Financial results of Rompetrol Rafinare Semester 1 2020

Rompetrol Rafinare, a member company of the KMG International Group, recorded declining financial results in the first half of 2020, due to unprecedented volatility in the oil market, but also the impact generated by the influences of COVID-19 on the demand for petroleum products.

Consolidated indicators*		Q2 2020	Q2 2019	S1 2020	S1 2019
Gross turnover	USD	596,316,417	1,363,132,989	1,525,454,497	2,501,387,792
EBITDA	USD	(28,111,976)	37,766,243	(43,678,808)	54,929,775
Net result	USD	(38,689,090)	(5,392,606)	(126,471,111)	(19,438,112)

* Note: The consolidated financial statements of Rompetrol Rafinare include the results of Rompetrol Rafinare S.A. and those of the subsidiaries Rompetrol Quality Control S.R.L., Rom Oil S.A., Rompetrol Downstream S.R.L., Rompetrol Logistics S.R.L. Rompetrol Gas S.R.L and Rompetrol Petrochemicals S.R.L.

In the context of the restrictive measures imposed with the onset of the pandemic that led to very low market demand, as well as the prolonged misunderstandings and negotiations by OPEC + members that led to a very low historical crude oil price, massive and cheap stocks of products were generated in the oil market. After the relaxation of measures and, in conjunction with the recovery of crude oil prices due to OPEC + agreements to reduce production, cheap oil products stored at full capacity, during the 2 months of isolation of the population in Europe, have created enormous pressure on refinery margins.

These external factors brought a major negative effect on the company's gross refining margins, which reached -16.6 USD / tonne between April and June 2020 and 5.5 USD / tonne in the first half of the year.

In addition, the Petromidia Năvodari refinery (KMGI's main asset in Romania) was shut down between March and April for the general turnaround, a mandatory and necessary measure to ensure the operation of production units in maximum safety. During this period, preventive and corrective maintenance works, technological inspections and verifications, catalyst replacement and other works related to refining and petrochemical installations were performed.

Through the investments made during the general turnaround, Rompetrol Rafinare continues its program of modernization and transition to the fourth industrial revolution (Industry 4.0), which involves a more rigorous control of the products obtained, but also increased stability and operational efficiency of facilities and technological flows.

Rompetrol Rafinare's gross turnover in the first half of the year reached 1.52 billion dollars, the indicator being directly influenced by the evolution of quotations for raw materials and petroleum products, which recorded a decrease of about 40% compared to the level for the similar period in 2019.

Against the background of unfavorable factors in the global environment, but also the rapid decline in domestic and regional demand for petroleum products (especially car and aviation fuels), caused by the restrictive measures imposed since the beginning of the pandemic with the new coronavirus, the company noted in S1 2020 an operational profit (EBITDA) of -43.7 million USD and a net negative result of 126.5 million dollars.

Rompetrol Rafinare continued to be an important contributor to the Romanian state budget in the first part of the year, the activities and products obtained generating a contribution of almost 200 million USD in Q1 2020, respectively over 468 million USD in S1 2020.

The main shareholders of Rompetrol Rafinare SA are KMG International (54.63% - directly and indirectly) and the Romanian State through the Ministry of Economy, Energy and Business Environment (44.7%).

Refining segment*

Indicators:		Q2 2020	Q2 2019	S1 2020	S1 2019
Gross turnover	USD	436.270.421	1.158.250.988	1.202.484.821	2.154.650.412
EBITDA	USD	(39.100.865)	28.741.501	(50.249.588)	37.808.454
Net result	USD	(38.373.307)	(6.299.129)	(110.305.138)	(9.156.253)
Operational
Raw materials processed – Petromidia	Kt	876	1.611	2.116	3.126
Raw materials processed – Vega	Kt	82	123	154	202
Gasoline production	Kt	196	407	520	804
Diesel & Jet Production	Kt	516	852	1.179	1.632
Fuel sales - internal	Kt	451	655	1.038	1.195
Fuel sales - export	Kt	243	549	583	1.123

* The refining activity includes the results of Rompetrol Rafinare related to the Petromidia and Vega refineries. Rompetrol Refining calculates the gross refining margin as follows - (Sales of petroleum products - Cost of raw material) / Sales volume. Net refining margin is operating profit (EBITDA) divided by sales volume.

The gross turnover of the refining segment reached over 436 million USD in Q2 2020 and over 1.2 billion dollars in S1 2020, recording a decrease compared to the same periods in 2019.

