HAIFA, Israel, November 24 /PRNewswire/ --
- Break-even third quarter with 24% increase in EBITDA YoY
- Net income of $73.5 in 9 months 2008
- Improvement in all operating parameters and net refining margin
- Lower net income in Q3 due to sharp decrease in fuel prices
- Board of Directors declares NIS 200 million dividend
Oil Refineries Ltd. (TASE:ORL.TA) (Oil Refineries or the Company) announced today its financial results for three and nine month periods ending September 30, 2008.
Third Quarter HIGHLIGHTS (Compared to third quarter 2007)
- 38% increase in consolidated operating profit to $54 million, compared to $39 million in the third quarter last year - 24% increase in consolidated EBITDA to $72 million; compared to $58 million in the third quarter last year - Net refining margin USD/bbl 8.1, compared to USD/bbl 4.1 in third quarter last year - Company reported margin 21% higher than average Reuters' quoted Mediterranean Ural Cracking Margin for the third quarter 2008 of USD/bbl 6.7 - On October 12, 2008 the Board of Directors approved the $670 million investment in establishing a 25k bpd capacity Hydro-cracker to be operational during 2011
Third Quarter 2008
Refining margin for the third quarter 2008, net of the IFRS recording method for derivative transactions, inventory gains and timing differences between purchase and sale, totaled USD/bbl 8.1, compared to USD/bbl 4.1 in the third quarter 2007. The average Mediterranean Ural Cracking Margin quoted by Reuters for third quarter 2008 totaled USD/bbl 6.7.
Consolidated EBITDA for the third quarter 2008 totaled $72 million, a 24% increase compared to $58 million in the third quarter 2007.
Processing capacity for the quarter (in tons) increased by 13% year-over-year reaching 2,098 thousand tons. Utilization rate for the quarter totaled 93%, compared to 82% in the comparable period last year. The higher utilization rate is primarily due to the substantial improvement in the operating focus resulting from the adopted organizational changes, as well as the Company's flexibility in choosing raw materials in the changing market environment and increased operating availability.
Consolidated Operating Profit for the third quarter 2008 totaled $54 million, a 38% increase compared to $39 million in the third quarter 2007. Operating profit from the Refining and Trade Segment totaled $42 million in the third quarter 2008, a 175% increase compared to $24 million in the third quarter 2007. Operating profit includes the loss on the decline in inventory value of approximately $43 million net of hedging income. This reflects the Company's exposure to the changes in its inventory value, under which the Company does not hedge basic operating inventory of 600 thousand tons.
Operating profit from the Petrochemicals Segment totaled $11 million in the third quarter 2008, compared to $15 million in the third quarter 2007. The Petrochemicals Segment includes the results of the Polymers Section and the Aromatics Section. The Polymers Section generated an operating profit of $7 million in the third quarter 2008, compared to $6 million in the third quarter 2007. The higher operating profit follows an increase in quantities sold as well as other income, offset partially offset by a decline in the product margins. Operating profit of the Aromatics Section in the third quarter 2008 totaled $4 million, compared to $9 million generated in the third quarter 2007. The decline in the section's operating profit primarily follows an in increase in production expenses as well as a decline in margins and quantities sold.
Finance expenses for the third quarter totaled $51 million, compared to $20 million in the comparable period last year. The increase in finance expense primarily follows the increase in the cost of short term credit mainly resulting from an increase in the company's debt level, following the increase in working capital resulting from the increase in global fuel prices, compared to last year. This was partially offset by the impact of the decline in interest rates during the quarter.
Consolidated net income for the third quarter was break even, compared to a $27 million net income in the third quarter 2007, primarily due to the increase in the operating income, explained above, offset by an increase in finance expenses.
Nine Months 2008
Refining margin for the nine months 2008, net of the IFRS recording method for derivative transactions, inventory gains and timing differences between the purchase and sale, totaled USD/bbl 5.7, compared to USD/bbl 7.0 in the nine months 2007. The Mediterranean Ural Cracking Margin average, quoted by Reuters, for the period totaled USD/bbl 5.6.
Consolidated EBITDA for the nine months 2008 totaled $208 million, compared to $258 million in the comparable period last year.
Consolidated Operating Profit for the nine months 2008 totaled $165 million, compared to $200 million in the comparable period last year.
Operating profit from the Refining and Trade Segment totaled $127 million in the nine months 2008, compared to $159 million last year. The operating profit from the Refining and Trade segment was impacted by a $91 million decline in the refining margins, partially offset by a decline in losses on derivative transactions as well as an increase in volumes sold.
