.
- In addition, and 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 (as of publication of this report, the Company has started the process of its commencement). 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 has made an amendment to its Transaction Report and Extraordinary General Meeting, from November 18, 2011. A convenience translation of this amendment will be available on the Company’s website later this week.
Conference Call
The Company will also be hosting a conference call today, November 21, 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 third quarter and first nine months 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, 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. 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
September September December
30, 2011 30, 2010 31, 2010
(Unaudited) (Audited)
Current assets
Cash and cash equivalents 10,528 31,342 6,704
Deposits 20,044 84,846 126,991
Trade receivables 627,340 501,637 366,227
Other receivables 122,780 73,518 98,241
Financial derivatives 77,498 23,316 27,577
Investments in financial assets at fair
value through comprehensive income 104,491 102,957 106,895
Inventory 1,176,343 1,190,655 1,200,922
Current tax assets 1,553 807 1,819
Total current assets 2,140,577 2,009,078 1,935,376
Non-current assets
Investments in equity-accounted investees 9,188 16,580 16,455
Financial assets at fair value through
other comprehensive income 7,300 11,165 17,701
Loan to Haifa Early Pensions Ltd. 70,640 74,142 77,014
Long term loans and debit balances 1,534 3,701 3,501
Financial derivatives 172,768 172,736 192,990
Employee benefit plan assets 6,297 10,536 7,922
Deferred tax assets 327 -- 688
Property, plant and equipment 2,215,777 1,936,241 2,030,414
Deferred costs 12,075 9,154 12,535
Intangible assets 69,924 82,204 78,950
Total non-current assets 2,565,830 2,316,459 2,438,170
Total assets 4,706,407 4,325,537 4,373,546
The accompanying notes are an integral part of the condensed consolidated interim financial statements.
Condensed Consolidated Interim Statement of Financial Position
USD thousands
September September December
30, 2011 30, 2010 31, 2010
(Unaudited) (Audited)
Current liabilities
Loans and borrowings 993,206 760,178 773,792
Trade payables 734,303 673,699 619,037
Other payables 89,823 118,225 102,099
Current tax liabilities 23,159 23,828 24,278
Financial derivatives 42,009 56,155 85,443
Provisions 9,633 11,507 9,231
Total current liabilities 1,892,133 1,643,592 1,613,880
Non-current liabilities
Bank loans 784,584 501,807 624,468
Debentures 780,632 869,816 872,421
Liabilities for finance lease 9,335 9,187 9,491
Financial derivatives 15,494 12,655 5,195
Employee benefits 70,845 59,201 70,537
Deferred tax liabilities 63,648 127,360 53,808
Total non-current liabilities 1,724,538 1,580,026 1,635,920
Total liabilities 3,616,671 3,223,618 3,249,800
Capital
Share capital 586,390 586,390 586,390
Share premium 100,242 100,242 100,242
Reserves 88,835 41,103 45,516
Retained earnings 314,269 374,184 391,598
Total capital 1,089,736 1,101,919 1,123,746
Total liabilities and capital 4,706,407 4,325,537 4,373,546
The accompanying notes are an integral part of the condensed consolidated interim financial statements.
Condensed Consolidated Interim Statement of Comprehensive Income
USD thousands
Year
Nine months ended Three months ended ended
September September September September December
30, 2011 30, 2010 30, 2011 30, 2010 31, 2010
(Unaudited) (Unaudited) (Audited)
Revenue 7,456,394 5,295,924 2,745,717 1,713,114 6,791,809
Cost of sales,
refining and
services 7,226,447 5,101,206 2,625,760 1,609,507 6,561,599
Revaluation of open
positions in
derivatives on
prices of goods and
margins, net 30,311 859 79,050 36,627 32,052
Total cost of sales 7,256,758 5,103,065 2,704,810 1,646,134 6,593,651
Gross profit 199,636 192,859 40,907 66,980 198,158
Selling and
marketing expenses 77,959 80,073 27,673 24,078 99,282
General and
administrative
expenses 39,384 43,331 8,489 10,048 57,955
Operating profit 82,293 69,455 4,745 32,854 40,921
Financing income 20,844 87,632 (14,460) 28,355 89,330
Financing expenses (89,756) (115,894) (6,801) (48,178) (140,439)
Financing expenses,
net (68,912) (28,262) (21,261) (19,823) (51,109)
Company's share in
earnings (losses) of
equity accounted
investees, net of
tax (8,404) 600 (4,866) 258 476
Profit (loss) before
taxes on income 4,977 41,793 (21,382) 13,289 (9,712)
Tax benefits (income
tax) (14,450) 8,030 (3,262) (*)9,804 82,781
Profit (loss) for
the period (9,473) 49,823 (24,644) 23,093 73,069
Items of other
comprehensive income
(loss)
Actuarial gains
(losses) from a
defined benefit
plan, net of tax (403) 108 (485) 212 (5,724)
Foreign currency
translation
differences for
foreign operations 336 (176) (483) 642 (309)
Effective share of
the change in fair
