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ORLEN Group 2016 Integrated Report

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

Retail

Capitals:  

The retail segment plays a fundamental role in creating the ORLEN brand image, and consistent development of this segment across many dimensions increases its contribution to building the value of the entire Group. In 2016, the segment posted record sales thanks to better alignment of its offer with customers’ expectations, further unification of standards across the retail chain, and continued process optimisation. We are implementing ambitious growth projects, such as the Stop.Cafe food service format and the O!Shop store format. We also plan to add new services to our portfolio, in response to fast-changing global consumer trends.

Zbigniew Leszczyński
Member of the Management Board, Sales

 
    units ORLEN Group Poland Germany Czech Republic Lithuania
 Total sales thousand t 8 186.6 5 052.4 2 453.6 617.4 63.2
Market share % 17.7 34.8 6 17.8 3.5
Number of retail stations number 2 726 1 766 572 363 25
including:            

Premium

number 1 758 1 616 - 117 25

Economical

number 898 108 555 235 -

Others

number 70 42 17 11 -

CODO/COCO

number 2 173 1 317 475 356 25

DOFO/DODO

number 553 449 97 7 -

 

    units ORLEN Group Poland Czech Republic Lithuania
Number of outlets number 1 691 1 500 168 23
Stop Cafe number 1 114 959 132 23
Stop Cafe Bistro number 536 500 36 -
Stop Cafe 2.0 number 41 41 - -

Market position and environments

The ORLEN Group is an unquestionable leader in Central Europe, with a network of 2 726 fuel stations operating in the premium and economy segments.

The number of the ORLEN Group stations for the key markets at the end of 2016:

In Poland, fuel stations operate under the ORLEN brand in the premium segment and under the BLISKA brand in the economy segment, whereas in the Czech Republic – they operate under the Benzina Plus and Benzina brands respectively, whereas in Lithuania – under the ORLEN brand (premium segment). On the German market, fuel stations have been operating primarily in the economy segment – under the STAR brand and the network is complemented by a dozen Familia market stations

a) Polish market

At the end of 2016 the ORLEN Group operated a network of 1 766 fuel stations in the Polish market. The implemented investment program implemented focused on the establishment of new fuel stations
and highway facilities, with the upgrading of existing facilities and the rebranding of the BLISKA stations to ORLEN.

Halfway through 2016 the ORLEN group began to implement the new shopping and gastronomic format named Stop Cafe 2.0. The provision of new functionalities dedicated to fleet customers and  the marketing campaigns run by the firm let the ORLEN Group
strengthen its position on the Polish market and increase the total volume of fuel sold by 5.6% (y/y). The Company's premium customer service quality and operational excellence were once again awarded with the Customer Service Quality Star. PKN ORLEN was also named the winner in the four main categories of the Best Service Station of 2016 cometition. Futhermore, PKN ORLEN is Poland's first company to have received a certificate given to serice stations which fully cater for the needs of persons with disabilities.

Share of the ORLEN Group in the retail fuel market in Poland:

The market share decrease has a static nature. As a result of the introduction in 2016 of regulations, the so-called “grey zone” in the fuel market has been limited and, thus, the registered consumption as well as the one presented by the Energy Market Agency (ARE) increased. In relation to the above, the values of market shares in the years 2015-2016 are incomparable.

According to data published by POPiHN (Polish Organisation of Oil Industry and Trade) in 2016, more than 6.8 thousand fuel stations operated in the Polish market.

The main competitors of PKN ORLEN on the Polish market included such foreign concerns as: Shell, BP, Statoil, Lukoil, Total and two self-service station networks AS 24 and IDS, which owned 21.6% of the stations. At the end of 2016 the Lotos Group retained a 7.2% share in the total number of fuel stations in Poland. Especially noteworthy is the growing market share of independent stations.

 

Fuel station network in Poland as at 31.12.2016:


 

Source: Own preparation based on POPiHN data

The continued expansion of the road system in Poland creates the possibility for a development that includes so-called Passenger Service Centers (MOP) located next to highways and expressways.