Operating profit from the Petrochemicals Segment totaled $39 million in the nine months 2008, compared to $45 million in the comparable period last year. The Petrochemicals Segment includes the results of the Polymers Section and the Aromatics Section. The Polymers Section generated an operating profit of $15 million in the nine months 2008, compared to $20 million in the comparable period last year. The decline in the operating profit of the Polymers' section primarily follows a decline in the margins of the product slate, partially offset by an increase in volumes sold. Operating profit of the Aromatics Section in the nine months 2008 totaled $24 million, compared to $25 million in the comparable period last year. The decline in the operating profit of the Aromatics' Section is primarily the result of higher manufacturing costs, mainly energy.
Consolidated net income for the nine months totaled $73 million, compared to $124 million in the comparable period last year.
On October 12, 2008, the Company's Board of Directors approved the establishment of a hydro-cracking unit (Unit) at the Haifa refinery, for a total investment of $670 million. Upon activation, the Hydro-Cracker will mitigate the margin fluctuations by substantially increasing the refineries complexity and flexibility, hence enabling the Company to produce higher added-value products with each barrel of oil.
Mr. Yashar Ben-Mordechai, Oil Refineries' CEO said Oil Refineries is investing substantial efforts in order to both adapt to the changing market environment and to increase its utilization rates. We seek to manufacture high value-added products, such as jet fuel and diesel oil, while adapting the raw materials slate to evolving market demands. During the third quarter we refined 13% more than the third quarter last year, primarily due to our units' high utilization rates. It is important to note that as of December both the European and Israeli markets are transitioning to the Euro 5 standard transportation fuel. As Oil Refineries' is already compliant and ready for manufacturing under this new standard, we expect to start seeing a positive impact on our margins already in the fourth quarter this year.
Mr. Ben-Mordechai, commenting on the decline in net income this quarter, added, This quarter our operating income increased 'only' by $42 million, despite the increase in the refining margin to the level of $8.1 per barrel. This is primarily the result of the substantial decline in fuel prices. As published in the past, we do not hedge our basic operating inventory of 600,000 ton, and the change in the inventory values is of a non-cash nature. We currently estimate the ongoing decline in fuel prices, since the beginning of the fourth quarter, to have an exercised impact on the value of the inventory that was being held by the company on September 30, 2008, by approximately $74 million.
Mr. Ben-Mordechai, continued Maalot recently downgraded our debenture credit rating. We believe that this downgrade did not take into account the substantiated claims presented by the Company with respect to the developments and actions taken, substantially reducing the Company's risk. It is important to note that the majority of the debenture repayments start from 2012 onwards, during which time the Company expects to generate large cash inflows on these investments. We operate in a long-term industry and have taken long term actions which will, over time, contribute to increased profitability, while mitigating risks.
During the preparation of the strategic plan, Oil Refineries reviewed its measures in detail. This plan highlights the Company's core strengths, namely: its human resources, among the highest in terms of technological aptitude worldwide, integration of the petrochemical and refining industries, excellent strategic location with very good accessibility to a wide selection of crude oils, close proximity to growing markets, and strong modern infrastructure in its main Haifa facility.
Mr. Yossi Rosen, Oil Refineries' Chairman of the Board noted, The Company's Board of Directors recently approved the decision to invest in establishing a Hydro-Cracker. We believe that this decision serves as a clear vote of confidence by our controlling shareholders, in the Company's ability to undertake and finance the project, and this, given the long term vision and strong belief in the success of the project. The project's completion will contribute to the employment in the region, and to the country as a whole. This decision to establish a Hydro-Cracker is one of the focal points of Oil Refineries' strategic plan. The Unit is expected to substantially contribute to the Company's profitability and serve as a driving force, as part of the planned expansion and core-business enhancement process. The Hydro-Cracker will be built to meet the most stringent environmental protection standards serves as an additional stage in the strategic plan aimed at protecting the environment by enabling the Company to manufacture cleaner and more environmentally-friendly products.
Mr. Rosen added, The current global economic uncertainty requires the Company to make a detailed review of all investments, however, to date, the Company's business has not been affected, save for a decline in the price of oil and products.
Mr. Rosen commented on Oil Refineries' agreement to acquire the 50% balance in shares of Carmel Olefins noting that the transaction is currently waiting for final regulatory approvals and, primarily, a solution to the Petroleum Chemical Holdings' Control Permit.
