PKN ORLEN S.A.
MANAGEMENT BOARD REPORT ON THE OPERATIONS OF PKN ORLEN IN 2012
(Translation of a document originally issued in Polish)
4.1.5 Macroeconomic factors affecting the financial results and sensitivity analysis Changing macroeconomic environment has significant influence on PKN ORLEN operations.
Economic situation on the labor market and macroeconomic trends have significant impact on level of fuel and petrochemical products’
consumption and in consequence on size and prices of their sales.
The Gross domestic product (GDP) as a basic indicator reflecting economic situation in Poland which is determined by consumption, capital expenditures and export allows to assess the stage of the economy. Changes in GPD index are correlated with changes in unemployment rate.
DIAGRAM 9. GDP in Poland (year-to-year increase)*. DIAGRAM 10. Unemployment rate in Poland (year-to-year increase)**.
*) Based on EUROSTAT data
**) Based on GUS data
Changes in interest rates affect the value of financial gains realised on bank deposits, loans granted, as well as costs of servicing debts resulting from variable interest rate loans.
DIAGRAM 11. WIBOR 3M average interest rate (%). DIAGRAM 12. EURIBOR 3M average interest rate (%).
DIAGRAM 13. LIBOR 3M average interest rate (%).
PKN ORLEN S.A.
MANAGEMENT BOARD REPORT ON THE OPERATIONS OF PKN ORLEN IN 2012
(Translation of a document originally issued in Polish)
Changes in exchange rates have material impact on PKN ORLEN’s financial results. The level of revenues generated by the PKN ORLEN largely derives from the value of PLN in relation to other currencies. Fixing of prices of refining and petrochemical products is based on quotations carried out on commodity markets. The costs of crude oil, raw materials and debt servicing incurred by the PKN ORLEN are also denominated in foreign currencies.
DIAGRAM 14. USD/PLN average exchange rate. DIAGRAM 15. EUR/PLN average exchange rate.
Consumption tendencies are closely related to macroeconomic factors. The overall market situation affects both individual consumers and investors, who condition their consumption decisions on the current market situation, primarily on the forecast market situation. The world economic crisis did not spare fuel markets, which reduced the sales mainly due to the decreased transportation demand.
DIAGRAM 16. Consumption of gasoline and oil on Polish market.
The basic raw material used in the production by PKN ORLEN is crude oil. International crude oil prices in the past used to be subject to significant fluctuations caused by changes in global demand and supply for this raw material and due to political factors. The financial situation and operating activity of PKN ORLEN are mainly dependent on changes of the crude oil prices on global markets and on the possibility of reflecting those changes in the prices of refining and petrochemical products produced by PKN ORLEN. Level of the Brent/Ural differential has also a significant impact on the operating results of PKN ORLEN in accordance with 93% share of sulphated crude oil in processing structure.
DIAGRAM 17. Brent oil quotations (USD/bbl). DIAGRAM 18. Brent/Ural differential * (USD/bbl).
PKN ORLEN S.A.
MANAGEMENT BOARD REPORT ON THE OPERATIONS OF PKN ORLEN IN 2012
(Translation of a document originally issued in Polish)
PKN ORLEN operating results significantly depends on realisation of refining and petrochemical margins. In turn the margins deoends on changes in finished products prices on global markets and prices of crude oil..
DIAGRAM 19. Refinery margin („crack”) quotations (USD/t). DIAGRAM 20. Petrochemical margin („crack”) quotations (EUR/t).
Quotations of refining products for the purpose of the above crack spreads originate from the Platts information service that publishes data on the basis of daily quotation of products on the London Stock Exchange. Quotations of petrochemical products originate from the ICIS information service that publishes data on the basis of weekly quotations of products on the London Stock Exchange.
PKN ORLEN basing on the product sale structure and available global quotations has developed its own definitions of model refining and petrochemical crack spreads, which, in an aggregated manner reflect the influence of macroeconomic factors on operating results generated by the refining and petrochemical segments taking into account the nature of the conducted business activity.
DIAGRAM 21. Model refining margin and differential* (USD/bbl). DIAGRAM 22. Model olefin margin* (EUR/t).
*) The differential, refining and olefin margin calculation methods are presented in the Glossary of definitions and abbreviations at the end of the foregoing Management Board Report
PKN ORLEN carries out an analysis of the impact of key macroeconomic indices on operational gains realised. Methodology of estimating the impact of changes in main macroeconomic factors on PKN ORLEN financial results is presented below.
Estimates of impact on the model refining margin and differential Brent/Ural are performed using full processing capacity of crude oil of PKN ORLEN amounting to 16.3 million tonnes (around 120 million barrels) per year.
Estimates of impact on the model olefin margin are performed assuming the sale of monomers and aromas in PKN ORLEN of approximately 950 thousand tonnes per year.
Estimates of impact on retail margin are performed assuming the sale of motor fuels in PKN ORLEN of approximately 6 billion liters per year.
PKN ORLEN S.A.
MANAGEMENT BOARD REPORT ON THE OPERATIONS OF PKN ORLEN IN 2012
(Translation of a document originally issued in Polish)
DIAGRAM 23. Sensitivity analysis of the change in the crucial macroeconomic parameters – impact on the operating result.
The impact of the change in the above mentioned parameters has been estimated with the assumption of the lack of dependence between them and between other parameters forming PKN ORLEN’s results. The changes of macroeconomic factors can have additional effect on many other elements such as optimisation of the structure of products, sales directions or the capacity utilisation, which can have an additional impact on the presented operating results.
4.2 Financial resources management