HAIFA, Israel, November 11 /PRNewswire/ --
- Consolidated Quarterly net Income Reaches $100 Million, Compared Break Even in Third Quarter 2008; - Consolidated net Income for the Nine Months Reaches $167 Million - Adjusted Refining Margin Totals USD/bbl 8.1 Compared to Reuters' Mediterranean Ural Cracking Margin Benchmark of USD/bbl 1.6; - Refining Capacity Increases to 197 kbpd, up From 180 kbpd, Following Upgrade of Largest Crude Unit; - Continue to Prepare for Merger of Carmel Olefins With ORL; Following General Meeting Approval and Completion of Transaction -- ORL will Wholly-own Carmel Olefins
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, 2009. Results reported in US Dollars and under International Financial Reporting Standards (IFRS).
- Adjusted refining margin USD/bbl 8.1, compared to USD/bbl 1.6 average Reuters' quoted Mediterranean Ural Cracking Margin - Adjusted refining and trading segment EBITDA totaled $55 million, compared to a $83 million in nine months 2008 - Polymer sector EBITDA totaled $17 million, an increase from the $16 million in last year - Aromatic sector EBITDA totaled $8 million, an increase from the $7 million in last year - Consolidated net income of $100 million, compared to break even in the first nine months 2008
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 method under IFRS. This, in order to enable a common base for comparison of the Company's ongoing operations.
Volatility in Global Fuel Prices and Refining Margins
The increase in crude oil prices had a substantial impact on the Company's results during the reporting period. The Company maintains a basic un-hedged inventory of 600,000 tons of crude oil. The change in the value of this inventory does not draw a cash flow impact on the Company, therefore the Company reports its operating results net of these and other factors as outlined below.
As of September 2009 the Company hedges its basic inventory by means of options for the instance of a significant decline in crude oil prices.
Third Quarter 2009 Results
Adjusted refining margin for the third quarter of 2009 totaled USD/bbl 8.1 (USD/ton 60.1), compared to the average Mediterranean Ural Cracking Margin quoted by Reuters for the third quarter 2009 of USD/bbl 1.6 (USD/ton 11.0). Adjusted refining margin for the third quarter 2008 totaled USD/bbl 8.1 (USD/ton 58.9). The Company estimates that the adjusted refining margin for the quarter was substantially higher than the regional Ural benchmark for several reasons: the completion of unit upgrades, differences in the refined crude oil mix as compared to the Ural, full capacity activation of downstream units despite the decline in refining throughput due to the periodic turnaround of the largest crude unit and crossover impacts between quarters in volatile environment.
Utilization rate for the third quarter totaled 76.5%, compared to 92.5% in the same period last year. The decline in utilization rate is mainly due to the periodic turnaround of the Company's largest crude unit.
Refining and Trading sector adjusted EBITDA totaled $55 million in the third quarter of 2009, compared to $83 million in the comparable period last year.
Polymer Segment EBITDA, conducted through 50%-held Carmel Olefins, totaled $17 million in the third quarter of 2009, compared to $16 million in the comparable period last year.
Aromatic Segment EBITDA, conducted through wholly-owned Gadiv Petrochemical Industries, increased to $8 million in the third quarter of 2009, compared to $7 million in the comparable period last year.
Finance expense for the third quarter of 2009, on a consolidated basis, totaled $17 million, compared to a $52 million finance expense in the third quarter of last year. The decline in finance expenses resulted from the fair value adjustment of financial derivatives, as accepted under IFRS accounting standard, as well as from the decline in interest expenses, resulting from the lower LIBOR rate. Furthermore the Company generated an income on its traded securities' portfolio.
Taxes on Income: As a result of the Israeli Economic Efficiency Law which determined, among others, the gradual reduction in the corporate tax rate to 18% in 2016 and onwards, the Company's deferred tax liabilities were reduced resulting in the Company recording a related tax income of approximately $36 million.
Consolidated net income for the third quarter of 2009 totaled $100 million, compared to break even in the third quarter last year.
