Motor Oil Hellas Corinth Refineries SA
ATHEX:MOH
If you don’t study any companies, you have the same success buying stocks as you do in a poker game if you bet without looking at your cards.
Utilize notes to systematically review your investment decisions. By reflecting on past outcomes, you can discern effective strategies and identify those that underperformed. This continuous feedback loop enables you to adapt and refine your approach, optimizing for future success.
Each note serves as a learning point, offering insights into your decision-making processes. Over time, you'll accumulate a personalized database of knowledge, enhancing your ability to make informed decisions quickly and effectively.
With a comprehensive record of your investment history at your fingertips, you can compare current opportunities against past experiences. This not only bolsters your confidence but also ensures that each decision is grounded in a well-documented rationale.
Do you really want to delete this note?
This action cannot be undone.
| 52 Week Range |
19.2
28.56
|
| Price Target |
|
We'll email you a reminder when the closing price reaches EUR.
Choose the stock you wish to monitor with a price alert.
This alert will be permanently deleted.
You don't have any saved screeners yet
Ladies and gentlemen, thank you for standing by. I'm Costantino, your Chorus Call operator. Welcome, and thank you for joining the Motor Oil conference call and Live Webcast to present and discuss the 9 months 2021 financial results. [Operator Instructions] The conference is being recorded. [Operator Instructions] At this time, I would like to turn the conference over to Mr. Tzannetakis Petros, Deputy Managing Director and Chief Financial Officer; and Ms. Mary Psyllaki, Investor Relations Officer. Mr. Tzannetakis, you may now proceed.
Hello to all of you. Good morning, good afternoon, good evening to some. From Athens, it's winter now, 9 months results. I try to give a sort of a punchline every time in every sort of quarterly conference call. It's not always easy, but trying to find something that characterizes the quarter. I think it was actually Mary's suggestion what suits this quarter well and actually the 9 months as a whole too, is towards consistency and perseverance.
Showing these attributes brings us to where we are today and gives us hope and the positive spirit attitude for going forward and for the next sort of quarter and quarters. What did we see during this quarter? Improved profitability across the business on the back of a gradual industry normalization. Refining margins picked up from historical lows, while energy and CO2 costs reached record high levels.
Refining in the third quarter supported high -- head high margins, which were supported by white crude differentials on the back of OPEC increased output and improved middle distillate cracks on demand recovery and low inventory levels.
Let's look at individual products. Starting from gasoline. The combination of recovering demand across Europe, many countries reported road traffic at prepandemic levels. The very low inventory levels and specific events like Hurricane Ida in the U.S. and others kept cracks at very high levels, which we can actually see this on this slide.
In respect of diesel, recovery of industrial activity, along with low inventory levels and increased demand for jet fuel supported an expansion in cracks that remained though below historical levels. In respect of jet fuel, as aviation traffic recovered, we witnessed an improvement even though from a low basis.
On the crude side, and we can see it on the left bottom slide. As OPEC supply continued to increase in line with the agreement, it led to a widening of crude differentials even though at a slower pace compared to the previous quarters. The Greek market recovery continues with transport fuels close to 2019 and aviation picking up from August.
I use the word continues because it is continuing as we speak, and I'll come back to that. During this period, we had the highest refinery crude throughput for 2021 at the same level as Q3 2019, the highest total inputs of the past 3 years.
Another very important point, which we will see in a moment, is record high resulting sales of over 4 million metric tons, the highest ever quarter in our history. A little bit on the crude prices themselves, not on margins alone, but the absolute crude prices. A new yearly high was reached at $79 on September 30 at the end of September and an average for the quarter of $73 per met -- per barrel. Product prices followed the same pattern. Let's not go into detail, but it's the same pattern.
The dollar vis-a-vis the euro strengthened to $1.158 at the end of September and $1.18 on average for the first quarter. But already as we speak, it is well above it in terms of strength. Today, it was actually below $1.12 or stronger than $1.12. Looking a little bit at the specifics for Motor Oil, the crude mix was heavier in the 9 months of '21 versus the 9 months of '20, but similar between Q3 and Q2 of 2021.
So as you can see on this slide, we opted for more Kirkuk, more Basra Heavy, has also correctly picked up by most of you. Refinery runs were high, well above nameplate capacity at 190,000 barrels per day in the third quarter compared to 181,000 in the second quarter. The yearly runs, which is the weighted average are at 185,000.
So a year, which is 13,000 above our nameplate capacity on average, which is a good performance. Gasoline and diesel sales exceeded the 9-month '19 levels. Specifically gasoline sales increased by 26% in Q3 following an already strong increase in Q2 of about 25%. And actually, you can see this on both those Slides 4 and 5, where you see production -- you see throughput actually and then you see production of gasoline, in particular, and jet as well being well above 2020 and actually almost at the same level as the sales of 2019 for the whole year.
