HAIFA, Israel, March 30 /PRNewswire/ --
- Consolidated Reported Loss Totalled $109 Million, Resulting From the Extreme Volatility in Oil Prices - Refining Sector Adjusted EBITDA[i] Reached $180 Million, Compared to $162 Million in 2007 - Adjusted Refining Margin 5.7 $/bbl, Compared to 5.5 $/bbl Reuters' Quoted Mediterranean Ural Cracking Margin Benchmark - Refined Quantity Increased 6% yoy; Utilization Reached Record Levels of 92%, Compared to 86% in 2007 - Trade Sector Contributed $13 Million to Gross Profit During First Year of Operation - Working Capital Requirements Down by $317 Million Compared With the Beginning of 2008, Following Decline in Oil and Product Prices - Board Decided to Not Pay 2008 Bonuses to Management and Employees; This Due to the Reported Results, Despite Improvement in Operating Performance and Majority of Defined Milestones Being Met.
Oil Refineries Ltd. (TASE: ORL.TA) (Oil Refineries or the Company) announced today its financial results for three and twelve month periods ending December 31, 2008. Results reported in US Dollars and under International Financial Reporting Standards (IFRS).
Full Year Highlights (Compared to 2007) - Adjusted refining margin of USD/bbl 5.7, compared to the average Reuters' quoted Mediterranean Ural Cracking Margin for 2008 of USD/bbl 5.5. Adjusted margin for 2007 totaled USD/bbl 6.1 - Adjusted EBITDA for the refining sector totaled $180 million, compared to $162 million in 2007 - Cash flow generated from operating activities totaled $223 million for the year - EBITDA for the trade sector, established in the first quarter 2008, totaled $11 million in its first year of activity.
During 2008, crude oil and product prices were highly volatile. During the year, the price of crude oil declined from $96 per barrel at the end of the fourth quarter 2007 to $36.5 per barrel at the end of 2008. The majority of the decline was in the fourth quarter, which started the quarter at $94 per barrel. The Company maintains a basic un-hedged inventory of 600,000 tons of crude oil, and this based on Company policy. The change in the value of this inventory does not draw a cash flow impact on the Company.
Since the end of 2008, oil prices have risen 37%, with the oil reaching $50 per ton. Subsequently, the Company expects to record an $85 million gain resulting from the reversal of part of the decline in inventory value recorded in 2008.
The Company, similar as the majority of global refiners and marketers of oil and its products, does not hedge its basic inventory. The impact of changes in the value of this inventory, is not of a cash flow nature, and therefore the following results are also adjusted to net out these impacted, 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.
The decline in oil and its products prices bore a substantial positive contribution to the Company's working capital requirements, such that by the end of 2008, working capital requirements declined by $317 million, compared to the beginning of the year. This decrease in working capital requirements grants the company additional flexibility in utilizing its available resources, as well as reducing financing costs.
Full Year 2008 Results
Adjusted refining margin for the year totaled USD/bbl 5.7 (USD/ton 41), compared to the average Mediterranean Ural Cracking Margin quoted by Reuters for 2008 of USD/bbl 6.7. Adjusted refining margin for 2007 totaled USD/bbl 6.1 (USD/ton 44.2).
Refining and Trade sector annual adjusted EBITDAi reached $191 million in 2008, compared to $162 million in 2007.
Revenues for the year reached $8,258 million, compared to $5,234 million last year. Despite the decline in local demand for refined produce, the Company continued to increase sale volumes and market share.
Refined capacity for the year (in tons) increased by 6% reaching 8,245 thousand tons. Utilization rate for the year totaled 92%, compared to 86% last year.
Consolidated reported EBITDA for 2008 totaled $76 million, compared to $354 million in 2007.
Tax income for the year totaled $110 million dollars in 2008, compared to a tax expense of $45 million dollars last year. The move to a tax income in 2008 primarily follows the receipt of tax benefit for previous years to the amount of $44 million, resulting from the Company receiving initial 'approved factory' status, as well as lower profits.
Consolidated net loss for the year totaled $109 million, compared to a net income of $142 million in 2007, primarily from the write off of un-hedged inventory, resulting from price volatility.
Fourth Quarter 2008
Adjusted refining margin for the quarter totaled USD/bbl 5.5 (USD/ton 40.3), compared to the average Mediterranean Ural Cracking Margin quoted by Reuters for the quarter of USD/bbl 5.3 (38.7 USD/ton). Adjusted refining margin for the fourth quarter 2007 totaled USD/bbl 3.6 (USD/ton 26.1)
Refining sector fourth quarter adjusted EBITDA[i] reached $53 million, compared to $6 million in the fourth quarter 2007. The trade sector contributed a further $3 million to the EBITDA.
