Polski Koncern Naftowy Orlen SA
WSE:PKN
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 |
50.39
72.93
|
| Price Target |
|
We'll email you a reminder when the closing price reaches PLN.
Choose the stock you wish to monitor with a price alert.
This alert will be permanently deleted.
Polski Koncern Naftowy Orlen SA
You don't have any saved screeners yet
Good afternoon, ladies and gentlemen. And welcome to all of you who are listening and watching us live online. This conference is devoted to the consolidated financial results of PKN ORLEN after the first quarter of 2020.
I would like to extend a warm welcome to the Management Board members of PKN ORLEN, Mrs. Patrycja Klarecka, Management Board Member for Retail Sales; as well as Mr. Zbigniew Leszczynski, Management Board Member for Development; and last but not least, Mr. Jan Szewczak, Management Board Member for Finance.
Today's presentation and conference will be -- today's conference will be launched with the presentation of our performance -- financial performance.
Well again, ladies and gentlemen, we meet today at a conference summarizing PKN ORLEN's consolidated financial results for the first quarter of 2020. PKN ORLEN closed the first quarter of the year with a solid EBITDA LIFO at PLN 1.6 billion, and were not for the negative NRV revaluation in effect, it would have been -- it would be a positive effect, which would be much more than the market consensus. This result was delivered among a -- in the context of very low prices of crude oil. Model downstream margin went up by 10 percentage points year-on-year in the first quarter of 2020. In Q1 PKN ORLEN delivered -- reported a decline in sales volumes by 8% year-on-year. However, this decline was an effect mainly of the coronavirus pandemics as well as lower consumption of fuels.
Thanks to its operational flexibility, the company managed to react to those unfavorable circumstances by adjusting its time lines and accelerating the planned shutdowns. It was a very difficult operation. However, it did succeed. And we managed to eliminate fuels -- imports of fuels down to 0 as well as reduce jet airline fuel and change our production time line and schedule. Our throughput was at 7.7 million tonnes and our capacity utilization was at 88%.
In the first quarter of 2020, PKN ORLEN managed to maintain strong financial position. We generated approximately PLN 0.5 billion in operating cash flows. We delivered an investment program at PLN 1.2 billion, and our net debt at the end of quarter 1 stood at PLN 4.2 billion, which translate into the financial gearing at 11.5%. And the Management Board in the first quarter of 2020 recommended a payment of dividend for 2019 at PLN 1 per share.
Among other highlights of the first quarter of the year, I would focus on consistent delivery of the project, focusing on the takeover of the LOTOS Group. We received a statement of objections. There is an official objections from the European Commission on this particular transaction. On the May -- on May 3, we replied to the statement of objections, and we proposed certain measures in reaction to that. However, we would like to withhold from commenting specifically on that matter by now -- at now. We are waiting for the market test. It should take approximately 2 weeks. However, considering today of current limit, it would take a little bit longer. In the meantime, we will have the quasi court hearing, after which the European Commission should give its decision or should publish a decision. We assume that this date would be around 30th of June 2020.
In terms of the acquisition of the ENERGA Group, this is one of -- definitely our success. We acquired 80% of ENERGA's shares. And at the same time, around 85% of the voting rights at the ENERGA's general shareholders' meeting. That means we have become an owner of ENERGA. This is the major -- the biggest transaction in Poland in the energy market, and we managed to conclude and close it within only 4 months, meeting all the conditions precedent necessary to close that transaction. The price paid for ENERGA shares was set at PLN 8.36 per share.
We do not put our investments on hold. The momentum is still there. However, we are closely looking into the developments in terms of the spread of the COVID-19 pandemics. And we are taking a close look at the developments on the market. However, we would like to stress that our PLN 7.7 billion of CapEx plans should be maintained as declared before.
In the first quarter, we closed the construction of the main part of the PE installation in the Czech Republic, which also launched the process for selection of the general contractor for offshore wind farms in the Baltic Sea, and we started the construction of the Visbreaking unit at Plock. As part of the petrochemical project, petrochemical development project, we signed a baseline project for the capacity -- production capacities to increase the production capacities of phenol. We are consistently extending our service stations network on -- also in Lithuania and Czech Republic, and we are continuing with our co-branding project.
