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ORLEN Group 2016 Integrated Report

II nagroda specjalna w kategorii Raport Zintegrowany | Najlepszy raport on-line

Management's discussion and analysis of 2016 financial results

Capitals:  

 

 

In 2016, PKN ORLEN posted record-high financial results, with contributions from all segments. Consistent implementation of key investment projects, successful efforts to tackle grey market for fuels, and supportive (although not as favourable as in 2015) macroeconomic environment, translated into outstanding cash flows. With our pursuit of growth-oriented projects, the ORLEN Group’s competitive position is consolidating, making us perfectly placed to face future challenges and achieve further strategic objectives.

Sławomir Jędrzejczyk
Vice President of the Management Board, Chief Financial Officer
(to 06/30/2017)

In 2016, the ORLEN Group generated revenue of PLN 80bn. The year-on-year decline reflects falling prices of key ORLEN products, affected by the downward trend in crude oil prices.
Sales volumes totalled 39.5 million tonnes, having improved across all segments.

In 2016, the ORLEN Group once again posted record-high LIFO-based EBITDA of PLN 9,412m, before impairment losses on property, plant and equipment1. The realised profit was higher by PLN 674m year on year.

The negative impact of macroeconomic factors, including in particular lower fuel margins, amounted to PLN (631)m yoy, with the positive impact of the Brent/Urals differential, petrochemical product margins, and the depreciation of PLN against USD and EUR.

The negative volume-related effect of PLN (880)m, reported despite higher sales volumes, was mainly attributable to lower sales of high-margin petrochemical products by the Unipetrol Group, due to the unavailability (until November 2016) of the ethylene production unit following its failure in August 2015.

The positive impact of the other factors amounted to PLN 2,185m year on year, including mainly:

After accounting for impairment losses on non-current assets1, the ORLEN Group’s LIFO-based EBITDA in 2016 amounted to PLN 9,557m.
The positive effect of changes in crude oil prices on the valuation of inventories was PLN 85m, raising the ORLEN Group’s EBITDA to PLN 9,642m in 2016.
After accounting for finance costs and taxes, the ORLEN Group posted a net profit of PLN 5,740m for 2016, up PLN 2,507m year on year.


1) In 2016, reversal of net impairment losses on property, plant and equipment amounted to PLN 145m and was chiefly the result of reversal of impairment loss on the Unipetrol Group’s refining assets of PLN 316m in 2016 and recognition of impairment losses of PLN (73) m on the ORLEN Upstream Group’s exploration assets in Poland and PLN (55) m on ORLEN Oil’s assets.

In 2015, net impairment losses on property, plant and equipment amounted to PLN (993) m and comprised mainly impairment losses of PLN (429) m on the ORLEN Upstream Group’s exploration assets in Poland, PLN (423) m on production assets in Canada, and PLN (93) m on the Unipetrol Group’s petrochemical assets due to the fire accident at the ethylene plant in August 2015.


ORLEN Group’s performance by segment

The ORLEN Group operates in three major business segments. Corporate functions provide support for business processes performed within the segments.

ORLEN Group’s capital expenditure.

The ORLEN Group allocated PLN 4,673m for the 2016 investment programme.

Capital expenditure by segment [PLNm]                                                           Capital expenditure by market [%]

Major investment projects pursued in 2016 included:

  • Construction of CCGTs with related auxiliary infrastructure in Włocławek and Płock,
  • Construction of a new polyethylene unit (PE3) in Litvínov,
  • Construction of a metathesis unit in Płock.

  • Launch of 70 service stations (including CODO stations: 35 in Poland, 10 in Germany and 25 in the Czech Republic),
  • Upgrade and rebranding of 67 service stations (including CODO stations: 50 in Poland, 11 in the Czech Republic and 6 in Germany),
  • Opening of 133 new Stop Cafes, Stop Cafe Bistros and Stop Cafes 2.0 in Poland and the Czech Republic.

 


  • Exploration and production projects in Poland and Canada aimed at increasing the Company’s crude oil and gas reserves.

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