Slowly improving external circumstances reflected on INA Group financial results
Key achievements
- Net sales revenues amounted to HRK 11,209 million
- CCS EBITDA excl. special items amounted to HRK 1,340 million
- CAPEX amounted to HRK 750 million
- Net Operating Cash Flow amounted to HRK 798 million
Zagreb, October 30, 2020 – This year, 2020, continues to be one of the most challenging years for the entire oil & gas industry and, consequently, for INA. Although the oil markets partially stabilized, the price environment is still far from pre-crisis levels. Upstream is burdened by lower realized prices, while Downstream witnesses lower demand and deteriorated refining margins.
CCS EBITDA excl. special items of INA Group amounted to HRK 1,340 million in the first nine months of 2020, of which around 40% was generated in Q3 2020 in line with the usual seasonality trends. This is 44% decline compared to the same period of 2019, still the reported EBITDA turned positive in Q3 2020 and amounted to HRK 470 million.
Operation of Exploration and Production is marked with the combination of 13% lower production due to natural decline and the decrease in realized hydrocarbon prices, driving EBITDA to HRK 707 million.
CCS EBITDA excluding special items of Refining and Marketing including Consumer Services and Retail stayed positive at HRK 536 million in Q1-Q3 2020, mainly due to the Retail contribution and additionally supported by higher share of own product sales and cost saving measures, needed to offset the effects of the economic downturn and lower demand. Retail sales volumes, although 16% lower in Q1-Q3 2020, compared to the same period in 2019, show a healthy spike in Q3 2020, with almost 300 kt of fuels sold.
Strategic projects in INA Downstream continued, amounting to almost half of the spent CAPEX. Despite the market turmoil, financial stability of INA stayed strong with a gearing ratio of 20.9%, reflecting strict cost control and efficiency improvements across all segments. At the end of Q3 2020, net debt decreased by 18% compared to the same period last year and amounted to HRK 2,503 million.
Statement of Mr. Sándor Fasimon, President of the Management Board of INA:
“During the summer months Croatia still experienced somewhat better tourist season than expected, but its effect and the seasonal increase in turnover could not compensate for the overall deteriorated environment. INA operations during 2020 required several operative adjustments in order to ensure sustainable cash generation. Postponing non-critical investments and taking other numerous internal optimization activities were the main focus, thanks to which strategic projects INA is committed to, such as Rijeka Refinery Upgrade project as part of INA R&M New Course program, are not endangered.
As for the results of the first nine months 2020, they remained strong on operational level, with CCS EBITDA of HRK 1.3 billion. Expected seasonality effect helped boost the result during Q3 2020, driving the reported EBITDA also to positive area after a negative first half 2020. Exploration and Production expected natural production decline stayed burdened by the low hydrocarbon prices, especially in the natural gas area, with reduced prices but also lower demand considering the economic downturn. Refining on one side benefited from higher share of own product sales, but on the other side witnesses’ negative margins caused by lower economic activity. Compared to first half of 2020 Retail performed significantly better in Q3 2020, and the 16% decrease in volumes compared to first nine months 2019, can be considered a strong result taking into consideration the overall market conditions.
A year such as 2020 can hardly be repeated, but the autumn and winter months are also difficult to foresee, and the full economic recovery is still not near. Still, INA will enter 2021 as a company adjusted to this unforeseen crisis and with the strong strategic projects underway, aimed to ensure future growth potential.”