As a national corporation, a national company, state-owned company, we are actively involved in the struggle and fight against the pandemics, coronavirus spread. Our support of financial and nonfinancial is focusing mainly on the medical services and uniform services in Poland, devoted to the saving the life and health of people who are endangered, including face masks, goggles -- medical goggles and hand gloves. We purchased millions of head masks. We earmarked millions of PLN to help hospitals who are involved -- which are involved in the fight against the epidemics. We supplied hygiene and personal protection products to welfare units. And we purchased 7 breathing support units to hospitals and at Plock, among other hospitals.
And we obviously launched the production of hand disinfectant at Jedlicze within only 10 days. We managed to switch the production process at [ Yerlita ] and so producing hand disinfectant. In the meantime, we intensively worked on intensifying those production capacities. And our monthly capacity right now is at 4 million liters of disinfectant.
We also decided to drive down the prices of fuels at our owned petrol stations in Poland, so that all the drivers who need to use their cars and get around using their cars, they can refuel their cars at low price. The -- our measures will -- also benefited to a number of services that are involved in the fight against the pandemics in Poland.
Another year in a row, we were also -- we also received Top Employer in Poland awards and also most -- World's Most Ethical Company. And I'd like to take this opportunity on behalf of Daniel Obajtek and all the Management Board members and thank you to all. I'd like to extend my gratitude to all PKN ORLEN employees for their involvement and engagement.
Let me now move on to the more detailed discussion of our financial performance in the first quarter of the year. Moving on to Slide #5, you can see a macroeconomic slide and focusing on macro environment in the first quarter of the year, which was way better year-on-year. The model downstream margin went up by $1 per barrel. That is per -- that is by 10% year-on-year, thanks to a decline of crude oil prices by $13 per barrel as well as higher Urals/Brent differential, up by $2.20 per barrel as well as higher margin on light distillates and heavy refinery fractions. This positive effect, however, was offset by the margins on petrochemical products, middle distillates as well as fertilizers and PVC.
In the first quarter of the year, we were faced with a very uncalled for and unusual macro environment. On the one hand, we had low crude prices, which supported our margin levels. However, we needed to face the coronavirus pandemics, which translated into lower consumption of fuels. We will focus on that particular issue in -- on slides to come. As I mentioned, however, despite this very unfavorable situation and concerning the spread of pandemics, we are still expecting good figures for all our markets. However, they will be lower the year before -- than the year before. In March, unfortunately due to the spread of the pandemics, the consumption of fuels went down, offsetting the good results delivered in the first 2 months of the year. Therefore, all in all, we expect lower consumption figures in all our markets, except for Lithuania.
On Slide #8, we are showing you our financial results and financial performance across the group. In the first quarter of 2020, we reported a decline in revenues by 13% year-on-year due to lower prices of petrochemical and refining products due to falling crude prices and also falling figures of sales volumes due to COVID-19. We delivered LIFO-based EBITDA at PLN 1.6 billion. That is down by PLN 0.4 billion year by year. On the one hand, we reported a PLN 0.1 billion negative effect on sales volumes, [ PLN 0.45 billion ] in terms of our the utilization of our historical revenue, PLN 0.9 billion in terms of the effect of NRV as well as the effect of higher fixed cost and labor costs. On the other hand, however, we had a positive effect of macro as well as higher trading margins, both in retail and in wholesale as well as PLN 1.2 billion in terms of hedging transactions year-on-year.
The effect of falling crude prices on our inventory levels and inventory value, that is the LIFO effect was at PLN 1.2 billion, which resulted in our EBITDA reported for the quarter at PLN 0.5 billion. Our operating result stood at PLN 0.7 billion in the first quarter, mainly due to higher negative foreign exchange results as well as derivatives and revaluation of derivatives as well as cost of interest.
Despite the solid LIFO-based EBITDA in the first quarter of the year, our net loss stood at PLN 2.2 billion, mainly due to noncash accounting effects, including a PLN 1.2 billion for revaluation of our inventories, and that is write-downs of inventories as well as assets. As an effect of lowering -- lower falling prices of gas as well as a negative balance of our negative activities due to lower PLN versus foreign exchange -- foreign currency exchange levels.