So we almost matched the full year of 2019 in the gasoline sales. Jet sales almost doubled compared to the previous year, but of course, they are lower than 2019. And diesel sales slightly down as the focus was mainly on jet production to cover the increased demand. A little bit on the specifics of the Greek market since we already moved to Slide 6.
What we can see on the Greek market is that in Q3, it grew by 8.8% in total, which is broken down to 5% in gasoline, 13.1% in automotive diesel and 9.2% in automotive fuels. Clearly, an improved -- very much improved picture compared to Q1 and Q2 where expected numbers for the total were minus 14.7%, minus 8.6%, with gasoline being minus 21.8% in Q1 and of course, strengthening in Q2.
So a very strong comeback of the domestic demand. You can see the details of the specific third quarter volumes on Slide 7, where you see the total of being at 664,000 metric tons for this quarter, compared to 512,000 for last year's third quarter, compared to 562,000 for Q3 2019. So indeed, looking at those numbers, actually it is the highest, I would say, third quarter in this graph, quite impressive.
The total as well, 4,030,000 almost is the highest volume of sales of any quarter, as I said at the beginning, we have experienced. Shipping and aviation picked up. Clearly, it was stronger than last year's third quarter, not as strong as Q3 2019, but we have still some way to go as the September and October figures were quite strong because the tourist season has been sort of slightly prolonged. So in short, these are details for what happened both in the domestic market and shipping aviation. So it's a very satisfactory picture. And the breakdown per product is exactly as we said it, stronger on [indiscernible] auto diesel. Heating diesel has started not that strong, but still satisfactory, but still it's early.
Total volumes clearly above last year, both from a refined point of view, but also from additional trading volumes. Clearly, we do more trading when there is more demand to sell our products. And this results in the refinery margin, which you see on the next slide, Page 9, which was 49.7% for the 9 months giving us a Q3 margin per barrel of 7.3% and a full year of about -- of 9 months of about just under 7%.
Again, much better than the benchmark. And also keep in mind that our refinery margin includes the increased costs -- incorporated increased cost for the energy usage that we had in the 9 months.
Moving on to the numbers. Parent company, Q3 EUR 114 million EBITDA, EUR 285 million for the 9 months and EBIT 90, EUR 225 million for the 9 months, EUR 70 million, and EUR 174 million. Clearly, an improvement, a significant improvement for what we saw last year where we had losses for the 9 months. And even if we go to the next slide with the adjustment for inventory losses last year against this year, we clearly see EUR 202 million versus EUR 188 million last year or EUR 143 million before tax versus EUR 85 million and EUR 109 million after tax.
Going to the next slide, we see the contribution of the group. So the group added on the EBITDA line, another EUR 122 million for the 9 months, EUR 38 million for the quarter. And even if you look at it after the adjustments, we are standing at an EBITDA of EUR 306 million. So EUR 104 million is the difference and EUR 159 million before tax and EUR 126 million after tax.
Good numbers, pleasing numbers, which helped us also restart the dividend and give an interim dividend actually last week. On the next slide, CapEx has been progressing normally. We lowered it a little bit in the guidance based on the 9 months spending. It doesn't mean that there is a delay on any of the projects. It simply means that this is a more realistic forecast, the closer we come to the end of the year. Otherwise, the reformer and all the other projects are proceeding according to plan.
Net debt slightly reduced compared to last year. And a good point here is that the working capital is gradually unwinding. And the operating cash flow gave us a total positive of EUR 107 million for this quarter, gradually improving the situation from what we experienced in the first couple of quarters where we were stretched with the working capital changes being sort of negative. So as expected, regardless of the capital expenditure, which happened this quarter as well, we ended up being able to slightly reduce net debt, and we are on a trajectory which is improving.
The Slide 15. The right part of the slide shows you the debt maturity profile on which we are working continuously. This now includes the Eurobond, which is maturing in 2026. So out of this EUR 507 million, the biggest part, just around EUR 400 million is the Eurobond. In the column of 2028, we have the Greek bonds, the EUR 200 million; and the rest are either club deals, syndicated deals, loans or bilateral facilities committed. And we are currently working on restructuring the 2023 and 2024 maturities and take them 5 to 7 years later. So the profile that you will see at the end of the year will be considerably further improved as we shall draw the EUR 200 million new loan that has already being signed for the financing of the reformer.
