Oil Refineries Announces Results for Third Quarter and First Nine Months of 2009
By Oil Refineries Ltd., PRNETuesday, November 10, 2009
HAIFA, Israel, November 11 -
- 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
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 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 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
Company Contact: Rony Solonicof, Chief Economist and Head of Investor Relations, Tel. +972-4-878-8152, ContactIREn at 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 at gkir.com
Tags: Haifa, Israel, Oil Refineries Ltd