On the following slides, you can see our EBITDA LIFO by segments. Let me start with Downstream, our major segment, which stood at PLN 900 million, offset by the negative effect of falling sales volumes down by PLN 0.25 billion as well as the usage of historical inventory layers and NRV inventory revaluations with higher fixed costs and labor costs, which was offset by the positive macro effect as well as higher trading margins and our results on hedging transactions.
In the following segment, that is Retail. Retail came in at 670 -- PLN 706 million, going up year-on-year, mainly due to higher fuel margins, limited by nonfuel margins and higher costs.
Upstream in terms of its performance, it stood at PLN 219 million, which went up year-on-year, mainly due to positive effect of sales volumes increase as well as hedging transactions, which was offset by the negative macro effect again. Our corporate functions in the first quarter of the year went up by around PLN 14 million, which included higher costs spent on COVID-19-related expenditure, IT systems and labor costs as well as insurance.
Moving on to the next slide, which focuses on our segments. One of another -- let me start with Downstream, again, our major segment, our flagship segment, which generated the operating profit LIFO-based EBITDA at PLN 901 million. The LIFO effect -- or macro effect was positive again due to lower crude oil prices related to lower throughput, higher Ural/Brent differentials as well as improvements of cracks on light distillates and heavy refining fractions. However, those figures were offset by lower cracks on middle distillates, petrochemical products as well as fertilizers and PVC.
The macro effect in Downstream stood at minus PLN 1.2 billion, falling down by 10% year-on-year due to lower sales of gasolines, diesel oil, LPG, olefins as well as polyolefins, offset by higher sales of PTA, PVC and fertilizers. In addition, other important factors included revaluation of inventories, NRV, higher fixed costs and labor costs at around 1. -- PLN 0.1 billion and higher hedging transactions in terms of -- higher performance in terms of hedging transactions, up by PLN 1.1 billion.
The next slide, Slide #11, still discusses Downstream. It presents other operational data for this segment. Our throughput in the first quarter stood at 7.0 million tonnes, which is down year-on-year compared to the first quarter of 2019 due to lower capacity utilization across all our refinery units. However, this had no major effect in terms of our situation amidst the COVID-19 crisis. The oil throughput went down by -- our sales volumes went down by 10%, mainly due to the planned maintenance shutdown at Kralupy. At ORLEN Lietuva, our production throughput went down due to the reduction of our throughput in January 2020, mainly due to low refining margins. However, in Plock, we reported 4 percentage points in terms of our decline in throughput year-on-year due to the maintenance shutdowns for HDS, PTA and CDU.
Let me now focus on our sales country by country. In Poland, lower sales of both petrochemical and refining products. The decline stood at 7% year-on-year, which was offset -- and lower sales of gasolines were offset by higher sales of other products. In the Czech Republic, our volume -- sales volumes went down by 14% year-on-year due to lower sales of fuels, polyolefins and fertilizers due to the shutdown of the hydrocracking unit as well as unfavorable market situation due to COVID-19. A comparable drop in sales were reported for ORLEN Lietuva due to lower refining throughput in January 2020. However, this was offset by higher sales of petrochemical products.
Moving on to the next slide, which presents our next segment, which is Retail. Retail in the first quarter of the year generated the result at PLN 706 million for LIFO-based EBITDA, going up 4% year-on-year. Despite a slight decline in sales volumes, we still consider this to be a very solid result. In the first quarter, we saw a decline in sales volumes -- Retail sales volumes by 1% year-on-year, given lower sales in Germany and in Lithuania, offset by higher sales in Poland and in Czech Republic.
Year-on-year, we reported higher sales in the beginning of the year. However, in the second half of the month of March due to the spread and the problems related to the spread of COVID-19, we reported lower sales of fuels. In Poland, sales of fuels went down by 13% year-on-year and 11 percentage points across the group.
In terms of our fuel margins, they went up across all our markets, combined with lower nonfuel sales margins in Poland and comparable fuel sales -- nonfuel sales margins in other -- at our other markets. This is presented in the lower part of the slide.
We are consistently introducing the ORLEN brand across our foreign markets and as -- part of our co-branding effort, ORLEN logo is being introduced in the Czech Republic and in Germany. We also had more than 70 or 70 -- actually 70 chargers, electric car chargers, which is -- which represents an increase year-on-year.