Mr. Rosen concluded that the Company's Board of Directors has decided to distribute a NIS200 million dividend (the Dividend), from the Company's distributable retained earnings as of September 30, 2008. The determining date for the Dividend payment will be December 1, 2008, and the payment date for the Dividend will be December 16, 2008. Following the implementation of the agreement dated June 24, 2008, between the Company and Israel Petrochemical Enterprises, for the acquisition of the balance of shares in Carmel Olefins, the said dividend will be counted as part of the 'First Dividend' as defined in the said agreement.
Conference Call
The Company will also be hosting a conference call later today at 10:00am ET. On the call, management will present a presentation reviewing the third quarter 2008 highlights and industry trends. The presentation can be downloaded from the Company's website http://www.orl.co.il : Investor Relations Financial Reports prior to the call. 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 dial-in number.
US Dial-in Numbers: 1-888-668-9141 UK Dial-in Number: 0-800-032-3367 Israel Dial-in Number: 03-918-06587 International Dial-in Number: +972-3-918-0687 at: 10:00am Eastern Time, 7:00am Pacific Time; 3:00pm UK, 5:00pm Israel 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 oil refinery. ORL operates sophisticated and state-of-the-art industrial facilities with refining capacity of 9 million tons of crude oil per year, with 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 is also active in the area of Polymers and Aromatics through its holdings in Carmel Olefins Ltd and Gadiv Petrochemical Industries Ltd. The Company also provides power and heat services to industrial customers in the Haifa Bay, as well as infrastructure services. ORL is traded on the Tel Aviv Stock Exchange under the ticker ORL. For additional information please visit the Company's website: http://www.orl.co.il.
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.
Oil Refineries Ltd.
Selected Pro-forma Consolidated Data from the Report of the Board of Directors on the State of the Corporation's Affairs for the Period
For the nine months For the three months ended ended September September September September 30, 2008 30, 2007 30, 2008 30, 2008 in USD millions Revenues Refining 6,397 3,504 2,496 1,232 Trade 369 - 58 - Polymers 383 233 142 83 Aromatics 474 392 164 146 Cancellation of inter-company transactions (642) (461) (235) (172) Total 6,981 3,668 2,625 1,289 Cost of sales, refinery and services Refining 6,227 3,281 2,442 1,197 Trade 360 - 53 - Polymers 362 199 129 71 Aromatics 429 346 154 130 Cancellation of inter-company transactions (638) (458) (235) (171) Total 6,740 3,368 2,543 1,227 Gross profit Refining 170 223 54 35 Trade 9 - 5 - Polymers 21 34 13 12 Aromatics 45 46 10 16 Cancellation of inter-company transactions (4) (3) - (1) Total 241 300 82 62 Selling, general and administrative expenses Refining 51 41 16 11 Trade 1 - 1 - Polymers 21 14 7 6 Aromatics 21 19 6 7 Cancellation of inter-company transactions (3) (2) (1) (1) Total 91 72 29 23 Other (income) expenses Refining - 23 - - Polymers (15) - (1) - Aromatics - 2 - - Cancellation of inter-company transactions - 3 - - (15) 28 (1) -
For the nine months For the three months ended ended September September September September 30, 2008 30, 2007 30, 2008 30, 2008 in USD millions Operating income Refining 119 159 38 24 Trade 8 - 4 - Polymers 15 20 7 6 Aromatics 24 25 4 9 Cancellation of inter-company transactions (1) (4) 1 - Total 165 200 54 39 Financing expenses, net (89) (43) (51) (21) Profit before taxes on income 76 157 3 18 Income tax (3) (34) 1 6 73 123 4 24 Company's share in earnings of investees - 1 (4) (6) Net income for the period 73 124 - 18
Oil Refineries Ltd. Consolidated Balance Sheet In thousand US Dollars September September December 30, 2008 30, 2007 31, 2007 (Unaudited) (Audited) Assets Cash and cash equivalents 26,333 19,523 259,325 Derivatives at fair value through profit and loss 3,106 4,485 6,513 Investment in other financial assets at fair value through profit and loss. 131,320 106,917 113,035 Trade receivables 517,815 396,693 394,470 Receivables and debit balances 121,868 75,508 84,029 Income tax 30,129 1,526 10,153 Inventory 1,150,429 770,893 1,042,545 Total current assets 1,981,000 1,375,545 1,910,070 Investments and long-term loans Investments in investees accounted by the equity method 40,197 54,026 53,958 Loan to Haifa Early Pensions Ltd. 93,864 75,670 80,038 Long term loans and debit balances 4,885 2,021 3,631 Derivatives at fair value through profit and loss 103,706 - 2,571 Employee benefit plan assets 6,689 6,681 7,519 249,341 138,398 147,717 Fixed assets, net 1,066,178 972,218 978,412 Intangible assets and deferred expenses, net 24,816 22,418 22,924 Total non-current assets 1,340,335 1,133,034 1,149,053 Total assets 3,321,335 2,508,579 3,059,123
The notes to the financial statements are an integral part of the financial statements.