As of the end of 2016, there were 72 MOPs in the Polish market, out of which 28 (39%) belong to the ORLEN Group. Additionally, the ORLEN Group owns four facilities of this type, which are currently under construction.

b) German market

The ORLEN Group has been present in the largest retail market in Europe – in Germany – since 2003. As of the end of 2016, the network owned by ORLEN Deutschland GmbH included 572 fuel stations (4% of all fuel stations in Germany) and maintained a 6.0% share in the German retail market in 2016.

 

Share in the retail fuel market in Germany:

The major competitors of ORLEN Deutschland GmbH are international fuel station networks such as: Aral, Shell, Esso, Total (45% of all stations) and the economy segment networks of Jet and HEM (8% of all stations).

c) Czech market

The ORLEN Group has retained its leading position in terms of the number of fuel stations in the Czech Republic – as of the end of 2016, Benzina increased the number of locations by 24 and managed 363 stations. Concluded investment projects i.e. the incorporation of 20 fuel stations acquired from OMV  and the persistent policy of retail price management contributed to a significant increase of the share of the Czech retail market to a level of 17.8%.

The share of the retail fuel market in the Czech Republic

The second place in the Czech market in terms of the number of fuel stations belongs to Hungarian concern MOL (with 308 stations). In 2016 the MOL concern decided to implement the new gastronomy format named Fresh in 46 of their fuel stations in Europe. Within the next 5 years this new format is to be implemented in a further 750 fuel stations managed by the Hungarian concern. Key members of the fuel market are also Shell, Euro Oil and OMV.

d) Lithuanian market

As of the end of 2016, the ORLEN Group in Lithuania owned 25 fuel stations (managed by the subsidiary AB Ventus-Nafta) and its market share accounted for 3.5% of the total.

The share of the retail fuel market of Lithuania:

Concern Neste remains one of the main competitors of the ORLEN Group in the Lithuanian market, with 63 self-service stations. The remaining stations are owned by networks operating under the Lukoil brand, which possess 82 stations (network taken over by an Austrian company Amic Energy Management) and Statoil with 79 stations owned by the Canadian company Alimentation Couche-Tard.

Sales volume of retail segment

The sales volume of the retail sector of the ORLEN Group increased by 2.5% (y/y) in 2016 and amounted to 8 187 thousand tonnes as a result of higher fuel sales in the Polish, Czech and Lithuanian markets with a slightly lower volume in the German market.

 

The ORLEN Group sales in the retail sector (PLN million/thousand tonnes):

Sales 2016 2015    
  value volume value volume change %
1 2 3 4 5 6=(2-4)/4 7=(3-5)/5
Light distillates1 11 838 3 136 12 084 3 000 (2.0%) 4.5%
Medium distillates2 14 305 5 051 15 567 4 986 (8.1%) 1.3%
Others3 3 698 0 3 401 0 8.7% -
Total 29 841 8 187 31 052 7 986 (3.9%) 2.5%

1) Gasoline, LPG
2) Diesel oil; light heating oil sold by ORLEN Deutschland
3) Other values – including revenues from sales of non-fuel goods and services

Structure of sales revenue of the ORLEN Group in the retail sector:

 

Markets

Domestic markets of the ORLEN Group in the retail sector include PKN ORLEN operating in the Polish market, ORLEN Deutschland GmbH in the German market, Benzina network in the Czech market and AB Ventus Nafta in the Lithuanian market.

Sales volume of the ORLEN Group in the retail sector of domestic markets (thousands of tonnes):

Sales 2016 2015 change change %
1 2 3 4=(2-3) 5=(2-3)/3
Poland 5 052.4 4 784.9 267.5 5.6%
Germany 2 453.6 2 602.0 (148.4) (5.7%)
Czech Republic 617.4 537.8 79.6 14.8%
Lithuania 63.2 61.3 1.9 3.1%
Total 8 186.6 7 986.0 200.6 2.5%

Structure of sales volume of the ORLEN Group in the retail sector of domestic markets:

a) Polish market

Fuel sales volumes in 2016 increased by 5.6% (y/y) and amounted to 5 052 thousand tonnes. The completion of a series of developmental projects and the implemented efficiency initiatives contributed to an increase in the annual average sales volume of CODO fuel stations by 3.2% (y/y) to a level of 4.25 million litres. The total sales of premium fuel (Verva) increased by 12% (y/y).