The next slide, Slide #11 presents our results in terms of retail -- Slide #12, (sic) [ Slide #13 ] I'm sorry, focusing on our -- on the number of our service stations, which went up by 33 year-on-year. We had an increase in terms of the number of service stations across all our markets. Due to lower fuel consumption due to COVID-19, our Retail sales figures went down and especially in Germany and in Lithuania, offset by higher figures for Poland and the Czech Republic.
We need to stress at this point, the very intensive development in terms of the number of nonfuel offering in terms of -- especially our cafe -- Stop Cafes going up year-on-year by 535 and convenience stores as well.
Moving on to the next segment that is Upstream. In the first quarter of the year, the -- our Upstream segment generated EBITDA-based -- LIFO-based EBITDA at PLN 219 million, going up considerably year-on-year, both in Poland and in Canada. We also had a positive impact of not only higher sales volumes but also settlement, the valuation of derivative financial instruments. This was offset by the negative macro impact especially a decline in crude oil, gas and NGLs prices. In terms of average production, it stood at 20,200 of barrels of oil equivalents, going up in Canada and in Poland.
The next slide presents more details on our Upstream operations. We now have around 197 million barrel oil equivalents across all -- both our markets. Our average production stood at 22,000 barrels of oil equivalents per day. In terms of our CapEx, it exceeded PLN 170 million for both markets.
In terms of our operational measures taken in the first quarter of the year, in Poland, we continued the drilling works at -- in Bieszczady as well as design works for Miocen and Plotki. We continued seismic data processing for Edge, Plotki and Karpaty projects.
In Canada, we continued work related to the use of our assets. We started 4 well drilling -- the drilling of 4 wells. We launched fracturing for 5 wells, and we added 7 wells to -- bringing them on stream. Due to the unfavorable market situation and decline in crude oil as well as the spread of COVID-19 pandemics, we are looking very closely and analyzing the opportunities in terms of modification of our timetables and further investment works in 2020.
The next slide goes back to our financial figures. In terms of cash flow, our cash flow stood at PLN 0.5 billion at the end of the first quarter due to lower prices of crude, which translated into the decline in terms of petrochemicals, and it -- this was also combined with our working capital decrease. Our cash flow from investments were at PLN 1.2 billion. CapEx liabilities and others stood at PLN 0.3 billion, including PLN 0.1 billion in terms of our term deposits as well as the settlement of derivative financial instruments other than those used for hedging.
On the bottom of this very slide, we can see free cash flow. After 3 months of 2020, we generated PLN 1.6 billion LIFO-based EBITDA. LIFO effect stood at minus PLN 2.1 billion. Our working capital decrease stood at PLN 1.4 billion, and CapEx came in at minus PLN 1.2 billion. Deposition others, designated as others, includes mainly the revaluation in terms of our debt valuation and interest as well as lease payments and the settlement of paid interest in derivatives. All in all, we had a net debt increase by PLN 1.8 billion year-on-year.
The next slide presents our financial strength, one of our basic pillars of our operations. Let me stress at this point that all our financial strength indices stand at a safe level. Our covenants are on the safe side. Our net gearing is at 11.5%, which is way below 30% that is the maximum level provided for -- assumed in our strategy. And our net debt is at PLN 0.28 billion, going up year-on-year due to higher spending on CapEx as well as paid interest, lease payments and negative effect of our foreign exchange settlements, combined with the positive cash flow from operations at PLN 0.5 billion. Our sources of financing remain diversified, and the average maturity is still on the safe side. You can see that the maturity date is 2021. You can see that in the lower part of the slide. And this creates a natural hedging for our operations.
The next slide is devoted to CapEx. Our planned CapEx for 2020 stands at PLN 7.7 billion, of which PLN 3.9 billion is expected to be spent on growth CapEx, and PLN 3.8 billion on maintenance and regulatory projects. We delivered our CapEx projects at PLN 1.2 billion in the first quarter, including PLN 0.8 billion for Downstream, PLN 0.3 billion for Retail and PLN 0.2 billion for our Upstream CapEx projects.
The main projects, growth projects realized in the first quarter of the year included completion of the construction of the main part of the PE installation in the Czech Republic. We also continued our works related to the development of a petrochemical operations. We extended our ANWIL -- petrochemical works at ANWIL. We constructed the propylene glycol unit. We constructed a paraffin separation unit from reforming raw materials in MaxEne as well as we constructed -- construction -- we were involved in the construction of the Visbreaking unit in Plock, and we also prepared ourselves for the construction of offshore wind farm on the Baltic Sea. In terms of Retail, we opened 7 fuel stations and 10 Stop Cafe and Star Connect locations, including convenience stores.