So -- and the headroom for funding our investments, a very good loan profile continuously improving. A little bit of an update on where we stand today because I'm sure you will -- asking me the questions. We had October and November continue with strong demand in the domestic market. Of course, compared to last year, it is a better and easier comparison because lockdown started at the beginning of November last year, while this year, there was no full lockdown.
So figures for the domestic demand are very favorable vis-a-vis 2020, but we are gradually surpassing the respective months of 2019 as well for October and November in the automotive fuels. I don't think anything -- I don't have anything else to tell you on the progress. So I will rest and have you -- have time to answer your questions. Thank you.
[Operator Instructions] The first question is from the line of George Grigoriou with Pantelakis Securities.
A few quick questions, please. First of all, regarding your CapEx plans from 2022 onwards. Also in that respect, with regards to future expansion into renewables. And if you could provide or speak with an update when is the schedule -- when is the next scheduled shut down for [indiscernible] at your refinery?
Scheduled shutdown. Yes, Mr. Grigoriou. So we are actually formulating the CapEx plan for the next 5 years because it is in the preparation phase to include all our targets for CO2 emissions, et cetera. So it's quite a complex exercise on which we are working as we speak. So I can't really enlighten you very much. What I can say is that 2022 is going to be lower CapEx than 2021 for obvious reasons, since the reformer is going to be completed in the first sort of few months of the year, for which reformer we have spent this year -- How much?
EUR 120 million.
So there is a remaining, I think, EUR 70 million for next year. There is -- EUR 70 million for next year. And yes, this is it. Now the shutdown for the refinery is in 2023 -- yes, 2023. And then is a major shutdown of the refinery. I cannot give you the detailed plan yet because I don't have it. We try and fine-tune the shutdowns depending on many variables, including the market, including the agreements we have with the contractors and the optimal stoppage time for different units. And you know this is something we have done in the past.
So there is a lot of -- a lot -- very significant flexibility. I would definitely over a quarter to shift the shutdown from first to second or second to fourth or second to third quarter. So we'll have to come back on that for more details closer to the time.
And as for renewables, your expansion in [indiscernible] business...
Renewables, we are completing the 84, I think, megawatts that I have told you last time. So to reach these 363 operating renewables, these are well underway. And I don't have details of the CapEx, but it's in the normal CapEx that we will give you for the next year. And as far as the pipeline, which we mentioned, this 650 megawatts of licenses that we acquired from in this last project. We are examining the ones that are in a more advanced stage and are more promising. And we are proceeding gradually. There is no investment decision taken yet on any of these but we are making, let's say, a cleansing and optimization of this list. So there isn't anything very aggressive at this point of time to share with you.
The next question is from the line of Patricot Henri with UBS.
Yes. I have 3 questions, please. The first one on the third quarter results, there's a high contribution from associates. Can you expand on what was driving the strength in the quarter and whether that's something that is expected to be replicated in the next few quarters? And then secondly, if you can comment on profitability in the fourth quarter and the impact of higher energy costs both from -- on the refining business and also on the power retail business.
And last one, just around the interim dividend payment that you announced. And basically, how we should think about the full year dividend, what's a good metric to look at, we'll be targeting some sort of dividend yield payout ratio. Any indication here would be helpful given you're going through quite a lot of changes in terms of capital allocation, developing renewables, et cetera. I would be interesting to hear how to think about the dividend?
Henri, always very full questions. So let's start. Associates. Associates is everything. The one that was, let's say, stands out is Korinthos Power and Shell MOH Aviation. These are the ones that are standing out and sort of overperformed during this period because for obvious reasons, on the one hand, Korinthos Power gives us more profit, while our electricity company, NRG, it was weaker, okay, because of these very, very high prices in electricity. So this is mainly the strength of the associates.
Profitability in Q4 was strong in October, slightly weaker in November because there was high prices of crude, but slight weakening of prices of products in November. So we can see this -- October being very strong, probably with inventory gains, but at the end of the day, reported numbers are going to be good.
And in November, there is a gradual weakening of products without the respective weakening of crude prices. Hoping that this is temporary, so there will be further normalization in December. Now with the energy costs, we have switched as of October 1, the refinery utilization away from gas into naphtha and LPG, which are our own production. So clearly, we will be much more protected, shall we say, from the extremities that others will experience.
As far as interim dividend, that's sort of a difficult and academic, almost, topic. Looking at the table presentation, Page 25, not the one that the one, we usually make the full one. What we see here is that in years of losses, even though the losses were because of inventory sort of fall in value like in 2014 and 2020. We stopped paying our dividends, even though in June of 2020, we paid the dividend for the profits in 2019. So from a pure cash outflow point of view, we did actually pay something to the shareholders. Coming back to 2021, which is, let's say, a very good year, we are more optimistic, and we are encouraged to restate the dividend.
