PKN Orlen posts strong Q2 returns
Oil group Polski Koncern Naftowy Orlen (PKN Orlen) has announced second-quarter net profits of zl. 214.37 million ($51.04 million), an increase of 58.4% on its first-quarter 2000 result. But the company's year-end profits will be lower than last year due to its uncompetitive retail network, said Bidzina Bejuashbili, senior oil and gas analyst for Raiffeisen Bank.
Bejuashbili said the group's consolidated half-year results do not compare to its strong performance last year. "If you take first-half numbers in 2001 and compare them to first-half numbers last year, you will see that net profit almost halved," he said. "The decline in profit margins will be seen in the annual results as well. The retail part of PKN Orlen's operations is not greatly developed its gas stations cannot compete well with foreign competitors."
Dariusz Grebosz, director of investor relations at PKN Orlen defended the company's performance. "The last couple of years saw continuous growth of the economy, which is directly correlated to fuel consumption in Poland," Grebosz said. "In the fourth quarter of last year and the first quarter of this year, we saw a reverse trend. Given this fact I think that the results achieved by PKN Orlen are quite good."
According to PKN Orlen, Poland's economic slowdown has led to a reduction in its oil revenue from zl. 351 million ($83.5 million) in the second quarter of 2000 to zl. 333 million ($79.2 million) in 2001. PKN Orlen was responsible for 96.3% of the group's oil production, 91% of sales revenue, and it generated 85.3% of profits.
Grebosz said the company's retail assets are in need of improvement, and that this was a problem currently being addressed. "Our annual general meeting this year decided to sell about 200 of our smallest filling stations," Grebosz said. "We are restructuring our retail operations with a focus on effectiveness."
The sale of Nafta Polska's 17.6% stake in the company will help to improve PKN Orlen's market position in Poland, Bejuashbili said. He said the shares will most probably be sold to Austrian oil company OMV, due to the poor financial performance of its Hungarian competitor MOL. "In the best-case scenario MOL will probably not be able to offer Nafta Polska more than 50% in cash. Given that the Polish government needs money for the budget, MOL doesn't have a very good chance in the tender." He also said that the deal would strengthen its position in southern Poland where it has its least profitable refineries.