Consolidated reported EBITDA for the fourth quarter 2008 totaled a loss of $299 million, compared to an income of $97 million in 2007.
Consolidated net loss for the fourth quarter 2008 totaled $182 million, compared to a quarterly net income of $18 million in the fourth quarter 2007, primarily from the write off of un-hedged inventory and decline in prices.
Mr. Yashar Ben Mordechai, CEO of Oil Refineries commented: The decline in crude oil prices over the past year impacted the Company's basic inventory which, from a responsible and long term prospective, is not hedged, similar as the majority of the world's refining and fuel marketing companies, drawing substantial non-cash inventory losses in the financial statements. With a business and operative view, the Company continues to increase its market share while increasing product quantities sold, despite the decline in overall consumption. The implementation of the new organizational structure, enabled the Company to increase focus on its main segments of activity, drawing an increase in utilization levels to 92%, a new Company record. The Company continues to develop its new international trade sector, incorporating logistic mediums such as naval transport and storage. The expanding trade activities contribute to higher profitability, substantially enhancing the manufacturing facilities' optimization, while increasing the Company's sales in both Israel and overseas. As part of the Company's plan for 2009, ORL announced a series of efficiency measures in a wide variety of areas including manufacturing, logistics, purchasing and outsourced projects. As part of these measures, the Company's management team took a 10% salary cut in 2009 salaries, and a substantial number of outsourced projects were transferred back under the responsibility of Company employees.
Mr. Ben Mordechai added that, The Company reviewed its steps in detail when it compiled its strategic plan, taking into account both its strengths, namely: the high technological level of its workforce, among the highest in the world, the integration of the petrochemical industries with the refining, its excellent strategic location with good access to a wide variety of crudes as well as to fast growing markets, in addition to its advanced infrastructure at its central Haifa facility. We continue to strengthen the Company's core businesses through continued focus and investment prioritization, as well as improving the facilities' efficiency and effectiveness, measures which are already bearing fruits as visible in the increased utilization rates and refining capacities.
Mr. Yossi Rosen, Chairman of the Board of Oil Refineries added: ORL is responding, and swiftly adapting itself, to the changing economic environment both globally and in Israel, and continues to implement efficiency measures, freeing up resources, and laying the foundations for long term growth. The Board's decision to continue to invest in strengthening the Company's core assets serves as a vote of confidence, on the part of the shareholders, in both the Company and its management's capabilities. We continue to move to implement the hydrocracker project and believe that especially in times of global economic crisis, there is the opportunity to undertake the project at substantially lower costs. This is, without a doubt, a project of national importance which will supply work for thousands of employees in the coming years. We hope that the government will act, as part of the expected new economic scheme, to encourage such projects
Mr. Rosen added that: Even though we have not yet undertaken the merger with Carmel Olefins, the two companies are actively working together to leverage the inherent synergies, and this, until the conditions for a full merger occur.
The Company will also be hosting a conference call later today at 8:30am EDT. On the call, management will present a presentation reviewing the fourth quarter and full year 2008 highlights and industry trends. The presentation can be downloaded from the Company's website http://www.orl.co.il : Investor Relations Financial Reports prior to the call. 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 dial-in number.
US Dial-in Numbers: 1-888-723-3164
UK Dial-in Number: 0-808-101-2717
Israel Dial-in Number: 03-918-0610
International Dial-in Number: +972-3-918-0610
at: 8:30am Eastern Daylight 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 http://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 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. ORL is traded on the Tel Aviv Stock Exchange under the ticker ORL. For additional information please visit the Company's website: http://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.
[i] Adjusted EBITDA relates to the reported EBITDA, net of inventory losses, buy\sell timing differences and IFRS-derivative transaction recording impact.