value of cash flow
hedging, net of tax (2,973) 4,995 (1,992) 4,995 3,529
Change in fair value
of financial assets
at fair value
through other
comprehensive
income, net of tax (9,153) 210 (4,390) 1,669 6,143
Net change in fair
value of debentures
designated at fair
value through
comprehensive
income, attributable
to change in credit
risk, net of tax 34,979 -- 33,003 -- --
Other comprehensive
income for the
period, net of tax 22,786 5,137 25,653 7,518 3,639
Comprehensive income
for the period 13,313 54,960 1,009 30,611 76,708
Earnings (loss) per
share (USD)
Basic and diluted
earnings (loss) per
ordinary share (0.004) 0.020 (*) (0.010) 0.009 (*) 0.030
The accompanying notes are an integral part of the condensed consolidated interim financial statements
Results of the Group's operations
The following table presents selected information of the Group for the nine months period (USD millions)
Petrochemicals
Refining Trade Polymers Aromatics Oils
Nine months ended September 30
2011 2010 2011 2010 2011 2010 2011 2010 20112010
Revenue 5,739 3,951 166 130 930 772 538 383 83 59
Inter-company
operations 1,035 735 -- -- -- -- 45 31 -- --
Total sales 6,774 4,686 166 130 930 772 583 414 83 59
Cost of sales 6,650 4,576 180 139 373 323 18 28 23 17
Inter-company
operations 44 31 1 -- 479 351 507 343 47 33
Total cost of
sales 6,694 4,607 181 139 852 674 525 371 70 50
Gross profit
(loss) 80 79 (15) (9) 78 98 58 43 13 9
Selling,
general and
administrative
expenses 43 48 4 4 38 39 22 22 3 1
Inter-company
operations -- -- -- -- -- 2 1 1 -- --
43 48 4 4 38 41 23 23 3 1
Operating
profit (loss)
for segments 37 31 (19) (13) 40 57 35 20 10 8
Amortization
of excess cost
arising on
acquisition of
investees
Operating
profit
Financing
expenses, net
Company's
share in
earnings
(losses) of
equity
accounted
investees, net
of tax
Profit before
income tax
Tax benefits
(income tax)
Profit (loss)
for the period
Table continues…
Adjustments to
consolidated Consolidated
Nine months ended September 30
2011 2010 2011 2010
Revenue -- -- 7,456 5,295
Inter-company operations (1,080) (766) -- --
Total sales (1,080) (766) 7,456 5,295
Cost of sales -- -- 7,244 5,083
Inter-company operations (1,078) (758) -- --
Total cost of sales (1,078) (758) 7,244 5,083
Gross profit (loss) (2) (8) 212 212
Selling, general and administrative
expenses -- -- 110 114
Inter-company operations (1) (3) -- --
(1) (3) 110 114
Operating profit (loss) for segments (1) (5) 102 98
Amortization of excess cost arising
on acquisition of investees (20) (29)
Operating profit 82 69
Financing expenses, net (69) (28)
Company's share in earnings (losses)
of equity accounted investees, net of
tax (8) 1
Profit before income tax 5 42
Tax benefits (income tax) (14) 8
Profit (loss) for the period (9) 50
The following table presents selected information of the Group for the three months period (USD millions)
Petrochemicals
Refining Trade Polymers Aromatics Oils
Three months ended September 30
2011 2010 2011 2010 2011 2010 2011 2010 20112010
Revenue 2,153 1,306 37 34 315 237 210 116 30 20
Inter-company
operations 372 248 -- -- -- -- 23 8 -- --
Total sales 2,525 1,554 37 34 315 237 233 124 30 20
Cost of sales 2,487 1,522 43 38 159 72 12 4 -- 5
Inter-company
operations 24 8 -- -- 153 127 190 106 26 12
Total cost of
sales 2,511 1,530 43 38 312 199 202 110 26 17
Gross profit
(loss) 14 24 (6) (4) 3 38 31 14 4 3
Selling,
general and
administrative
expenses 11 14 1 -- 12 10 8 7 1 1
Inter-company
operations -- -- -- -- -- 1 -- -- -- --
11 14 1 -- 12 11 8 7 1 1
Operating
profit (loss)
for segments 3 10 (7) (4) (9) 27 23 7 3 2
Amortization
of excess cost
arising on
acquisition of
investees
Operating
profit
Financing
expenses, net
Company's share in
earnings (losses)
of equity accounted
investees, net of
tax
Profit (loss)
before taxes
on income
Tax benefits
(income tax)
Profit (loss)
for the period
Table continues...
Adjustments to
consolidated Consolidated
Three months ended September 30
2011 2010 2011 2010
Revenue -- -- 2,745 1,713
Inter-company
operations (395) (256) -- --
Total sales (395) (256) 2,745 1,713
Cost of sales -- -- 2,701 1,641
Inter-company
operations (393) (253) -- --
Total cost of sales (393) (253) 2,701 1,641
Gross profit (loss) (2) (3) 44 72
Selling, general and
administrative
expenses -- -- 33 32
Inter-company
operations -- (1) -- --
-- (1) 33 32
Operating profit
(loss) for segments (2) (2) 11 40
Amortization of excess
cost arising on
acquisition of
investees (7) (7)
Operating profit 4 33
Financing expenses,
net (21) (20)
Company's share in
earnings (losses) of
equity accounted
investees, net of tax (5) --
Profit (loss) before
taxes on income (22) 13
Tax benefits (income
tax) (3) 10
Profit (loss) for the
period (25) 23
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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