Nine Month 2009 Results
Adjusted refining margin for the nine months of 2009 totaled USD/bbl 4.9 (USD/ton 36.0), compared to the average Mediterranean Ural Cracking Margin quoted by Reuters for the period of USD/bbl 2.1 (USD/ton 15.0). Adjusted refining margin for the comparable period last year totaled USD/bbl 5.7 (USD/ton 41.7).
Utilization rate for the first nine months totaled 81.7%, compared to 91.0% in the same period last year. The decline in utilization rate is mainly due to the periodic turnaround of the Company's main crude unit.
Refining and Trading sector adjusted EBITDA totaled $95 million in the first nine months of 2009, compared to $134 million in the comparable period last year. The year over year decline mainly followed lowering refined volumes resulting from the periodic shutdown of the Company's main refining unit paired with the lower refining margins. This was partially offset by the proactive decrease in operating expenses.
Polymer Segment EBITDA increased to $28 million in the nine months of 2009, compared to $19 million in the comparable period last year. The increase resulted primarily from higher quantities sold, offset by a decline in product margins.
Aromatic Segment EBITDA totaled $26 million in the nine months of 2009, compared to $30 million in the comparable period last year.
Finance expense for the nine months of 2009, on a consolidated basis, totaled $8 million, compared to an $88 million finance expense in the third quarter of last year. The decline in finance expenses resulted primarily for the fair value adjustment of financial derivates as accepted under IFRS accounting standards, as well as a decline in interest payments resulting from the lower LIBOR interest rate.
Taxes on Income: As a result of the Israeli Economic Efficiency Law which determined, among others, the gradual reduction in the corporate tax rate to 18% in 2016 and onwards, the Company's deferred tax liabilities were reduced resulting in the Company recording a related tax income of approximately $36 million.
Consolidated net income for the nine months of 2009 totaled $167 million, compared to $74 million in the nine months last year.
Significant Recent Developments
Agreement to acquire the entire holdings of Israel Petrochemical Enterprises in Carmel Olefins (CAOL): On October 27, 2009 the Company signed an agreement with Israel Petrochemical Enterprises (IPE) under which IPE will sell to the Company its entire shareholding in CAOL, representing 50% of CAOL's issued and outstanding share capital, in such a manner that following the acquisition, the Company will hold 100% of CAOL's issued share capital. In return for the acquired CAOL shares, the Company will issue 431,610,944 ordinary shares to IPE, representing, after the allocation (undiluted), 17.75% of the Company's issued share capital. The acquisition of CAOL's entire share capital will enable the Company to take advantage of potential inherent synergies between the refining, aromatic and polymer industries, enabling total optimization of the production process in the three plants - ORL, CAOL and Gadiv, through joint planning of crude oil and feedstock purchases, optimized manufacturing and materials allocation to the plant where it will achieve the highest added value.
Mild Hydrocracker - In May 2009 the Company completed, and activated, the first phase of the HVGO desulphurization plant conversion into a mild hydrocracker. Subsequently the unit started contributing to added value by increasing gasoil production capacity by 2% per annum -- an even higher rate than initially forecast. The Company is currently bringing forward the second stage of the project, which is expected to further increase capacities by the same level as the first stage.
Periodic Turnaround and Upgrade of Crude Unit 4 - The turnaround and upgrade of the largest crude unit was completed at the end of July 2009. This upgrade enables the Company to refine a broader range of regional crudes, capturing higher refining margins. With the commissioning of the upgraded unit, the refinery's capacity has increased from 180,000 barrels per day to approximately 197,000 barrels per day.
Full Hydrocracker - As part of the strategic plan, under which a 25 kbpd hydrocracker was approved, the Company is now finalizing the financing package.
Efficiencies - The Company adopted a comprehensive efficiency work plan for 2009. Under the plan, the Company has substantially reduced ongoing operating expenses and intends to continue to implement efficiencies and cost savings in the coming quarters.