In the first half of the year, the Petromidia Năvodari refinery processed over 2.1 million tons of raw materials, obtaining over 520 kt of gasoline and about 1.18 million tons of diesel and special aviation fuel.

In the first half of 2020, Petromidia refinery managed to obtain good results in the yield of white products (87.31%wt), technological loss (0.847%wt) and the energy intensity index (102.05%).

Petromidia Refinery has continued its production process optimization programs (increasing processing capacity along with increasing the productivity of valuable products, reducing technological losses, optimizing raw material recipes, etc.) and streamlining operating costs (energy efficiency and reducing production costs for processing), programs started in 2014 and continued until now.

Regarding the Vega Ploieşti refinery, the only domestic producer of bitumen and hexane, the unit recorded good results in the following chapters: technological loss (0.84%wt), energy consumption (2.84 GJ/t) and mechanical availability (98,7%).

The refinery in Ploieşti is in perfect synergy with the Petromidia Năvodari refinery - the largest in Romania and one of the most modern in the Black Sea region. Thus, Petromidia entirely provides the refinery in Ploieşti with the raw materials / semi-finished products necessary to obtain special products with a high added value.

Petrochemicals segment*

Indicators:		Q2 2020	Q2 2019	S1 2020	S1 2019
Gross turnover	USD	27.717.408	37.551.936	62.556.178	90.650.355
EBITDA	USD	(6.942.602)	(3.527.609)	(15.677.242)	(10.093.285)
Net profit / (loss)	USD	(9.651.738)	(6.080.704)	(24.186.426)	(19.545.226)
Operational
Processed propylene	kt	20	38	48	76
Processed ethylene	kt	14	9	28	17
Total sales	kt	34	32	71	80

 

* The petrochemical segment includes the petrochemical activity of the company Rompetrol Rafinare and the activity of the company Rompetrol Petrochemicals SRL.

In S1 2020, the petrochemical segment of the company processed a total of 48 kt of propylene, a level decreasing compared to S1 2019. However, the amount of processed ethylene registered, during the same mentioned period, a significant increase, reaching a total of 28 kt.

The results of the petrochemical division continued to be affected by market pressure on margins, and as a result of volatility, polyethylene plants continued to operate at the most economical rate, so that the High Density Polyethylene (HDPE) plant continued to be in non-operation during the first half of 2020.

The Low Density Polyethylene (LDPE) plant of the petrochemical segment works with 100% imported ethylene, and the Polypropylene (PP) plant works with raw materials produced and delivered internally by the Petromidia refinery.

The petrochemical segment is the only producer of polypropylene and polyethylene in Romania, constantly managing to increase its market share by secondary product categories.

Distribution segment*

Indicators:		Q2 2020	Q2 2019	S1 2020	S1 2019
Gross turnover	USD	439.806.670	767.160.717	1.044.994.900	1.421.921.925
EBITDA	USD	15.488.310	11.479.595	19.639.121	26.892.486
Net profit / (loss)	USD	8.484.542	6.019.997	5.513.548	11.297.898
Operational
Fuel sales retail	Kt	163	192	347	355
Fuel sales wholesale	Kt	232	319	503	594
LPG quantities sold	Kt	66	99	144	209

* The distribution segment includes the results of the subsidiaries Rompetrol Downstream, Rom Oil, Rompetrol Quality Control, Rompetrol Logistics and Rompetrol Gas

The consolidated gross turnover for the distribution segment was over 1.04 billion USD in S1 2020. Amid rising demand between April and June, as a result of increased mobility in large cities, the distribution segment recorded an increase of 35% of the operational profit (EBITDA) - 15.5 million USD in Q2 2020, respectively an increase of over 40% in net profit - 8.5 million dollars in Q2 2020. Thus, the recovery in the second quarter offset the losses in the first quarter of the year, reaching a net profit of 5.5 million USD in the first half of 2020.

The application of restrictive measures in the two months of the state of emergency generated strong decreases, which led to significant losses in the distribution segment. They canceled the higher sales than last year in January and February. Towards the end of the first half of the year, there were slight adjustments, but they could not compensate for the deficit in the months affected by the restrictive measures. Thus, total fuel sales for S1 2020 amounted to 850 kt.

The recovery was recorded despite the general unfavorable conditions in the first half. For example, compared to the same period in 2019, Platts quotations expressed in the reference currency (USD) were, on average, about 38.5% lower for both diesel and petrol.

At the end of June 2020, Rompetrol Downstream's distribution segment comprised 1017 points of sale, including its own network of stations, partner stations and mobile stations (express, internal bases of 9 and 20 cubic meters).

Communication and Public Relations Department

KMG International