Let me wrap up this discussion by focusing on our outlook and on the macro situation. As you are well aware, and all of you are well aware, the COVID-19 pandemics put us in a very difficult situation across -- around the world, which translates into lower fuel consumption. We also need to remember that after the decision to discontinue the OPEC+ agreement, we saw a major decline in fuel -- crude prices. We are waiting for the decisions of crude-producing countries, and we are waiting for the revival of the global economy. This obviously has an impact on our margins, which was clearly visible in the first quarter of the year. We are expecting that low crude prices will support our refining margins and petrochemical margins in the second quarter of the year and will revive the economic conditions around the world, combined with higher consumption and higher demand for fuels, which should allow us to maintain our refining prices -- margins at safe levels.
In terms of regulations, I would like to add that the national -- NCV (sic) [ NCW ] level -- the National Index Target went up by -- to 8.5%. However, PKN ORLEN has an opportunity in May take the opportunity -- this opportunity to drive down this ratio to 5.576%.
Thank you very much for your attention. Thank you very much for listening in. Let me now invite you to ask questions, if you have any.
We are now moving on to the Q&A session. We received a number of questions from our webcast viewers.
[indiscernible], Gazeta Prawna Daily. Will you be restructuring your headcount after the acquisition of -- or takeover of ENERGA? If so, what will be the scale of this reconstruction of your employment and where?
We emphasized time and again that we are looking for synergies. However, we'll not be looking those synergies in terms of driving down the headcount. We will continue our employment policy. I would not like to -- you to consider our acquisitions and takeovers as an equivalent of reduction of headcount. I do believe that this is an opportunity to grow and develop in terms of professional promotions of our employees, both at ORLEN and at ENERGA. All those people who work both at ORLEN and ENERGA are valuable assets. This is why we do not plan any restructuring in terms of employment reductions.
[indiscernible], another question. In the context of lower full sales volumes in terms of fuels, both in retail and wholesale due to COVID-19, should we expect a reduction of production volumes? If so, how and for how long?
Thank you very much for this question. Our production plans are considered on a long-term basis. We have monthly plans, but we also have annual plans. In the first quarter, we reduced our production capacities. Our asset utilization stood at 88%. However, across our different production units, this utilization ratio differed. We are delivering our production plans in line with our assumptions. We are looking closely at the situation in the market. And we assume that, and we expect that the fuel consumption will steadily -- slowly but steadily increase. Therefore, we do not expect to have any reductions in terms of our production capacity. So let me remind you that in March, when our fuel consumption went down across all our markets, we decided to reduce our imports to 0. Therefore, our main goal and our main task is to optimize our operations. We need -- you need to remember that we make most money on our Downstream margin, therefore, we'll do our best to utilize our production capacities in an optimum way. We need to remember that we had maintenance shutdowns planned across all our refineries. We caught the opportunities kind of, so to speak, offered by the spread of pandemics. We moved and postponed some of them -- some of those planned production shutdowns to other months of the year. And I do believe that our production capacities will grow with time.
We are observing -- we have been observing recently the demand for fuels went up and has been going up. But we also need to remember that amidst this very difficult situation related to the global pandemics, that our petrochemical figures went down, but not too much, only slightly. This gives us an optimistic outlook for the future in terms of the capacity utilizations in the months to come.
Another question. Considering your lower revenues related with record-low prices of fuels and service stations, what will be the sources of your CapEx projects and the sources of financing?
You can see quite clearly, given the market conditions, we can see quite clearly that this has an effect on the operations of not for stock exchange companies and for businesses in general. But we need to remember that this has an effect on the economic conditions in Poland across the country at large. We expect to maintain our previous plans for CapEx at PLN 7.7 billion, including PLN 3.9 billion for growth CapEx. We are absolutely looking into the market. We watch the behavior and the measures taken by other businesses on the market. We are analyzing the situation very closely. And at this point, we do not see any reason for revising our CapEx figures and our assumed CapEx figures.
