Deepening global economic crises and recession in Q1 2009 negatively impacted the results of the Slovnaft Group, mainly due to significantly lower quoted crude and oil product prices and weaker domestic demand. Despite of this fact Slovnaft succeeded to increase sales volumes of oil products by 0.8% y/y to 1338 kt. Export grew by 7% y/y, on the other hand domestic sales decreased by 16.9/, affected also by shopping tourism into neighboring countries (mainly Hungary, Poland and the Czech Republic), triggered by the weakening local currencies against EUR and weaker GDP growth in Slovakia due to crisis. Retail fuel sales were lower by 11.9% y/y, however ECO+ Autoplyn sales continued to grow.

„To soften the impact of the global economic crisis and recession on the Group, management adopted a series of measures already at the end of 2008. Therefore, despite the worsening external environment in Q1 2009, Slovnaft managed to compensate weaker domestic demand for refinery products by higher export sale, which along with production and sales optimization allowed the Company to maintain its refinery production on comparable level as in the same period of 2008. At the same time “anti-crisis” measures resulted in a higher cost discipline in both operational and CAPEX areas and thus created preconditions for efficient operations also in the future„ commented the results Slovnaft´s CEO Oszkár Világi.

Due to the fact that the company managed to compensate lower domestic demand by higher export sales, crude processing remained practically at the comparable level to Q1 2008. Motor gasoline production in Q1 2009 was inter-annually higher by 15.6 kt. In Q1 2009, Slovnaft produced motor gasoline with ETBE (Ethyl-Tertiary-Butyl-Ether) representing 67.5% from the total motor gasoline production and also motor gasoline with direct blending of ethanol for export markets representing 32.5% from the total motor gasoline production. In Q1 2008, only motor gasoline with ETBE was produced. Motor diesel production increased by 13.9 kt compared to Q1 2008. In Q1 2009, Slovnaft produced only motor diesel with low-sulphur-content (10 ppm), thereof 80.6% represented motor diesel with FAME (Fatty Acid Methyl Ester), compared to 75.9% in Q1 2008.
Despite slightly higher sales of refinery products compared to Q1 2008 Slovnaft Group recorded an operating loss excluding the main one-off items of EUR -25 mln compared to EUR 44 mln profit in Q1 2008. Net Q1 2009 loss of the Group was EUR 11 mln compared to EUR 41 mln profit a year ago. The main reason was the unfavorable development of the external environment as a result of the global economic crisis, which was reflected mainly in the drop in quoted prices of crude oil and motor fuels compared to the previous year. Other important factor was lower inventory changes, compared to Q1 2008 by EUR 40 mln as a result of lower inventory stockpiling, due to the general turnaround planned for May 2009 when compared to 2008. This effect will however weaken during the year as the inventories return to normal operating levels. In Q1 2009, the crude oil price averaged at 44.5 USD/bbl and compared to Q1 2008 decreased by 52.3 USD/bbl.

In 2009 Q1, the negative impact of the petrochemical segment on the Group results continued. The operational result of the petrochemical segment was EUR -8.7 mln. While the petrochemical raw material prices recorded an increasing trend compared to the previous quarter, the polymer prices grew much slower. The segment result was negatively influenced by lower market demand partially offset by cost savings. In Q1 2009, the polymer sales volumes dropped inter-annually by 5.1 kt and reached the level of 99.1 kt.

In Q1 2009, the capital expenditures of the Slovnaft Group represented EUR 18.9 mln (EUR 1.6 mln lower compared to Q1 2008) and were focused mainly on the production efficiency improvement, maintenance of operational reliability and further quality improvement. The significant part of investments was directed to ecological projects.

Economic growth in Slovakia and competitiveness of Slovnaft products resulted in 8.7% year-to-year increase of refinery product sales on the domestic market in volume terms in Q1-3 2008. Demand for diesel, kerosene and bitumen was driven by the growing industry production, construction works and service sector.

As a result of executed turnaround of the key production units in H1 2008 resulting in lower crude processing and production and the strong GDP growth in Slovakia, in spite of the continuous demand increase for biofuels on the export markets, the total volume of refinery products sold in Q1-3 2008 was lower by 6.7% compared to Q1-3 2007. However, export remains the main driver of the Group’s results.

Total sales revenues of refinery products increased by 27% compared to Q1-3 2007 to SKK 81 bn in Q1-3 2008 and were positively influenced by high crude oil and crude oil product quoted prices. The average crude price in Q3 2008 achieved the level 114.8 USD/bbl and was higher by 40 USD/bbl when compared to Q3 2007.

The retail sales volume in Q1-3 2008 remained on the level of Q1-3 2007, despite the strong competition. Diesel and ECO+ Autogas sales showed a continuous increasing trend and gasoline sales stagnated. ECO+ Autogas sales were triggered mainly by the cancellation of excise duty from the 1 July 2008. At the end of September 2008, the company operated 209 filling stations.

Despite moderately improving external environment for the petrochemical industry in Q3 2008 compared to the first half of the year, polymer sales by petrochemical division of Slovnaft Group were down year-to-year by 11% to SKK 13.95 bn.

