9. FINANCIAL AND OPERATING RESULTS

Profitor loss

Sales revenues of the ORLEN Group for the 2020 amounted to PLN 86,180 million and was lower by PLN (25,023) million (y/y). The decrease of sales revenues (y/y) result mainly from lower volume sales by (12)% (in Refining, Petrochemical and Retail segments) and reflects also (35)% decrease of crude oil prices and, as a result, also quotations of major products. In the 12-month period of 2020 in comparison to the same period of 2019 the fuel prices decreased by (36)%, diesel oil by (38)%, aviation fuel by (43)%, heavy heating oil by (33)%, ethylene by (21)% and propylene by (21)%.

The operating expenses decreased totally by PLN 19,275 million (y/y) to PLN (86,187) million. The largest item in this cost structure constitute the costs of materials and energy consumption related mainly to the crude oil and other chemicals used in technological processes. The decrease in the costs of materials and energy consumption by 33% (y/y) resulted mainly from the reduction by (4.4) million tons (y/y) of crude oil processing as a result of the unfavourable macroeconomic situation and realised maintenance shutdowns mainly in PKN ORLEN and in the Unipetrol Group.

The positive result of other operating activities was higher by PLN 4,303 million (y/y) and amounted to PLN 3,832 million mainly due to recognition of gain on bargain purchase of 80% shares of ENERGA in the amount of PLN 4,062 million, impact of net positions of valuation and settlement of derivative financial instruments related to operating exposure (non-designated instruments for hedge accounting purposes) in the amount of PLN 1,293 million, including CO2 futures contracts settlement in the amount of PLN 700 million and the recognition of impairment allowances of property, plant and equipment and intangible assets, right of-use asset and other non-current assets mainly in Upstream segment in Poland in the amount of PLN (337) million and in Canada in the amount of PLN (1,085) million.

As a result profit from operations amounted to PLN 3,908 million and was lower by PLN (1,457) million (y/y).

Net finance cost in the described period amounted to PLN (1,037) million and included net foreign exchange loss in the amount of PLN (506) million, net interest expenses in the amount of PLN (375) million and settlement and valuation of financial instruments in the amount of PLN (178) million.

After the deduction of tax charges in the amount of PLN (31) million, the net profit of the ORLEN Group for the 2020 amounted to PLN 2,825 million and was lower by PLN (1,473) million (y/y).

Statementof financial position

As at 31 December 2020, the total assets of the ORLEN Group amounted to PLN 83,827 million and was higher by PLN 12,625 million in comparison with 31 December 2019.

As at 31 December 2020, the value of non-current assets amounted to PLN 59,212 million and was higher by PLN 19,935 million in comparison with the end of the previous year, mainly due to increase in property, plant and equipment and intangible assets by PLN 17 958 million mainly due to takeover of control of non-current assets of ENERGA Group in the amount of PLN 15,163 million. Additionally the change in balance of property, plant and equipment and intangible assets comprised investment expenditures in the amount of PLN 7,885 million including development of fertilizer production capacities in Anwil, construction of the Glikol installation in ORLEN Południe and Visbreaking Installation in Płock, expenditure on the construction of installations under Program of the Petrochemical Segment Development, projects in the Energy segment related mainly to the upgrade TG1 turbine generator of power plant in Płock, preparation for the construction of offshore wind farms in the Baltic Sea, construction of the wind farm and the connection of the Energa-Operator distribution infrastructure and projects in Retail and Upstream segment and impairment allowances of property, plant and equipment and intangible assets net in the amount of PLN (1,518) million and depreciation and amortisation in the amount of PLN (3,907) million.

The change by PLN 1,300 million in the line right-of-use assets compared to 2019 related mainly to the recognition of new lease agreements and an increase in remuneration in the amount of PLN 1,052 million, recognition of new assets at the date of acquisition of new subsidiaries in the amount of PLN 851 million and depreciation PLN (630) million.

The value of current assets as at 31 December 2020 decreased by PLN (7,310) million in comparison with the end of the previous year, mainly as a decrease in inventories by PLN (2,795) million, balance of cash and cash equivalents by PLN (4,919) million, trade and other receivables by PLN (29) million by increase of income tax receivables by PLN 187 million. The decrease in value of inventories is mainly the result of a decrease in crude oil and petroleum product prices.