In terms of financing and the source of financing, I do believe that our source of financing are well diversified for all the planned investments. However, obviously, we are looking into the market. We're looking at the bond market. We do have a number of opportunities related to consortium loans. We are looking at the level of costs in this particular market. We can see that interest rates are low. So all in all, we do believe that PKN ORLEN has a solid standing in terms of liquidity. And solid performance, financial performance delivered for the first quarter is an indication that we are faring well amidst this very difficult market condition related to pandemics. We will react flexibly if need be.
The next question from Monika Borkowska, INTERIA.PL. In terms of sales figures across ORLEN service stations, has the situation improved recently compared to the precrisis period?
In terms of our Retail volumes, obviously, the fact that we -- people in Poland face certain restrictions in terms of moving around the country, it translated into lower sales volumes, down by around 30%. The situation looked the same around -- more or less the same in April. However, the situation has been picking up in recent days, in recent weeks. We are looking closely at our companies also in Germany and the Czech Republic and Lithuania. In terms of the Czech Republic, they have reacted earlier than Poland in terms of removing, eliminating the restrictions, and the situation has been picking up. And the situation in Poland has been improving in the very same manner.
Our sales went down by around 20%. For our nonfuel offering, it stood at 60% obviously -- which obviously was due to the restriction in terms of the sales of our food products and restaurants offerings. As I said before, the situation has been improving in recent weeks.
[indiscernible] has another question about the stage of your investment or progress of your investment in the petrochemicals assets. Can we expect that the R&D center will be open still this year? And what will be the effects, positive effects for the company of those projects.
Thank you very much for this question. Absolutely. Yes, we will maintain all our CapEx delivery time lines and dates. And our petrochemicals development projects included -- including the olefins and phenol units. We are delivering this project as planned. We would like these investments to be included and brought on stream at the end of 2023. And we are also delivering the project focusing on the construction of this new R&D center, state-of-the-art R&D center. This will be opened at the end of 2020.
I'd like to point to the fact that the program for the development of petrochemicals in the context of global standards is a mega investment. It's a supersized investment. This will take a huge area, and this will include a number, a dozen of various investments. This is a huge challenge and a huge project. Therefore, we are working on this very intensively and very quickly.
For several months, we have been cooperating with -- have partnered with Fluor, the company that helps us to prepare that projects and deliver that projects and also supervise the delivering, the implementation of the project.
In terms of -- so considering those actions and measures, this -- we are still on the safe side, absolutely on the safe side, also in terms of our financials. As Mr. Leszczynski said -- Mr. Szewczak said, our financing sources are still safe and very much diversified.
In terms of R&D center, it is not only the construction of the building itself but the key equipment and furnishings and whatever will be offered within that R&D center. Therefore, we are putting much work into it. We are expecting around 30 R&D projects. After opening the center, however, in the years to come, we'll have around 40 R&D projects per year. We'll have 4 workshops or working facilities and pilot investments and pilot units. Thanks to the R&D center, we'll be able to extend our value chain. We'll be able to modify and upgrade our products. These are all the works we're focusing on. Five PhD holders are working on it right now. This number will be extended to around 10 people. In our R&D center will be -- or the new R&D center will be cooperating and will be partnering with our R&D center in the existing R&D center in the Czech Republic and will also partner with tertiary education institutions, universities, both in Poland and around the world as well as with a number of our business partners, both in Poland and abroad.
Thank you very much. The next question comes from [ Martin Isis ], Business Insider PL. Why did you decide to drive down your recommended dividend payment level if -- considering that you announced that the payment of dividend will be at PLN 3 per share still in March of this year.
PKN ORLEN, it seems, will be a great exception to the rule because we will share our profit among our shareholders. Amidst this very crisis caused by COVID-19, we still expect to pay dividend to our shareholders, and we are consistently driving that goal given our stable financial condition, which we have discussed before. However, the level of the dividend is impacted and has been impacted by external factors as well. It is not only driven by our internal efforts, but it's also driven by the externalities, such as the COVID-19 pandemics, and we need to take this into account, both in terms of the future growth of Polish and the global economy in the context of coronavirus and its spread. And this is why we decided to drive down the recommended dividend level, which is a proof that we are considering and approaching our declarations in a very serious manner. However, we need to remember that we are also diversifying our operational measures. And we do remember that we need to take care of the profitability of our operations. This is our main goal.