On one hand the executed general turnaround affected operating profit of the Group, on the other hand it created preconditions for good operational reliability in the following periods. The Slovnaft Group operating profit was SKK 3.29 bn in Q1-3 2008, what represents 44% of profit generated during Q1-3 2007. The results were influenced also by continuously strengthening Slovak crown against USD (18%) and EUR (7%) and a significant fall in crude oil price. Net profit was SKK 2.68 bn, down by 56% y/y.

“Q3 2008 performance of the Slovnaft Group was in line with the development of key parameters in the external environment. In spite of worsening market conditions due to the global financial crisis, Slovnaft has been able to maintain its position of a reliable and high-quality business partner,“ Mr Oszkár Világi, CEO of SLOVNAFT, a.s. commented the results.

In Q1-3 2008, crude oil processing was lower by 149.4 kt as a result of scheduled turnaround of the key production units realized in this period. Production of motor gasoline was lower by 68.6 kt, while production of motor diesel was higher by 35.3 kt.

During Q1-3 2008, only motor diesel with low-sulfur-content was produced, thereof 78% represented production of motor diesel with the content of bio component FAME (Fatty acid metylester). Slovnaft produced only bio gasoline with ETBE (ethyl tertiary butyl ether) content in this period.

Capital expenditures reached SKK 3.0 bn during the period Q1-3 2008. This was twice as much as a year ago. Investments were focused on the ecological projects and projects aimed at improvement of operational reliability.

At 31 December it was already 2.4 mil. working hours that Slovnaft Petrochemicals employees worked without any accident, which would require sickness absence. This positive trend still persists. The last work accident with sickness absence happened in the company more than 3 years ago.

According to available data of European refining and chemical associations, it is an extraordinary achievement not only in Slovak but also international terms. International Association of Oil and Gas Producers, which registers the lowest level of injury from the relevant international associations, recorded 1.7 accidents per 1 million hours, while the CEFIC (European Chemical Industry Council) 6.7 and CONCAWE (Conservation of Clean Air and Water in Europe) 2.5 accidents per 1 million hours worked for year 2007.

Slovnaft Petrochemicals s.r.o. is a 100% subsidiary of SLOVNAFT, a.s., which specializes in production and sales of polymers, particularly polyethylene and polypropylene. Slovnaft Petrochemicals, together with the Hungarian company TVK in Tiszaujvaros forms the petrochemical division of the international MOL Group, which is with annual petrochemical capacity of 1.2 million tones the largest producer of petrochemical products in Central Europe and is also an important player in Europe.

Despite this year’s extensive planned general revisions of key production units, crude oil processing in the Slovnaft refinery in the first half of the year 2008 was lower by only 4.3% y/y. The company processed no less than 2.7 million tonnes of crude oil, petrol production decreased year-to-year by 53,700 tonnes and diesel production by 41,300 tonnes. In H1 2008 Slovnaft produced exclusively diesel with low sulphur content, while 77% of that was the diesel with FAME bio-component.

In the first half of 2008 Slovnaft produced exclusively bio-petrol with ETBE. „Despite extensive planned general revision of key production units, the company succeeded in keeping a sound financial performance in Q2, too. In parallel, successful revisions established preconditions for a good operational reliability and results in the coming period,“ Slovnaft CEO Oszkár Világi commented on the results.

The total volume of refinery product sales on the domestic market for the first 6 months of 2008 increased year-to-year by 7.2%, particularly due to increased sales of diesel and jet fuel due to dynamic development of the Slovak economy. As a consequence of unfavourable external environment for the petrochemical industry (production of polymers), which resulted in high input prices for the industry and planned overhaul in Slovnaft Petrochemicals, s.r.o., sales revenues from the polymer sales in H1 2008 dropped year-to-year by 8.6%. Total revenues from domestic sales of refinery and petrochemical products in H1 2008 amounted to SKK 16.86 billion, and year-to-year increased by 30.7%. As a consequence of the general revisions, the volume of refinery product sales at export markets in the first half-year dropped by 7.7%. Total export revenues in H1 2008 amounted to SKK 42.56 billion and year-to-year were higher by 16.2%.

The volume of fuel sales in Slovnaft´s retail chain in the first half of 2008 slightly exceeded the previous year’s level. While sales of diesel as well as ECO+ Autogas further increased, sales of petrol year-to-year slightly decreased. Improved performance continued in sales of complementary goods and services at the petrol stations, where revenues increased year-to-year by 12 %. Slovnaft operated 209 petrol stations as of the end of June 2008 that is 1 station less compared to the year before.

In H1 2008, the Slovnaft Group recorded operating profit amounting to SKK 3.5 billion, that is year-to-year drop by 32%. The net profit was SKK 2.87 billion, and was year-to-year lower by 32%. The main reasons behind this development was the planned revisions performed and continuously strengthening Slovak koruna, which in H1 2008 gained 18% against USD and 5% against EUR.

Capital expenditures of the Slovnaft Group in the first six months of this year reached SKK 2.2 billion, that is almost three-fold value compared to the same period of 2007. Investments were directed particularly in ecological projects and projects focusing on ensuring the operational reliability.