Slick business
Poland's twin oil giants, PKN Orlen and Lotos Group, reported strong financial results in the first half of the year, with profits driven by record oil prices and favorable exchange rates. The two are expected to remain in top form, at least in the short term.
Orlen boosted
PKN Orlen, by far the larger of the two oil groups, announced Q2 EBITDA of zł.2.25 billion, 20 percent higher than in Q2 2007. Its net profit stood at zł.1.67 billion, 47 percent higher than a year ago.
The company refined around 7.3 million tonnes of oil in Q2, a 22-percent y/y increase in output. Revenues from refining grew by 53 percent y/y to reach zł.1.4 billion.
Bulk sales of refined oil grew by 27 percent to reach 6.06 million tonnes in Q2, while retail sales increased by 18 percent to 1.3 million tonnes. Sales to the petrochemicals sector experienced a seven-percent rise, to 848,000 tonnes, and chemicals-sector sales saw an 11-percent drop, to 393,000 tonnes.
Orlen's Mažeikių Nafta refinery in Lithuania reported very good results. The facility, which suffered a major fire in late 2006, saw its oil processing grow by 64 percent y/y and earned EBIT of zł.355 million.
Meanwhile, Lotos Group saw a zł.422.2-million consolidated net profit on sales revenues of zł.4.22 billion last quarter, marking y/y growth of 74.4 percent and 37.4 percent, respectively. The capital group's H1 consolidated net profit reached zł.700.9 million on sales revenues of zł.7.77 billion, amounting to respective y/y growth of 129.9 percent and 38.6 percent.
Lotos' sales volume grew by 6.4 percent in Q2 to reach a total of 1.7 billion tonnes. Around 1.5 billion tonnes of oil was processed in that period.
High global prices for processed and crude oil products had a strong effect on the company's results. The firm's average net sales price grew by 29.1 percent, from zł.1,842 to zł.2,378 per tonne, in Q2.
"Price growth resulted from increased demand for diesel and jet fuels in European countries and China," said Paweł Olechnowicz, the president of the Lotos Group. The firm sold 720,000 tonnes of diesel fuel and 121,000 tonnes of jet fuel in Q2, which amounted to y/y growth of 47,500 tonnes and 13,100 tonnes, respectively.
Earning on margins
Orlen and Lotos earned on wide profit margins and benefited from a favorable dollar exchange rate, said Ludomir Zalewski, an analyst with PKO BP Securities. He added that despite slowly setting oil prices, the firms could also benefit from delays in the adjustment of retail prices to match global prices.
The price of fuel has fallen in Poland over the last few weeks. Szymon Araszkiewicz, an analyst from advisory e-petrol.pl, said that fuel prices would continue to decrease due to the dropping price of crude oil.
"This decrease will be balanced by a weakening złoty, however," he noted.
