Orlen (PKN) Q3 2024 (Q&A) earnings summary

Executive summary

• Q3 and the first nine months saw solid operating results despite a challenging macro environment, with revenues and net profit declining year-over-year due to lower prices in refining, energy, and gas, as well as significant impairment losses.

• LIFO EBITDA (adjusted for one-offs and write-offs) was PLN 8.1 billion in Q3, down from PLN 8.6 billion year-over-year, and PLN 22,296 million for the nine months, a decrease of PLN 18,840 million year-over-year.

• Cash flow from operations increased by PLN 0.5 billion in Q3, with higher operating cash flow year-over-year mainly due to the absence of gas windfall charges and improved working capital.

• The balance sheet remains robust, with net debt to EBITDA at -0.09x in Q3 2024, indicating very low leverage.

• Significant impairment losses were recognized, especially in the Refining (ORLEN Lietuva) and Petrochemical (Olefins III) segments, totaling PLN 4,763 million for the period.

Financial highlights

• Revenues for Q3 2024 were PLN 67.9 billion, down from PLN 79.5 billion in Q3 2023; nine-month sales were PLN 219,778 million, down PLN 54,536 million year-over-year.

• LIFO EBITDA for Q3 2024 was PLN 8.8 billion, up from PLN 5.1 billion in Q2 2024 but down from PLN 10.3 billion in Q2 2024; nine-month EBITDA was PLN 17,306 million, down from PLN 37,532 million year-over-year.

• Net profit for Q3 2024 was PLN 188 million, a significant decrease from PLN 4.6 billion in Q3 2023; nine-month net profit was PLN 3,012 million, down PLN 17,034 million year-over-year.

• Net cash from operating activities for the nine months was PLN 26,205 million, down PLN 10,579 million year-over-year.

• Net debt/EBITDA improved to -0.09x in Q3 2024 from 0.04x in Q3 2023.

Outlook and guidance

• Brent price expectations lowered to $81 per barrel; refining margin forecast reduced to $11 per barrel due to increased supply and weaker demand.

• Q4 EBITDA expected to be slightly negative year-over-year, mainly due to gas segment margin compression; refining, energy, and upstream expected to improve sequentially.

• Persistently tough market environment for petrochemicals and normalization of margins in gas and retail.

• Planned CAPEX for 2024 reduced by PLN 2 billion to PLN 33 billion, with a total reduction of PLN 5 billion compared to the original plan.

• Management is comfortable with current market consensus for the year.