A number of questions received from other journalists. Mr. Kublik, representing Gazeta Wyborcza asks about the statement of the objections from the European Commission. And what was your response to the statement of objections of the European Commission.
Our remedies are not a publicly disclosed information. The European Commission at this point is looking closely into our response and our remedies proposed by PKN ORLEN. This will be put into test, and we are expecting that the decision will be announced at the end of June -- by the end of June. And only at this point, we can publish this information.
Magda Graniszewska, representing Puls Biznesu. Do ORLEN's, both Polish or foreign companies -- have Polish or foreign ORLEN companies applied for any support from the government?
No, we have not. Our financial condition is stable as well as our liquidity position is stable and on the safe side.
[ Sutemar Stempi ] representing the [ Argus Agency ]. A little bit related to what we have discussed before about the crude throughput and capacity utilization in our refineries, in our various refineries in the month of April versus May -- the month of May. And he also asked about further information in terms of maintenance shutdowns, plant maintenance shutdowns in the month of May.
We have met today to discuss the first quarter of the year. We will discuss our measures and activities taken in the second half of the year and during the upcoming presentation and conference. However, it is no mystery that we are doing our best to tap the opportunities, so to speak, to -- which was proposed or brought about by the COVID-19 situation. Our capacity utilization stood at 88%, which was due to, first of all, earlier planned maintenance shutdowns, but also from lower consumption of fuels, both in Poland and abroad, where our production capacities, our production assets are also located as well as our service stations.
In the second half of the year, we expect that our capacity utilization will be higher. We have taken a number of decisions to optimize our production volumes and capacities. We reduced the imports of diesel oil to 0. We still have various other opportunities to tap in the second quarter of the year. We will have a major maintenance shutdowns in the Czech Republic. We will analyze these opportunities from the financial side, but we do have certain opportunities to transfer and shift our capacities in terms of our different markets.
I do believe that the second quarter will be a better quarter for us, but we will also use this very quarter to tap the opportunities offered by this present situation, current situation. In the context of planned maintenance shutdowns, we will transfer to -- move the dates of those maintenance shutdowns to quarter 2.
[indiscernible] representing [indiscernible]. This question has already been answered. The question was how the COVID-19 pandemics will affect -- how will the COVID pandemics affect your sales on nonfuel offering, sales and service stations? Do you believe that the holiday period will make up for the losses that you have suffered for the past 6 to 8 weeks?
Yes, I have already mentioned that our nonfuel offering sales volumes dropped. We do believe -- we do expect that the limitations will be removed as time goes by. And we do believe and hope and expect that our losses will be offset in the months to come.
Obviously, all our questions and doubts and the answer to those will depend on the scale and on the progress and the dates of eliminating the restrictions on the economic activities in both in Poland and abroad and also the limitations related to, for instance, the transport. So all those questions and doubts will be answered as time goes by.
A question from Bloomberg referring to Mr. Kublik's earlier question. When can you expect the decision of the European Commission on the LOTOS transaction? And a question about the expected date for closing the transaction.
As I said before, the decision is expected by the end of June and the transaction could be closed in autumn of this year.
Let me just add at this point that our solid financial situation and solid financial standing is due to the fact that we are a big, multi-utility company, and we still have plans to develop and grow further. As a result, our portfolio does not include refining products only, which obviously dropped in terms of sales volumes in recent times. But we also offer petrochemical products and energy products. Our petrochemical products, first of all, in the first quarter, fared very well in terms of sales volumes as well as margins. So we can expect that amidst this common crisis in terms of the decline of crude prices, our refineries and our production units will be in a better standing versus, for instance, Western European production units or U.S. units, which have not reacted so flexibly to the falling crude oil prices and fuel prices. Let me remind you that we sell a major part of our petrochemical products outside of Poland. We will, therefore, have an advantage because our production units do rely on NAFTA more than gas.
And it is -- the trick is not to deliver good results in the times of good economic conditions. The trick is to continue investments, continue CapEx projects and fare well amidst a very difficult market conditions, which obviously we are witnessing right now.
Thank you very much. Thank you for your participation. Thank you to the management. And thank you, the Management Board members and also the participants and our webcast viewers as well. We will obviously have -- are expecting more questions to come. We will answer them by e-mail. Thank you very much.
[Statements in English on this transcript were spoken by an interpreter present on the live call.]