The impact of weak demand and low margins was partly offset by cost reductions. Due to these savings a negative cash flow turned into a positive one. 
Unipetrol has registered a slight pickup in petrochemical margins since the end of the second quarter. 

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Prague, August 31, 2009 –In the second quarter Unipetrol again had to deal with weak demandfor motor fuels and other refinery and petrochemical products. Thus, as in the previous period, the consequences of the global economic downturn in the region of Central and Eastern Europe had a major impact on the Group’s overall result. Besides low product prices and unfavourable margin development, there were other factors that had a negative impact on the results, i.e. shutdowns of some major production units. Therefore Unipetrol posted a loss in the second quarter of 2009. The group posted an operating loss (EBIT) of CZK 271 million, with a net loss of CZK 359 million. 

Compared to the previous quarter, Unipetrol’s revenues increased by 9 percent to CZK 15.8 billion, but this was still much lower than last year‘s level. The volume of crude oil processed by the refineries was lower on both a Q/Q and Y/Y basis. Only the retail segment registered a Q/Q increase in sales; nevertheless, as a result of lower demand, the volumes were down in all segments, compared to the last year. 

” The Unipetrol results reflect the situation in the sector. We are facing a deep economic crisis. We have been able – at least to some degree – to mitigate the impact of this crisis by adopting strict saving measures both on the cost and expense sides", said Wojciech Ostrowski, Unipetrol Vice-Chairman of the Board.

The effect of the recession is even more visible on a half-year basis. Unipetrol’s revenues were down 42 percent year-on-year, with a net loss for the first half of 2009 of CZK 544 million. Revenues were down mainly because of lower crude oil and product prices. During the second quarter, Unipetrol began implementing strict cost-cutting measures. These measures, aimed at significantly reducing costs and capital expenses, are based on an update of Unipetrol’s business plan approved in April this year. The adopted cost-cutting measures have already contributed to an increase in free cash flow to CZK 494 million (compared to a negative CZK - 1.71 billion in 1Q/09).

Commentary on the Q2/2009 results

The refinery segment registered a negative EBIT (CZK 62 million). The result was mainly driven by the following two factors: extremely low margins resulting from weaker demand and excessive production capacities in Europe and an almost two-month shutdown of the refinery in Kralupy. The impact of these factors was partly offset by the positive effect of inventory revaluation.The volume of processed crude oil was down 17 percent and 28 percent on a Q/Q and Y/Y basis respectively. Another negative factor was the shrinking price differential between Brent and Ural crude oil. 

The petrochemical segment continued to face weak demand. The operating result was alsonegatively affected by the unplanned shutdown of the ethylene unit. The segment recorded a negative EBIT of CZK 457 million, which is again a worse result than in the previous quarter. Although the sales volume stabilized somewhat and remained at the levels of the previous quarter, it was down 16 percent on a year-on-year basis. The sales of olefins and other products of the ethylene unit decreased by 20 percent and polyolefin sales were down 5 percent year-on-year. A slight pickup in the demand for polyolefins, which was registered at the end of the quarter, did not result in an increase in margins.

The motor fuel retail segment saw a significant improvement compared to the previous quarter. The operating profit (EBIT) amounted to CZK 187 million, more than three times higher than the same figure in the first quarter and more than twice as high as the profit posted in the same period of last year. The sales of motor fuels were up 17 percent Q/Q and comparable on a year-on-year basis. The market share of Benzina increased to 13.8 percent by the end of 2Q/09. Other services provided at petrol stations also performed well. Thanks to the past investment in modernizing and re-branding, the Benzina petrol station chain also increased its convenience store, food & drink and car wash sales. 

Outlook for the coming period 

In the next quarter, Unipetrol will continue to face unfavourable conditions, which are characterized by a weak and only slowly stabilizing market. Weak demand will continue to push down the margins on both refinery and petrochemical products. The recovery in transit transport, which contributed to an increase in the consumption of diesel, is not sufficient and, moreover, it is not sure, whether it will continue. Also, the higher interest in polyolefins can hardly be regarded as a trend, as their sales might be up only temporarily as a result of replenishing stock in the warehouses of plastic manufacturers. 

Stabilized prices and demand may become a positive factor. Unipetrol has also successfully launched its cost-cutting program, which it will continue to implement. The updated plan for 2009 assumes Y/Y savings of nearly CZK 1 billion in variable and fixed costs and lower capital expenses. The plan also projects no wage increases and a headcount reduction of 8 percent by the end of this year. 

” We have improved our cash flows and we have seen some stabilization. Unfortunately, we cannot expect any substantial or rapid acceleration in demand in the crude oil processing and petrochemical segments. Therefore, we have to continue focusing on cost reductions and our cost-cutting program“, said Krzysztof Urbanowicz, Unipetrol Chairman of the Board and CEO.

Consolidated unaudited financial results (CZK million)

	2Q/08	1Q/09	2Q/09	q/q	y/y	1H/08	1H/09	1H/H
Revenues	27,081	14,513	15,795	+ 9 %	- 42 %	49,229	30,308	- 38 %
EBITDA	1,701​​	709	584	- 18	-66 %	3,193	1,293	- 60 %
EBIT	838	- 127	- 271	-	-	1,491	- 399 1)	-
Net result*	303	- 185	- 359	-	-	708	- 544	-

 

EBIT Segment Breakdown (CZK million)

	2Q/08	1Q/09	2Q/09	q/q	y/y	1H/08	1H/09	1H/1H
EBIT, of whitch	838	- 127	- 271	-	-	1,491	- 399 1)	-
• Refinery	​1,037	- 329	- 62	-	-	1,146	- 392 1)	-
• Petrochemicals	- 260	110	- 457	-	-	130	- 346 1)	-
• Retail distribution	87	57	187	+226 %	+114 %	258	243 1)	-6 %

*) Net result attributable to the shareholders of the parent company

1) Minor counting discrepancy between 1Q09, 2Q09 and 1H09 due to rounding issues

 

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UNIPETROL, a.s. is a group of companies operating in the petrochemical industry in the Czech Republic. In 2005 UNIPETROL became a part of the PKN ORLEN Group, the largest oil processor in Central Europe. The UNIPETROL Group is oriented mostly towards oil processing, fuel distribution and petrochemical production. In all of these business areas the UNIPETROL Group is among the key players both in the Czech Republic and on the Central European market. The Group ranks among the leading firms in the Czech Republic in terms of its revenues, and employs more than 4,000 people.

Contact: 
Blanka Růžičková 
Spokesperson for Unipetrol, a.s. 
Telephone: +420 225 001 407, +420 731 881 111 
E-mail: blanka.ruzickova@unipetrol.cz