Summary
2011 HALF YEAR REPORT OF MOL GROUP
MOL Hungarian Oil and Gas Plc. (Reuters: MOLB.BU, MOLBq.L, Bloomberg: MOL HB, MOL LI; homepage: www.mol.hu), today announced its 2011 second quarter and first half year report. Pages 17-35 of this report contains a set of unaudited interim condensed consolidated financial statements for the six-month period ended 30 June 2011 as prepared by the management in accordance with IAS 34 Interim Financial Reporting.).
In the first half of 2011 MOL delivered another strong result. HUF 350 bn EBITDA and HUF 208 bn operating profit (both excluding special items) are 30% and 55% higher, respectively compared to H1 2010.
Upstream delivered almost 80% of the operating profit. Segment result was boosted by higher crude oil prices and elevated hydrocarbon production level, but it was negatively affected by the weak USD. Considerably improved operating profit in Downstream division was supported by higher sales volume and FX gain, but the overall refining environment remained very challenging. Gas Midstream division managed to maintain similar result as last year, despite the negative regulatory environment, being in force in the closed gas-year, which temporary shrunk the profitability of the transmission business.
In Q2 2011 both EBITDA and operating profit, excluding special items improved compared to the same period of last year, to HUF 164 bn and HUF 87 bn respectively. However comparing to the first quarter of this year, both EBITDA and operating profit declined, the Clean CCS-based operating profit improved slightly.
In Q2 2011 Upstream EBITDA remained on Q1 level and improved by 16% compared to the same period of last year. Result was supported by higher realized hydrocarbon prices, but negatively affected by weak USD. In the second quarter of 2011 Clean CCS-based Downstream result turned to positive again on the back of higher sales volume, despite still challenging refinery environment.
Net profit of the Group reached HUF 147 bn in H1 2011 after HUF 24 bn loss in H1 2010. Beside boosted operating profit, net financial gain also contributed to the improvement, mainly as unrealized foreign exchange gain, due to strengthened HUF.
Operating cash flow before movements in working capital increased by 27% and amounted to HUF 340 bn. Despite the higher working capital need, in line with the higher price levels, HUF 106 bn operating cash inflow was reached in H1 2011. Decreased net debt position and further improvement of gearing ratio (27.7%) at the end of the period was derived by strong operational result.
Mr Zsolt Hernádi, MOL Chairman-CEO commented:
MOL delivered strong result in the first half of 2011 again. Upstream segment was the main profit contributor thanks to higher international production and profit contribution. To further improve the profit generation of the segment we are aiming to execute intensive investment programs in Russia, Syria, Kurdistan Region of Iraq and of course in the core CEE countries. In Downstream our complex assets are delivering good results despite still challenging refinery environment. Looking at ther results delivered already it can be seen that we are on the right track to transform INA to a more efficient regional player, but further investments and efficiency improvements are essential.
In the first six month of the year we strengthened further our financial position. Operating results proved our strong cash generation capability, while we also improved the structure of our credit facilities. These provide good basis for delivering organic growth projects and selected inorganic steps.
► Upstream operating profit, excluding special items increased to HUF 162 bn, by 29% in H1 2011 compared to the same period of the previous year. This profit growth derived from combination of positive effects, such as increased production volumes from Syria and Croatian off-shore and 26% higher realized hydrocarbon prices in line with increasing international quotations. Positive effects were moderated by 6% stronger HUF against USD.
► Downstream operating profit, excluding special items improved significantly from the very low basis of last year to HUF 56 bn. The profit increase was influenced positively by both internal and external factors, like higher sales volume, more efficient operation, lower unit cost of refining, higher Brent-Ural spread, better petrochemical environment and FX gain on debtors and creditors.
► Gas Midstream segment’s operating profit, excluding special items accounted for HUF 33 bn. The most important profit contributor remained the FGSZ Ltd (gas transmission business), however the temporary freeze of gas tariffs by 1 July 2010 affected negatively the H1 2011 result.
► A net financial gain of HUF 18 bn was recorded in H1 2011 (compared to the net financial expense of HUF 101 bn in H1 2010). In H1 2011 a net foreign exchange gain of HUF 45 bn was recognised, compared to the loss of HUF 93 bn in H1 2010. The fair valuation difference on the conversion option embedded in the capital security issued in the monetization of treasury shares by Magnolia Finance Ltd. was HUF 5.0 bn decrease of liability. In addition, a loss of HUF 12.9 bn has been incurred on the fair valuation of the call option on MOL shares owned by CEZ.
► CAPEX spending was HUF 94 bn (46% lower than previous year) in H1 2011. The investments focused on CEE region, Russia and Syria in Upstream, on Thermal Power Plant revamp at Bratislava refinery and finalization of Rijeka refinery modernization in Downstream.
► Net profit for the period increased to HUF 147 bn in H1 2011, compared to HUF 24 bn loss in H1 2010, as a combined effect of better operating result and net financial gain.
► Operating cash inflow in H1 2011 was HUF 106 bn, compared to HUF 177 bn cash flow in H1 2010. Operating cash flow before movements in working capital increased by 27%.
Net debt position decreased to HUF 784 bn, resulting in an improved, 27.7% gearing ratio at the end of June 2011.