Hellenic Petroleum (Results H1 2014): By Manos Chatzidakis - Beta Sec.

Hellenic Petroleum reported a weak set of results affected by adverse refining environment. Adjusted 2Q 2014 EBITDA came at €49m (vs €55mn consensus estimate) and adjusted net earnings reached €-50mn (vs €-38mn in Q1 and -23mn consensus estimate). 

Despite the positive contribution of the Elefsina refinery and the improvement of its Marketing subsidiaries’ performance, both Greek and international, Group results were negatively affected by weak benchmark refining margins. 

On reported results, operating performance and gains from inventory valuation led Reported EBITDA, to €53m (2Q13: -€25m), while Reported Net Results, which include €53m of financial expenses and €48m of depreciation were also improved at -€50m (2Q13: -€95m).

In specifics:

¡  Domestic Refining Adjusted EBITDA came at €9m (2Q13: -€11m) as Elefsina contribution, the improved operational performance of both Aspropyrgos and Thessaloniki refineries, as well as cost control, with fixed opex excluding maintenance 17% lower, offset the adverse refining environment. Total refined product sales amounted to 3.2 million tons, with exports maintained at 50% of total sales.

¡  Domestic market sales recorded a 2% increase, improving the Group’s market shares while exports, at 1.5m MT, remained at the same high level as a share of total sales (50%). 

¡  Stronger Petchem margins vs 1Q13, cost control and high level of vertical integration between Aspropyrgos and Thessaloniki plants,  led to a 26% profitability increase with Adjusted EBITDA at €19m. (€17m, 1Q14). 

¡  DEPA contribution to Group results at €5m (vs €9m in 2Q13), due to weak demand from IPPs.

¡  ELPEDISON EBITDA at €13m (+21% vs 2Q13). 

¡  Net debt reached 1.625bn vs 2.333bn in Q1 (-30%) on lower working capital needs (€3.751bn vs €4,505bn in Q1).

Overall another poor quarter in terms of profitability despite the improvement in working capital. We don’t ignore that market conditions remain adverse for the core business yet there is gradual and slow improvement to refining margins in the beginning of Q3. 

Catalysts for the stock are DEPA sale, increase in Med margins, stabilization in domestic demand and Elefsina full utilization. Market has incorporated most of these risks to current price yet we haven’t seen a related development apart from current Med margins increase that will enhance visibility.

Manos Chatzidakis

Head of research

Beta Securities S.A.

29 Alexandras Ave.

GR - 11473

Athens, Greece