Prague, May 15, 2008 – In the first quarter of this year UNIPETROL’s business was kept under continuous pressure of negative external factors, such as rapidly rising prices of crude oil, further shrinking of petrochemical margins, and decreasing USD and EUR exchange rates. In spite of that, the company was able to stay profitable and reports net earnings of CZK 406m. This result means however a significant drop compared with Q1 2007. Quarterly revenues amounted to CZK 22.149bn, which means a y/y increase of 7%.

Highlights of Q1 2008

The difference in external environment was especially apparent in the y/y comparison because macroeconomic and market conditions were extremely favourable in the first quarter of last year, unlike the situation in the first three months of this year. The refining segment’s results were lowered by increased crude oil prices (Brent went up by USD 39/bbl compared with the year before). The petrochemical segment was hit by rising feedstock prices, which were not compensated by the development of selling price. Also exchange rate changes had an unfavourable impact on the current financial results (year-on-year decrease by CZK 4.3/USD and CZK 2.47/EUR).

“ We were just in time to complete asset optimisation and internal restructuring. Putting the company in the right shape in times when the markets were up gave us enough strength to overcome hard times,” says François Vleugels, UNIPETROL CEO. In the past two years the company went through a massive restructuring, divesting of its non-core asset, eliminating internal inefficiencies and capturing synergies with the parent company, PKN Orlen. The fact that the major changes have been completed is also borne out by the fact that this is the first quarter when no one-offs were affecting financial results.

Volume sales in the petrochemical segment grew significantly after the maintenance shutdown (+ 63% q/q). Also the utilisation ratio of refineries went up q/q (+ 9 p.p.). Retail sales went up by 5% compared with Q1 of last year; however, the financial impact was even more significant. Benzina raised its market share to 13.3% and after reaching the critical mass of rebranded and modernised stations in 2007 the company has launched an advertising campaign to promote the changes. By the end of the first quarter Benzina completed modernisation of 188 filling stations, of which 86 were rebranded to premium Benzina Plus. Also the number of stations offering premium fuels under the Verva brand has increased, as has the volume of the premium fuels sold.

Consolidated, unaudited financial results (CZK million)

EBIT Segment Breakdown (CZK million)

Outlook for the rest of 2008

The unfavourable macroeconomic and market conditions will remain the main factor influencing UNIPETROL’s financial results in the following quarters. In the refining segment the margins are currently improving and also an increase in the utilisation of production capacity is expected. In the petrochemical segment, margins in the category of monomers are recovering slowly; however in polyolefins the outlook is not very optimistic in this respect. The company will benefit from the investments in maintenance and capacity extension made in the past year (within both of the above segments), and expects highly reliable production with no significant interruptions. The positive effect of last year’s investments will stay also in the following years.

The strong momentum in the retail segment, represented by growing sales as well as by the strengthening of Benzina’s market share, will continue. By the end of the year around 250 out of the current 322 filling stations are to be modernised so that the whole project of modernisation and rebranding can be completed next year. Benzina has also started to offer franchise-based co-operation to selected owners of independent filling stations. Today the overwhelming majority of the Benzina network is owned by Benzina and particular stations are operated by third parties (tenants) based on a system of lease and operation agreements. Through the franchise concept, the company offers owners of independent filling stations a full rebranding to Benzina, marketing support, commercial know-how and preferential trading conditions. At the same time these partners stay owners and operators of the sites. In this way Benzina plans to enlarge its network by 10 to 15 additional stations by the end of 2008. “Franchising is a proven concept used quite frequently in our field. Its implementation in Benzina will enable us to grow faster. We want to focus on all important details to assure that customers are provided high quality service at each Benzina branded station, regardless who its formal owner is. They should not notice any difference,” explains Martin Durčák, Benzina CEO.

Press conference see here: http://netshow.play.cz/unipetrol/20080515-unipetrol-en.wmv

UNIPETROL is a group of companies operating in the petrochemical industry in the Czech Republic. In 2005 UNIPETROL became part of PKN ORLEN Group, the largest downstream oil company in Central Europe. UNIPETROL primarily focuses on crude oil processing, fuels distribution and petrochemical production. In all these areas UNIPETROL group is one of leading players in both the Czech and Central European markets. UNIPETROL is one of the Czech Republic’s most important companies in terms of revenues (89 bn CZK) and it employs approximately 4,500 people. 

Contact: 
Dana Dvořáková 
Director of Corporate Communications 
UNIPETROL, a.s. 

Telephone: +420 225 001 404 
E-mail: dana.dvorakova@unipetrol.cz