The sales volume of the ORLEN Group in the retail sector of the Polish market (thousands of tonnes):

Sales 2016 2015 change change %
1 2 3 4=(2-3) 5=(2-3)/3
Light distillates 1 809.3 1 686.0 123.3 7.3%
Medium distillates 3 243.1 3 098.9 144.2 4.7%
Total 5 052.4 4 784.9 267.5 5.6%

Structure of the sales volume of the ORLEN Group in the retail sector of the Polish market:

In 2016 another 17 facilities were added to ORLEN Group’s retail network and as of the year end the network consisted of 1 766 fuel stations.

As a part of the investment program there were 12 own CODO stations launched (including 1 Passenger Service Center “MOP”), 7 facilities were modernized and two own stations were closed. The result of these activities was an increase in the number of own stations, bringing the total up to1 317 facilities.

The PKN ORLEN franchise network increased by 23 new fuel stations and included at year-end 449 DOFO stations.

In 2016 the process of changing the brand from Bliska to ORLEN was completed in the own stations channel. In the DOFO segment the project was continued and 43 new stations received an ORLEN brand. The number of premium stations operating under the ORLEN brand has increased from 1 541 in 2015 to 1 616 at the end of 2016. A total of 108 stations operated under the Bliska brand as of the end of 2016. Other stations are facilities with a so-called simplified format, the number of which was reduced from 49 to 42 in 2015.

In 2016, the ORLEN Group increased the volume in fleet sales by over 10% (y/y), achieving a record level of 31.8% of the total volume of sales in the sector. In 2016, ORLEN started work on a new international fleet strategy allowing Polish customers to access filling points in most European countries. Sales to the small and medium enterprises segment increased by 16.9% (y/y).

In the first half of 2016, tests of convenience stores and of the new food corner ended. The project was initiated by implementing the new Stop Cafe 2.0 format in the ORLEN chain, combining a food concept with a convenience store. Since three versions of the formats were developed, it will be possible to launch Stop Cafe 2.0 at stations of all kinds, including the biggest highway structures.

As of the end of 2016, 41 ORLEN stations had the new Stop Cafe 2.0. format in place, and its further implementation will constitute the main project in the non-fuel area in the coming years.

The year 2016 was another period for the  improvement of the results of car washes - 10% of the existing automatic car washes were upgraded, 9 more were put into operation, and the failure rate of the facilities as well as downtime were reduced. These activities contributed to an increase of revenue from the related services by 10% (y/y).

b) German market

In 2016 the ORLEN Group recorded a decrease in the total sales of fuels of (5.7)% (y/y) on the German market. This result includes both retail sales at fuel stations, as well as middle distillates sold using wholesale formula. The retail volume of ORLEN Deutschland increased by 2.6% (y/y), mainly due to higher diesel oil sales (y/y). Better results of the retail segment did not offset the decrease in diesel oil and light heating oil sales realised in the wholesale formula. In 2016, the average annual flow per station was maintained at the level that it stood at the previous year and amounted to 4.5 million litres.

 

Sales volume of the ORLEN Group in the retail sector of the German market (thousands of tonnes):

Sales 2016 2015 change change %
1 2 3 4=(2-3) 5=(2-3)/3
Light distillates 1 106.3 1 117.0 (10.7) (1.0%)
Medium distillates 1 347.3 1 485.0 (137.7) (9.3%)
Total 2 453.6 2 602.0 (148.4) (5.7%)

Structure of sales volume of the ORLEN Group in the retail sector of the German market:

In 2016, ORLEN the Deutschland network included 10 new stations, including 3 within individual acquisition projects and 7 stations from the 13 stations of the Sun station portfolio purchased in 2015. After the shutdown of 3 facilities, the network of stations managed by ORLEN Deutschland grew by 7 facilities to the level of 572 stations. At the end of 2016, there were 554 facilities operating in the economy segment under the STAR brand, 1 station of the ORLEN brand located in Hamburg and 17 stations operating under supermarkets.