Mr. Yashar Ben Mordechai, CEO of Oil Refineries: Oil Refineries continues to present refining margins consistently higher than the regional benchmark. The measures recently implemented, including the conversion and upgrade of units, substantially contributed to our flexibility and to the added value of the plant. We are witnessing an increase in demand, primarily for transportation fuels in the local market. However, we continue to feel the impact of the global economic slowdown. The global economic recovery is key to driving demand, and as such we are positioning ourselves to take advantage of this opportunity to the maximum. The acquisition of CAOL will enable us to immediately leverage synergies through the optimization of activities, including optimal long term investment planning. The unique integration dynamics of our fuels industry with the aromatic and polymer industries, offers us an advantage in the competitive landscape. This optimization includes all areas of refining, petrochemicals and trade, and will enable us to generate higher added values for each raw material. The merger will enable us to better leverage our advantages and market, in tandem, fuels, polymers and aromatic products based on demand from the local and international markets.
Mr. Ben Mordechai added that Our current operating market dictates even more accelerated efficiency measures, though these measures do not relate to downsizing, but rather to increasing in-house activities while reducing outsourcing to contractors.
Mr. Yossi Rosen, Chairman of the Board of Oil Refineries: Oil Refineries operates in a highly volatile market and stands strong both its flexibility and response time in all areas of purchasing, trade and manufacturing optimization. The Company continues to implement its strategic plan with a view to enhancing its core businesses, preserving a relatively high EBITDA due to ongoing efficiency measures and declining overheads. Furthermore, the CAOL ORL merger serves as a focal point in the strategic plan to expand Oil Refineries' activities in the petrochemical areas while taking advantage of synergies to improve profitability and leverage, with a view to presenting long term growth. Once the transaction is completed, ORL will be unique in the East Mediterranean, integrating the capabilities of the petrochemical industries with its refining industry.
Mr. Rosen further commented on the delays in bringing the natural gas pipeline to the Haifa Bay: Bringing the natural gas pipeline to the Haifa Bay is critical to the continued development of Northern Israel's industry, and this includes the Haifa bay area. The Israeli Government must move swiftly to fulfill its promise and complete the gas pipeline. The company and its subsidiaries have invested hundreds of millions of Shekels to prepare for the reception of the natural gas for immediate use, and following these substantial investments, which were based on the Governments' promises, they do not intend to invest in alternative means to reduce emissions.
Conference Call
The Company will also be hosting a conference call later today at 8:30am ET, 1:30pm UK time.
On the call, management will present a presentation reviewing the third quarter and first nine months 2009 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: 1-800-994-4498
UK Dial-in Number: 0-800-917-9141
Israel Dial-in Number: 03-918-0644
International Dial-in Number: +972-3-918-0644
at: 8:30am Eastern Time, 5:30am Pacific Time; 1:30pm UK, 3:30pm 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 9.8 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. Oil Refineries' major shareholders are the Israel Corporation and Israel Petrochemical Enterprises, both public companies listed on the Tel Aviv Stock Exchange. 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.
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.
Condensed Consolidated Interim Statements of Financial Position
In thousand US Dollars
As at September September December 30, 2009 30, 2008 31, 2008 (Unaudited) (Audited) Current assets Cash and cash equivalents 7,468 26,333 14,840 Deposits 77,247 - 25,000 Derivatives at fair value through profit 522 3,106 15,374 or loss Investments in other financial assets at fair value through profit or loss 108,588 131,320 101,509 Trade receivables 312,088 517,815 253,215 Other receivables 79,491 121,868 82,642 Inventory 868,216 1,150,429 569,407 Current tax assets 46,530 30,129 42,047 Total current assets 1,500,150 1,981,000 1,104,034 Non-current assets Investments in equity-accounted investees 35,844 40,197 36,005 Investments in available-for-sale financial assets (*) 10,510 - - Loan to Haifa Early Pensions Ltd. 73,126 93,864 84,740 Long term loans and debit balances 2,965 4,885 2,606 Derivatives at fair value through profit or loss 112,975 103,706 64,369 Employee benefit plan assets 5,877 6,689 5,007 Property, plant and equipment 1,161,698 1,066,178 1,083,446 Intangible assets and deferred expenses, 24,992 24,816 25,170 net Total non-current assets 1,427,987 1,340,335 1,301,343 Total assets 2,928,137 3,321,335 2,405,377
(*) See Note 8 F to the Company's financial statements for the periods ending September 30, 2009
Oil Refineries Ltd.
