Orlen posts quarterly profit beat as Iran war boosts refining margins
Orlen’s Q1 Performance and Market Impact
Strong Profit Growth Driven by Refining Margins
May 28 (Reuters) - Poland's largest energy group Orlen reported a 22.8% rise in first-quarter adjusted core profit on Thursday, beating market expectations as the outbreak of the Iran war drove a surge in refining margins.
Share Performance Compared to Peers
As of 0725 GMT, shares of the company were up 1.6%, outperforming Poland's blue-chip WIG20 index, which fell 0.1%, as well as regional peers Unimot and MOL, which fell 0.5% and rose 0.2% respectively.
Analyst Commentary on Results
"The figures appear to confirm the resilience and diversification benefits of Orlen’s integrated business model amid elevated volatility on global energy markets," Erste analyst Cezary Bernatek said in a note.
Financial Highlights and Segment Analysis
Core Earnings and Refining Margins
Its LIFO-based earnings before interest, taxes, depreciation and amortisation, a measure excluding impairment losses and inventory valuation changes, reached 14.07 billion zlotys ($3.85 billion) in the quarter, topping a 13.2 billion zloty consensus compiled by Orlen.
The company's model refining margin, which measures the profit made from converting crude oil into refined products, rose to $17.0 per barrel in the quarter from $8.9 a year earlier, it said.
Impact of Weather and Tariffs
Boost from Cold Weather
Earnings were also supported by cold weather that boosted demand for electricity and natural gas in January and February.
Offsetting Lower Tariffs
The higher volumes lifted Orlen's energy segment, helping to offset a negative impact from lower domestic gas and electricity distribution tariffs.
Impairment Charges and Project Updates
The company's unadjusted earnings were hit by non-cash impairment charges of 1.11 billion zlotys, tied largely to its downstream segment including the revised "New Chemistry" petrochemical project, which Orlen had flagged earlier in May.
In April, Orlen's supervisory board approved an updated 35.8 billion zloty budget for the investment, which is now expected to reach full start-up in 2030.
Acquisitions and Future Outlook
Grupa Azoty Polyolefins Project
Orlen also confirmed it plans to close the acquisition of the remaining shares in the delayed Grupa Azoty Polyolefins project in the third quarter, a deal requiring 1.35 billion zlotys in financing to complete the unit's restructuring.
Exchange Rate and Reporting Credits
($1 = 3.6549 zlotys)
(Reporting by Rafal Nowak in Gdansk; Additional reporting by Marek Strzelecki; Editing by Jacqueline Wong and Milla Nissi-Prussak)