I tend to be a bit more conservative, though, because especially coming after a very negative year and having big CapEx, I want to be a little bit more conservative. That's purely a feeling, there is nothing else hidden in my words. I would look more at the pattern of what have we done since 2015 onwards.
So clearly, there will be a good remainder of the dividend. But I would prefer to be a little bit more conservative than not. Now what does this mean as dividend yields since you've raised it. Again, I cannot comment very much because it depends on where the share price is. If the share price is at EUR 14 or at EUR 16, it clearly gives you a different dividend. What I can tell you is that with the share price as it is today, the dividend yield is going to be quite healthy.
Understood. And if I just follow up on the fourth quarter profitability and the poor retail business because I understand a little bit negative in the third quarter because of higher energy cost? Is it less the case in the fourth quarter?
Yes, it is less the case in the fourth quarter. It's getting normalized. Clearly, here, the energy, the electricity company is being hit as everybody else in Europe or in Greece that has retail customers of electricity, because there is always a lag between the increase in prices and the time by which you can pass it on to the consumer. But this is gradually being normalized as we speak, progressively from the summer onwards. So from July onwards, each month, there has been a gradual normalization to almost balance by the end of the year. So this gives us, let's say, the certainty that Q4 will be slightly better.
And in Q1, even if high electricity prices prevail, we will have a more balanced operation as far as energy. On the other hand, the Coral Avin and the retail outlets are doing well because consumption demand is still pretty high in Greece, and people are driving the cars and there are a lot of new car registration. And maybe, I believe one of the reasons for people driving the cars more is COVID. They prefer driving the cars rather than taking the public transport. Okay? But you know me, I'm not going to be -- however hard you push me, you've known me for maybe 10 years. I don't know how long, maybe more. I always be more conservative than you would like to hear me be.
The next question is from [indiscernible] with [ Laser ].
So I wanted to talk about supply and demand. I'm not going to ask you to predict demand. That's pretty much guesswork. But I was hoping you can at least comment on supply over the next 5 years, particularly, we're seeing new capacity coming on board in Middle East, India and China. And I wonder how you expect that to -- what the effect that would have on your business and on margins?
Yes. So indeed, there is additional capacity coming on in sort of -- in Saudi and in other places and in Asia. But there is -- there are closures in Europe. And not only there are closures, but there are also cuts in the productive utilization, let's say, of refineries. We read every other day about another refiner turning into a terminal or another refiner turning into sort of a biofuels plant or something else.
So on the global perspective, it's very much what you just sort of mentioned. On a more regional perspective, Europe, and particularly, if you want to limit it rather to the Mediterranean and the Eastern Mediterranean, we are more optimistic as far as the supply-demand balance is concerned. Of course, margins is a global business. But still, there are comparative advantages, competitive advantages, if you operate in a region like the Eastern Mediterranean.
Demand in this area is strong and continues being strong because there is growth in these countries. Whatever financial problems they might have. They are still growing because, obviously, they start from a much lower basis than the Northern European countries.
And we see this in the Balkans. We see our subsidiaries in the Balkans giving us contribution. Actually, I forgot to mention this earlier on the question of Henri Patricot about the associates. The Shell, the coral subsidiaries in Croatia and in Cyprus and in other countries are doing actually very well, extremely well, better than expected. So there is growth there.
So if a refiner stays at the top of technology and those investments that are targeted, niche investments. And at the same time, it's proactive in improving its CO2 footprint so that the different costs and penalties that have to be incurred, simply the license to operate going forward, if one keeps this in mind. I think that we will have a difficult time, which we always had, but things will be all right.
Mr. [ indiscernible], have you finished with your questions?
Yes.
The next question is from the line of [indiscernible] with [ Euro Securities ]. Apologies. Mr. [ indiscernible] has withdrawn his question. We're moving on to the next question. [Operator Instructions] And gentlemen, there are no further questions at this time. I will now turn the conference over to Mr. Tzannetakis for any closing comments.
Yes. I -- It was nice hearing you, it was not nice not being able to see you. Hopefully, we will manage to travel next year to London or Paris. And we are actually making an effort with Mary Psyllaki to go to Prague for the conference at the beginning of December. So hopefully, we'll manage to see some of you. And wishing you all a nice rest of the day and goodbye from myself, Mary and my colleagues who are also sitting by in distances, but sitting around here. Thank you very much. Bye-bye.
Ladies and gentlemen, the conference has now concluded and you may disconnect your telephone. Thank you for calling, and have a pleasant evening.