State of art technology helped SLOVNAFT to overcome the problems with shorter crude supplies in Q4 2005
Q4 2005 again proved that state of art technology as a result of a long-term sophisticated investment strategy has been the key source of SLOVNAFT's competitive advantage.
Due to this technological competitive advantage SLOVNAFT was able to increase the utilization of its main conversion units in Q4 2005 by more than 8% compared to the same period of 2004 and thus partially compensate the drop in crude processing due to temporarily lower crude oil supplies from Russia in October. While crude processing decreased by 6.2% in the last quarter compared to Q4 2004, crude oil product sales practically stagnated at the previous year level. Moreover, the total volume was produced in the ultra-low-sulphur quality and nearly 28% represented biodiesel.
During the whole year 2005, including the Q4, SLOVNAFT kept focusing on export markets resulting in 80% profit contribution from export sales. In Q1-4 2005 export revenues grew by more than 22% at practically the same high level of volumes sold as a year ago (export sales in volume terms were down by slight 2.4% y/y). In order to further strengthen Group’s export position and overcome certain fluctuations in local market demands, from October SLOVNAFT started with supplies of bio diesel (up to 5% of MERO content) onto Austrian market, which also contributed to improved export sales revenues compared to 2004.
Total net sales revenues were higher by 18.6% in 2005, mainly due to higher level of international quoted prices on the world markets. Total domestic refined product sales decreased in volume terms by 1.8% in Q1-4 2005 driven mainly by planned shutdowns and turnaround of key production units carried out in the Q2 2005 and resulting lower production. Higher sales of diesel and bitumen driven by high market demand outweighed a decrease in sales of gasoline, kerosene and lubricants. Domestic sales revenues increased by 22.1%, thus confirming the trend of higher profitability of export than of domestic sales.
“Year 2005 again proved that state of art technology as a result of a long-term sophisticated investment strategy has been the key source of SLOVNAFT´s competitive advantage. Just like in the previous quarters, SLOVNAFT also in Q4 2005 kept focusing on strengthening export sales performance, being the driver of its profitability, which together with much higher capacity utilization of main conversion units and continuous efficiency improvement programs and the synergies within the MOL Group have remained the key factors of the company’s sustainable growth and stable strong performance” commented the results the SLOVNAFT CEO Vratko Kaššovic.”
Operating profit of the SLOVNAFT Group reached SKK 11.33bn in 2005, downy by 8% compared to year 2004 negatively influenced besides lower product volumes resulting from shutdowns in the first half of the year and strengthening of SKK towards USD (SKK -1.55bn) also by the penalty imposed by the Ministry of Finance, already appealed by SLOVNAFT. Without this extraordinary item the performance of the company would be in line with the results reported by comparable oil companies. On the other hand SLOVNAFT´s operating performance was positively influenced by favorable oil market/sector conditions and continuous internal efficiency improvements and synergies from joint operations within the MOL Group, which strengthened the company’s performance by SKK 2.32bn in the previous year. Without our key investment - EFPA -, which makes SLOVNAFT one of the top 3 refineries in Europe, the profitability of SLOVNAFT would reach only about one third of the current level.
Capital expenditures and investments represented SKK 4bn, which is a decrease of SKK 2.69bn compared to the previous year, mainly due to the finalization of PP3 and Diesel 2005 projects in 2004.