As at 31 December 2020, total equity amounted to PLN 42,379 million and was higher by PLN 3,772 million in comparison with the end of 2019, mainly due to recognition of net profit for the 2020 in the amount of PLN 2,825 million, increase by PLN 772 million (y/y) of non-controlling interest mainly from ENERGA Group, an increase in retained earnings attributable to owners of the parent in the amount of PLN 588 million, mainly due to the acquisition of additional 10.91% shares of the ENERGA Group, negative impact of the change in hedging reserve in the amount of PLN (344) million and the impact of exchange differences on translating foreign operations in the amount of PLN 481 million and dividend payments from the previous year’s profit in the amount of PLN (428) million.

The value of trade and other liabilities decreased by PLN (1,108) million compared to the end of 2019 mainly due to decrease of trade liabilities in the amount of PLN (1,426) million, tax liabilities in the amount of PLN (952) million related mainly to excise tax and fuel charge as well as value added tax due to lower volume sales and value of products, increase of investment liabilities in the amount of PLN 665 million and other liabilities mainly due to fees related to the National Index Target and the National Reduction Target in the amount of PLN 251 million. The decrease in trade liabilities results mainly from the lower amount of purchased crude oil and commodities and lower prices on the markets. As at 31 December 2020 liabilities from non-current and current leasing amounted to PLN 5,214 million and were higher by PLN 1,216 million compared to the previous year, mainly due to new lease agreements and an increase in remuneration in the amount of PLN 1,052 million.

As at 31 December 2020 the value of provisions amounted to PLN 4,564 million and was higher by PLN 2,215 million compared to the end of 2019. The increase resulted mainly from:

  • recognition of the provisions of the ENERGA Group in the statement of financial position of the ORLEN Group in the total amount of PLN 1,718 million (mainly jubilee bonuses and post-employment benefits, provisions for estimated emissions of CO₂ and energy certificates and other provisions relating to disputes);
  • net provision balance settlement of estimated CO2 emissions and energy certificates in the total amount of PLN 197 million mainly from the net effect of recognition of provision in the amount of PLN 1,726 million based on weighted average method price of owned rights and certificates and their usage due to redemption of rights for 2019 in the amount of PLN (1,529) million;
  • recognition of environmental provision for reclamation in the amount of PLN 233 million due to the revaluation of provision based on analyses provided by independent expert.

As at 31 December 2020, net financial indebtedness of the ORLEN Group amounted to PLN 13,120 million and was higher by PLN 10,672 million in comparison with the end of 2019 mainly due mainly due to the recognition of debt resulting from a change in the ORLEN Group's structure in the amount of PLN 7,395 million (the ENERGA Group's in the amount of PLN 7,349 million), the net outflows, including inflows and repayments of loans, borrowings and redemption and issue of bonds in the amount of PLN (2,206) million, an decrease in balance of cash and cash equivalents by PLN 4,919 million and the net impact of negative exchange differences from revaluation, of the valuation of debt and interest in the total amount of PLN 564 million.

Statementof cash flows

Net cash used in investing activities for 2020 amounted to PLN 7,247 million and was lower by PLN (2,072) million (y/y) mainly due to lower profit before tax by PLN (2,496) million, increase in amortisation by PLN 1,040 million due to newly handed over non-current assets in the amount of PLN 309 million and taking control of the ENERGA Group in the amount of PLN 690 million, increase in profit on investing activities in the amount of PLN (3,910) million (related mainly to gain on bargain purchase of ENERGA Group in the amount of PLN (4,062) million), change in the balance of working capital by PLN 1,027 million mainly related to decline in crude oil prices and prices of products, which translated into the value of inventories, receivables and liabilities, as well as reduction in demand related to coronavirus pandemic, increase of provision balance by PLN 667 million mainly as a result of the acquisition of the ENERGA Group and settlement of rights in the amount of PLN 1,532 million and lower payments of income tax paid by PLN 754 million.

Net cash used in investing activities for 2020 amounted to PLN (8,495) million and was higher by PLN (4,501) million (y/y) mainly due to increase of net expenses for the acquisition and sales of property, plant and equipment, intangible assets and right-of-use asset in the net by PLN (3,298) million, acquisition of shares of subsidiaries adjusted by acquired cash and cash equivalents in the amount of PLN (2,000) million and higher inflows from the settlement of derivatives not designated as hedge accounting in the amount of PLN 668 million and repaid loans in the amount of PLN 136 million.

Net cash used in financing activities for 2020 amounted to PLN (3,711) million and was higher by PLN (348) million (y/y) mainly due to increase in net repayments of loans, borrowings and bonds by PLN (1,095) million and lower by PLN 1,069 million dividend paid to the equity owners of the parent.

Following inclusion of the revaluation of cash due to exchange differences, the cash balance in the 2020 decreased by PLN (4,919) million and as at 31 December 2020 amounted to PLN 1,240 million.

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