On 19 January 2023, the Supervisory Board of Petrol d.d., Ljubljana was informed about the Petrol Group’s estimated business results for 2022. The Management Board of the Company prepared the business results estimate because of the expected deviations from the Petrol Group’s Business Plan for 2022 as a result of the exacerbated business conditions brought about by the continuation of the energy crisis and measures taken by governments to mitigate the consequences thereof.
The Petrol Group’s Business Plan for 2022 and an analysis of business conditions
The Petrol Group’s business plan for 2022 was optimistic and pursued ambitious goals set in the Petrol Group’s Strategy until 2025 where the Group has committed itself to leading the energy transition. The annual business plan was prepared on an assumption that the growth of energy prices would settle down in 2022 and that governments would take various measures to increase economic activity and consumption level.
The Petrol Group entered 2022 still faced with the Covid-19 epidemic. Economic growth was stable, although already accompanied by high prices of energy commodities which skyrocketed as the war began in Ukraine. In the continuation of 2022, business conditions significantly deviated from the assumptions underlying the business plan for 2022. In 2022, the Petrol Group operated under very complex conditions marked by the energy crisis at EU level and government interventions to mitigate its effects on citizens and businesses. The high prices of energy commodities and the rising inflation were the reasons why governments in the markets where the Petrol Group operates started regulating the prices of fuels, electricity, and natural gas (in Slovenia alone, 37 regulations were adopted for this purpose in 2022), which had a profound effect on operations and, hence, the achievement of the Petrol Group’s Business Plan for 2022. Moreover, Geoplin d.o.o. Ljubljana’s operations also had an important negative effect on the estimated performance of the Petrol Group because Geoplin d.o.o. Ljubljana was subject to Russia having cut off its natural gas supplies and the high volatility of natural gas prices due to the war in Ukraine.
In the light of the abovementioned circumstances, the following risks raised by the Management Board of the Company when releasing the Petrol Group’s Business Plan for 2022 were realised: a negative effect of the energy crisis on inflation and, consequently, on the growth of living expenses, the intensification of petroleum product purchase conditions, the regulation of selling prices of energy commodities, and other regulatory requirements.
Estimated business results of the Petrol Group for 2022 and deviations from the annual business plan
The Petrol Group planned its sales revenue to amount to EUR 5.9 billion in 2022, whereas the estimated total sales revenue reached a record-high amount of EUR 9.4 billion, up by 59 percent compared to the plan. In addition to the higher cost and selling prices of motor fuels and energy commodities, the growth of revenue compared to the same period of the year before was affected by the increased sales of fuels and petroleum products as a result of the low prices and the merger of Crodux derivati dva, d.o.o., into the Petrol Group. In 2022, the Petrol Group sold 4.2 million tons of fuels and petroleum products, up by 13 percent compared to the plan. Due to the high cost of all energy commodities and the effect of the regulation of motor fuels and other energy commodities, the aforementioned increase in sales revenue is not reflected in the adjusted gross profit, which was planned to amount to EUR 643.9 million, but stands at EUR 372.5 million, or 58 percent of the plan, according to the estimate.
Throughout the year, the Petrol Group focused greatly on cost management, yet it was not able to fully avoid the deviation from the plan. The estimated costs for 2022 (EUR 477.7 million) exceed the planned costs (EUR 452.5 million) by 6 percent. The majority of growth is tied to the increased sales, especially the costs of logistics.
The Petrol Group’s planned EBITDA for 2022 amounted to EUR 297.8 million. According to the current estimate, EBITDA stands at EUR 95.9 million, or 32 percent of the plan. The negative effect is mostly on account of the regulation of motor fuels in all markets, that is, in the amount of EUR 180.1 million. The Petrol Group’s EBITDA is also importantly affected by Geoplin, d.o.o. Ljubljana’s operating loss, which is a result of the stopped natural gas supplies under the Russian contract, and regulations of other energy commodities in Slovenia and Croatia.
For 2022, the Petrol Group planned a net profit of EUR 158.3 million which, according to the estimate, is negative and stands at EUR -12.1 million.
The Company was also forced to adjust its investment funds to the changed circumstances. In the plan for 2022, EUR 100 million of investment funds were earmarked for further development. In the estimate for 2022, the amount for investment stands at EUR 60 million, of which more than a half for energy transition projects.
The estimated data do not include potential receipt of compensation for the damage resulting from fuel price regulation in Slovenia (in the amount of EUR 106 million) and Croatia (in the amount of EUR 52.1 million) in 2022.
The Petrol Group complies fully with its financial covenants.
Supervisory Board’s opinion
The Supervisory Board believes that in the difficult situation marked by the energy crisis, the energy transition, and regulatory measures taken by governments, the Management Board of Petrol d.d., Ljubljana managed the Company successfully and professionally; moreover, it successfully managed business and liquidity risks, implemented the key development projects of the Company, and mitigated the effects of negative energy market trends to the greatest extent possible and, by leading an efficient procurement process, ensured a stable and secure supply of fuels and energy commodities and provided comprehensive support to its customers. Despite the exacerbated business conditions, S&P Global Ratings reaffirmed Petrol d.d., Ljubljana’s long-term BBB- and short-term A-3 rating with a stable outlook in December 2022.
Throughout the entire year, the Management Board of Petrol d.d., Ljubljana regularly and transparently reported all challenges and effects on operations to the Supervisory Board and kept the shareholders up to date via public announcements at its website and the LJSE website and, at the end of the year, at the 35th General Meeting of Shareholders.