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 Refining Trade Year ended December 31 2008 2007 2008 2007 Revenue 6,913 4,416 383 - Inter-company operations 707 594 - - Total sales 7,620 5,010 383 - Cost of sales 7,629 4,665 370 - Inter-company operations 57 45 - - Total cost of sales 7,686 4,710 370 - Gross profit (loss) (66) 300 13 - Selling, general and administrative expenses 54 54 2 - Other (income) expenses - 23 - - Operating profit (loss) (120) 223 11 - Financing income (expenses) Share in the profit (loss) of investees Profit (loss) before taxes on income Tax benefits (income tax) Net profit (loss)
Petrochemicals Polymers Aromatics Year ended December 31 2008 2007 2008 2007 Revenue 475 342 487 476 Inter-company operations - - 57 45 Total sales 475 342 544 521 Cost of sales 256 100 61 65 Inter-company 255 194 449 394 operations Total cost of sales 511 294 510 459 Gross profit (loss) (36) 48 34 62 Selling, general and administrative expenses 30 19 26 25 Other (income) expenses (14) 3 - 2 Operating profit (loss) (52) 26 8 35 Financing income (expenses) Share in the profit (loss) of investees Profit (loss) before taxes on income Tax benefits (income tax) Net profit (loss)
Adjustments to consolidated Consolidated Year ended December 31 2008 2007 2008 2007 Revenue - - 8,258 5,234 Inter-company operations (764) (639) - - Total sales (764) (639) 8,258 5,234 Cost of sales - - 8,316 4,830 Inter-company operations (761) (633) - - Total cost of sales (761) (633) 8,316 4,830 Gross profit (loss) (3) (6) (58) 404 Selling, general and administrative expenses (4) (4) 108 94 Other (income) expenses - - (14) 28 Operating profit (loss) 1 (2) (152) 282 Financing income (expenses) (61) (102) Share in the profit (loss) of investees (3) 7 Profit (loss) before taxes on income (216) 187 Tax benefits (income tax) 107 (45) Net profit (loss) (109) 142
Oil Refineries Ltd. Consolidated Balance Sheet In thousand US Dollars 2008 2007 Assets Cash and cash equivalents 14,840 259,325 Short-term deposit 25,000 - Derivatives at fair value through profit or loss 15,374 6,513 Investments in other financial assets at fair 101,509 113,035 value through profit or loss Trade receivables 253,215 394,470 Other receivables 82,642 76,381 Inventory 569,407 1,042,545 Current tax assets 42,047 10,153 Total current assets 1,104,034 1,902,422 Investments in investee companies accounted by the 36,005 53,958 equity method Loan to Haifa Early Pensions Ltd. 84,740 80,038 Long term loans and debit balances 2,606 2,026 Derivatives at fair value through profit or loss 64,369 4,176 Employee benefit plan assets 5,007 7,519 Property, plant and equipment 1,083,446 978,722 Intangible assets and deferred expenses, net 25,170 22,614 Total non-current assets 1,301,343 1,149,053 Total assets 2,405,377 3,051,475
The notes to the financial statements are an integral part of the financial statements.
Oil Refineries Ltd. Consolidated Balance Sheet (cont.) In thousand US Dollars 2008 2007 Current liabilities Bank overdrafts 28,973 948 Loans and credit 351,366 215,073 Trade payables 270,594 559,695 Other payables 70,056 88,820 Derivatives at fair value through profit or loss 1,853 1,595 Provisions 12,949 15,677 Total current liabilities 735,791 881,808 Non-current liabilities Debentures 726,554 717,302 Bank loans 233,749 452,154 Liabilities for finance lease 8,448 7,763 Other long-term liabilities 7,394 - Derivatives at fair value through profit or loss 6,900 - Employee benefits 68,845 67,358 Liabilities for deferred taxes 65,827 125,287 Total non-current liabilities 1,117,717 1,369,864 Total liabilities 1,853,508 2,251,672 Shareholders' equity Share capital 472,478 472,478 Capital reserves 20,953 29,036 Retained earnings 58,438 298,289 Total equity attributed to equity holders of the 551,869 799,803 Company Total liabilities and capital 2,405,377 3,051,475
Oil Refineries Ltd. Consolidated Profit and Loss Statements In thousand US Dollars 2008 2007 Revenue 8,257,458 5,234,483 Cost of sales, refinery and services 8,324,149 4,816,511 Revaluation of open positions in derivatives on prices of goods and margins, net (7,465) 13,626 Total cost of sales 8,316,684 4,830,137 Gross profit (loss) (59,226) 404,346 Selling expenses 40,582 35,010 General and administrative expenses 67,061 59,360 Reduction of negative goodwill created upon acquisition (14,535) - Privatization grant - 28,360 Operating profit (loss) (152,334) 281,616 Financing revenue 64,979 (12,361 Financing expenses (126,034) (114,284) Financing expenses, net (61,055) (101,923) Company's share in profits (losses) of investees (net of tax) (3,111) 6,913 Profit (loss) before taxes on income (216,500) 186,606 Tax benefits (taxes on income) 107,292 (44,937) Net profit (loss) for the year (109,208) 141,669 Earnings (loss) per share Net basic and diluted earnings (losses) per ordinary share (in USD) (0.055) 0.071
The notes to the financial statements are an integral part of the financial statements.
Contacts Company Contact: Igal Salhov, Chief Financial Officer, Oil Refineries 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.) +972-54-566-3221 email@example.com
Contacts: Company Contact: Igal Salhov, Chief Financial Officer, Oil Refineries, 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.) +972-54-566-3221, firstname.lastname@example.org