Condensed Consolidated Interim Statements of Financial Position (cont.)
In thousand US Dollars
As at September September December 30, 2009 30, 2008 31, 2008 (Unaudited) (Audited) Current liabilities Loans and credit 488,394 387,307 380,339 Trade payables 427,229 536,240 270,594 Other payables 81,997 160,155(*) 70,971(*) Derivatives at fair value through profit or loss 26,954 3,398 1,853 Provisions 14,385 30,994 12,949 Total current liabilities 1,038,959 1,118,094 736,706 Non-current liabilities Debentures 736,253 817,816 726,554 Bank loans (**) 272,074 381,265 233,749 Liabilities for finance lease 8,816 9,452 8,448 Other long-term liabilities 7,581 8,964 7,394 Derivatives at fair value through profit or loss 5,558 732 6,900 Employee benefits 50,967 70,760(*) 67,930(*) Liabilities for deferred taxes (***) 66,664 125,600 65,827 Total non-current liabilities 1,147,913 1,414,589 1,116,802 Total liabilities 2,186,872 2,532,683 1,853,508 Capital Share capital 472,478 472,478 472,478 Capital reserves 34,919 21,015 20,953 Retained earnings 233,868 295,159 58,438 Total capital 741,265 788,652 551,869 Total liabilities and capital 2,928,137 3,321,335 2,405,377
(*) Reclassified, see Note 2 D(1) to the Company's financial statements for the periods ending September 30, 2009
(**) See Note 8 H to the Company's financial statements for the periods ending September 30, 2009
(***) See Note 8 P to the Company's financial statements for the periods ending September 30, 2009
Oil Refineries Ltd.
Condensed Consolidated Interim Statements of Comprehensive Income
In thousand US Dollars
Nine months ended Three months ended Year September 30 September 30 ended December 31 2009 2008 2009 2008 2008 (Unaudited) (Unaudited) (Audited) Revenue 3,647,109 6,981,424 1,454,708 2,624,665 8,257,458 Cost of sales, refinery and services 3,360,451 6,738,068 1,340,590 2,574,325 8,324,149 Revaluation of open transactions in derivatives on prices of goods and margins, net 39,395 2,087 (8,468) (31,456) (7,465) Total cost of sales 3,399,846 6,740,155 1,332,122 2,542,869 8,316,684 Gross profit (loss) 247,263 241,269 122,586 81,796 (59,226) Selling expenses 31,275 32,215 13,425 11,029 40,582 General and administrative expenses 42,144 58,610 15,470 17,959 67,061 Negative goodwill arising on acquisition - (14,535) - (692) (14,535) Loss from the loss of material impact in a former equity-accounted investee (**) 7,091 - - - - Operating profit (loss) 166,753 164,979 93,691 53,500 (152,334) Financing revenue 62,390 56,298(*) 18,119 (25,863)(*) 64,979 Financing expenses (70,275) (145,441)(*)(34,477) (25,702)(*)(126,034) Financing expenses, net (7,885) (89,143) (16,358) (51,565) (61,055) Group's share in profits (losses) of equity accounted investees, net of tax 4,711 437 873 (3,289) (3,111) Profit (loss) before taxes on income 163,579 76,273 78,206 (1,354) (216,500) Tax benefits (taxes on income) 3,149 (2,754) 21,912 1,396 107,292 Net profit (loss) for the period 166,728 73,519 100,118 42 (109,208) Other components of comprehensive income Actuarial gains (losses) from a defined benefit plan, net 8,702 (5,050) 2,023 (4,885) (9,318) Foreign currency translation differences for foreign operations 168 (867) 195 (1,086) (1,078) Group's share of other comprehensive income of an equity accounted investee (**) 10,433 (10,339) - 751 (10,433) Change in fair value of available-for-sale financial assets, net of tax (**) 1,777 - 954 - - Other comprehensive income for the period, net of tax 21,080 (16,256) 3,172 (5,220) (20,829) Comprehensive income for the period 187,808 57,263 103,290 (5,178) (130,037) Earnings (loss) per share (USD) Basic and diluted earnings (losses) per ordinary share 0.083 0.037 0.050 (****) (0.055)
(*) Reclassified, see Note 2 D (2) to the Company's financial statements for the periods ending September 30, 2009
(**) See Note 8 F to the Company's financial statements for the periods ending September 30, 2009
(***) See Note 8 P to the Company's financial statements for the periods ending September 30, 2009
(****) Less than $0.001 to the Company's financial statements for the periods ending September 30, 2009
Due to first-time adoption of the revised IAS 1 commencing from January 1, 2009 in these financial statements, the presentation format of the statement of comprehensive income was changed. See also Note 3A (1) for a description of first-time adoption of the new standards.
