Public Company ORLEN Lietuva Reports Its Results for 2009
OREANDA-NEWS. February 27, 2010. Increase of the crude oil prices in the 2nd half of the year as well as low refining margins had a material impact on Public Company ORLEN Lietuva financial results of the year 2009. Despite of the complicated external microeconomic circumstances, operating profit for the year 2009 (taking into consideration the historical value of assets) of AB ORLEN Lietuva Group (EBIT – earnings before interest and taxes) has reached USD 1.1 million under International Financial Reporting Standards.
Optimization of the Company’s activities and efficiency increase became one of the most serious challenges of the last year. In 2009, reorganizational changes within the Company were continued by spinning-off the non-core business activities not related to the refining. The Company succeeded in reduction of its operating costs (almost by USD 20 million in comparison with 2008), optimization of the number of employees and implementation of the projects related to improvement of the Company’s management. The said activities assisted for increase of the sales and logistics efficiency and allowed saving almost USD 4 million.
In the area of production the Company managed to implement the projects of operational efficiency increase, reduce operating and fuel costs as well as improve the light petroleum products yield (73.3 percent in comparison with 72 percent in 2008).
The logistics-associated issues being of extreme importance for the Company and related to the terminal in Klaipлda as well as building of the product pipeline and restoration of the shorter route in Latvian direction had a negative impact on the Company’s financial results for the indicated period. Higher logistics costs to the markets of Latvia and Estonia had an adverse influence on the Company’s position in the said markets.
Organizational changes and restructuring allowed the workforce reduction during the last year. The number of employees at the end of 2009 was 2,275. In comparison with the year 2008, the number of employees decreased by 474, i.e. 14 percent.
Operational efficiency increase measures addressed to all business activities of the Company allowed to partially neutralize a negative impact of the external microeconomic circumstances, enabling AB ORLEN Lietuva Group to reach USD 1.1 million EBIT within twelve months of 2009. Nevertheless, the consolidated net loss of the Group for the year 2009 amounts to USD 34.4 million.
Krystian Pater, General Director of AB ORLEN Lietuva, in evaluation of the Company’s performance results for the year 2009, emphasized the impact of the global economy slowdown on decrease of refining margins and fuel consumption. “Macroeconomic circumstances last year were extremely complicated. Under such conditions we have started realization of several optimization projects of exceptional importance, and this helped the Company in improving its operational efficiency as well as mitigating the crisis effects. I believe that this will allow the Company to overcome the consequences of crisis and achieve higher profitability in the future”, told General Director of AB ORLEN Lietuva.
During the year 2009, the volume of feedstock refined in Maюeikiai amounted to 8.7 million tons, including 8.4 million tons of crude. The volume of feedstock refined during the same period of 2008 was 9.6 million tons (including 9.3 million tons of crude).
Low margins and drop of consumption in the major markets of AB ORLEN Lietuva (Lithuania, Latvia, and Estonia) was the main reason for decrease of the refining volumes. Petroleum product sales decreased by 22.6 percent if compared to the year 2008. Reduction of the refining volumes in 2009 was followed by decrease of the seaborne sales amounting to 4.3 million tons, while this number in 2008 comprised 4.7 million tons. Nevertheless, sales on Ukrainian market remained on the same level as in 2008 with over 500,000 tons of gasoline and diesel fuel sold. Such sales results were impacted by the quality of fuel and recognition of the refined petroleum products on the market.
Positive impact on the Company’s financial results was made by the arbitration decision made in November 2009 to compensate USD 26.8 million for the Company. This amount was the Company’s costs incurred upon decision of AB Lietuvos Geleюinkeliai to increase the railway transportation tariffs.
Last year the Company also completed modernization projects commenced earlier as well as implemented the most essential projects required for upgrade of existing units to ensure safe and continuous production process and compliance of petroleum products with the new requirements of the European Union.
In spring of 2009, the Company completed one of the largest environmental and efficiency improvement projects started in 2007, i.e. construction of new Hydrogen Generation Unit. The new unit ensures production of low-sulfur fuel oil.
In April 2009, PKN ORLEN S.A. became the sole shareholder of AB Mazeikiu Nafta. In this association, on 1 September 2009, the Register of Legal Entities of the Republic of Lithuania registered the new name of Public Company Mazeikiu Nafta becoming Public Company ORLEN Lietuva.