Oil Refineries Ltd. Consolidated Balance Sheet (cont.) In thousand US Dollars September September December 30, 2008 30, 2007 31, 2007 (Unaudited) (Audited) Current liabilities Credit from banking institutions and other credit providers 387,307 278,650 216,021 Trade payables 536,240 372,706 561,232 Other payables 159,035 65,282 92,253 Derivatives at fair value through profit and loss 3,398 4,013 - Provisions 30,994 16,523 19,950 Total current liabilities 1,116,974 737,174 889,456 Non-current liabilities Debentures 817,816 242,726 717,302 Bank loans 381,265 482,293 452,154 Derivatives in fair value through profit and loss 732 - - Deferred taxes 125,600 119,249 125,287 Liabilities for financing lease 9,452 7,273 7,763 Other long-term liabilities 8,964 - - Employee benefits 71,880 73,509 67,358 Total non-current liabilities 1,415,709 925,050 1,369,864 Total liabilities 2,532,683 1,662,224 2,259,320 Shareholders' equity Share capital 472,478 472,478 472,478 Capital reserves 21,015 28,501 29,036 Retained earnings 295,159 345,376 298,289 Total equity attributed to equity holders of the Company 788,652 846,355 799,803 Total liabilities and capital 3,321,335 2,508,579 3,059,123
Oil Refineries Ltd. Consolidated Profit and Loss Statements In thousand US Dollars For the For the nine For the three year months ended months ended ended September 30 September 30 December 2008 2007 2008 2007 31 2007 (Unaudited) (Unaudited) (Audited) Revenues 6,981,424 3,667,916 2,624,665 1,288,632 5,236,945 Cost of sales, refinery and services 6,738,068 3,346,340 2,574,325 1,192,300 4,805,066 Revaluation of open positions in derivatives on prices of goods and margins, net 2,087 21,135 (31,456) 33,557 20,156 Total cost of revenues 6,740,155 3,367,475 2,542,869 1,225,857 4,825,222 Gross profit 241,269 300,441 81,796 62,775 411,723 Selling expenses 32,215 24,138 11,029 9,086 33,518 General and administrative expenses 58,610 47,748 17,959 14,238 68,027 Reduction of negative goodwill created upon acquisition (*) (14,535) - (692) - - Privatization grant - 28,360 - - 28,360 Operating profit 164,979 200,195 53,500 39,451 281,818 Financing income 67,953 34,123 15,579 16,004 34,625 Financing expenses (157,096) (76,484) (67,144) (36,762) (136,750) Company's share in gains (losses) of investees (net of tax) 437 857 (3,289) (6,268) 6,913 Income (loss) before taxes on income 76,273 158,691 (1,354) 12,425 186,606 Tax benefits (taxes on income) (2,754) (34,237) 1,396 5,629 (44,937) Net Income for the period 73,519 124,454 42 18,054 141,669 Earnings per ordinary share Net basic and diluted earnings per ordinary share (in USD) 0.037 0.053 0.036 0.048 0.071
The notes to the financial statements are an integral part of the financial statements.
Contacts Company Contact: Rami Sasson, EVP Business Development and Capital Markets, Oil Refineries Tel. +972-4-878-8114 ContactIREn@orl.co.il Investor Relations Contact: Ehud Helft \ Fiona Darmon GK Investor Relations Tel. (US) +1-646-797-2868 \ (Int.) +972-54-566-3221 info@gkir.com
Contacts: Company Contact: Rami Sasson, EVP Business Development and Capital Markets, Oil Refineries, Tel. +972-4-878-8114, ContactIREn@orl.co.il; Investor Relations Contact: Ehud Helft \ Fiona Darmon, GK Investor Relations, Tel. (US) +1-646-797-2868 \ (Int.) +972-54-566-3221, info@gkir.com
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