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
In millions US Dollars
Refining Trade Nine months ended September 30 2009 2008 2009 2008 Revenue 2,683 5,822 422 348 Inter-company operations 324 576 29 21 Total revenue 3,007 6,398 451 369 Cost of sales 2,797 6,182 449 360 Inter-company operations 30 45 - - Total cost of sales 2,827 6,227 449 360 Gross profit (loss) 180 171 2 9 Selling, general and administrative expenses 35 51 2 1 Inter-company operations - - - - Operating profit (loss) for segments 145 120 - 8 Negative goodwill arising on acquisition Loss from the loss of material impact in a former equity-accounted investee Operating profit Financing expenses Share in profits of equity-accounted investees Profit before income tax Income tax Net profit
Table continued below
Petrochemicals Polymers Aromatics Nine months ended September 30 2009 2008 2009 2008 Revenue 289 382 253 429 Inter-company operations - - 30 45 Total revenue 289 382 283 474 Cost of sales 146 158 8 40 Inter-company operations 116 204 234 389 Total cost of sales 262 362 242 429 Gross profit (loss) 27 20 41 45 Selling, general and administrative expenses 17 18 19 21 Inter-company operations 2 3 1 1 Operating profit (loss) for segments 8 (1) 21 23 Negative goodwill arising on acquisition Loss from the loss of material impact in a former equity-accounted investee Operating profit Financing expenses Share in profits of equity-accounted investees Profit before income tax Income tax Net profit
Table Continued Below
Adjustments to consolidated Consolidated 2009 2008 2009 2008 Revenue - - 3,647 6,981 Inter-company operations (383) (642) - - Total revenue (383) (642) 3,647 6,981 Cost of sales - - 3,400 6,740 Inter-company operations (380) (638) - - Total cost of sales (380) (638) 3,400 6,740 Gross profit (loss) (3) (4) 247 241 Selling, general and administrative expenses - - 73 91 Inter-company operations (3) (4) - - Operating profit (loss) for segments - - 174 150 Negative goodwill arising on acquisition - 15 Loss from the loss of material impact in a former equity-accounted investee (7) - Operating profit 167 165 Financing expenses (8) (88) Share in profits of equity-accounted investees 5 - Profit before income tax 164 77 Income tax 3 (3) Net profit 167 74
Company Contact: Rony Solonicof Chief Economist and Head of Investor Relations Tel. +972-4-878-8152 ContactIREn@orl.co.il Investor Relations Contact: Ehud Helft \ Fiona Darmon GK Investor Relations Tel. (US) +1-646-797-2868 \ (Int.) +972-52-695-4400 info@gkir.com
SOURCE: Oil Refineries Ltd.
CONTACT: Company Contact: Rony Solonicof, Chief Economist and Head ofInvestor Relations, Tel. +972-4-878-8152, ContactIREn@orl.co.il. InvestorRelations Contact: Ehud Helft \ Fiona Darmon, GK Investor Relations, Tel.(US) +1-646-797-2868 \ (Int.) +972-52-695-4400 info@gkir.com
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