In 2016, Star stations once again recorded an improvement in non-fuel margins, i.a. as a result of adjusting the shops’ offer, changing the gastronomy offer and due to an increase in the availability of such services in the network. An important factor influencing the non-fuel business area’s results was the continuation of the replacement and modernisation process of car washes. During 2016 forty car washes were replaced.

c) Czech market

2016 was a consecutive year of high dynamic of fuel sales in the Benzina network at the level of 14.8% (y/y). The average annual sales recorded by Benzina stations increased by 6.7% (y/y) and reached a level of 2.1 million litres. An increase of Verva fuels availability in more Benzina stations contributed to an increase in the Verva sales share of the whole sales volume by 2 percentage points to 19.3% (y/y).

Sales volume of the ORLEN Group in the retail sector of the Czech market (thousands of tonnes):

Sales 2016 2015 change change %
1 2 3 4=(2-3) 5=(2-3)/3
Light distillates 205.0 178.6 26.4 14.8%
Medium distillates 412.4 359.2 53.2 14.8%
Total 617.4 537.8 79.6 14.8%

Structure of the sales volume of the ORLEN Group in the retail sector of the Czech market:

As of the end of 2016, the ORLEN Group was running a chain of 363 stations in the Czech Republic, operating under two main brands: Benzina Plus (114 stations), Benzina (231 stations) and Benzina Expres (5 self-service stations) and 13 stations operating mainly under the so-called simplified brand.

In 2016, the process of taking over 68 stations purchased in 2015 from OMV located in the territory of the Czech Republic started. As of the end of 2016, 20 stations had been included in the Benzina chain, and the process of taking over the remaining facilities should be complete by the end of 2017. In 2016, 4 new own stations were put into operation (including 1 highway station and 1 self-service station) and one franchise agreement was signed.

In 2016, a decision was made on brand unification in the Czech market. Ultimately, the ORLEN Group is going to run stations in the Czech Republic under the refreshed brand of Benzina. The chain of self-service stations (Benzina Expres) is going to be the exception. Ultimately, the Benzina stations are to become a premium chain. Verva fuels will be available at each service station operating under the revamped Benzina brand.

The flexible pricing policy and the implementation of prepaid fleet cards, representing a unique solution on the Czech market, allowed the fleet sales segment to record an increase by volume of 9.7% (y/y).

In 2016, Benzina recorded an increase in revenues from the sale of non-fuel products and services by over 35% (y/y). An increase by nearly 28% (y/y) was recorded in the case of catering services. 168 Stop Cafe and Stop Cafe Bistro outlets were operating by the end of 2016, this is an increase of 37 locations (y/y).

d) Lithuanian market

In 2016, the ORLEN Group recorded an increase in sales volume of 3.1% (y/y) in the Lithuanian market. Especially noticeable were the medium distillates sales increases which were partly offset by a decrease in light distillates sales (y/y). The average annual flow per station increased by 11.0% (y/y) to a level of 3.2 million litres.

The sales volume of the ORLEN Group in the retail sector of the Lithuanian market (thousands of tonnes):

Sales 2016 2015 change change %
1 2 3 4=(2-3) 5=(2-3)/3
Light distillates 15.5 18.0 (2.5) (13.9%)
Medium distillates 47.7 43.3 4.4 10.2%
Total 63.2 61.3 1.9 3.1%
 

Structure of the sales volume of the ORLEN Group in the retail sector of the Lithuanian market:

As of the 31 December 2016 the retail network in Lithuania comprised 25 own stations of the COCO model in the premium segment, under the ORLEN brand. In 2016 the last VENTUS-branded fuel station, operating in the economy segment, was excluded from the network. In 2016 Verva fuel share in the total sales volume increased by 0.8 p.p. to 19.5%.

An increase in fleet sales of 15.8% (y/y) had a big impact on sales volumes. In 2016 an improvement in margins in the non-fuel business area was once again recorded.

Sources of supply

The majority of fuels sold on the Polish, Czech and Lithuanian markets comes from production within the Downstream sector of the ORLEN Group. An exception to this trend is the German market, in which the ORLEN Group does not have its own refining assets. The largest suppliers of this German company include the following sellers operating on the German market, i.a. BP Europe SE, Shell Deutschland Oil GmbH, Holborn European Marketing Company Limited, Total Deutschland GmbH, Esso Deutschland GmbH, Raffinerie Heide GmbH. An important supplier of fuels to ORLEN Deutschland GmbH is also the Czech company Unipetrol RPS s.r.o., a member of the ORLEN Group.


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