Petrokemija Loss of 178 Million Kuna

The Petrokemija Group ended the past year with a loss exceeding 178 million kuna, and in the unaudited consolidated report submitted today to the Zagreb Stock Exchange, this loss is attributed to the high price of gas and a decrease in production and sales due to market reasons and unplanned production stoppages.

In 2012, the Petrokemija Group achieved total revenues of over 3.05 billion kuna, which is an increase of 2.9 percent compared to revenues from 2011, while at the same time, total expenses of the Group increased by as much as 12.9 percent, to 3.23 billion kuna. The EBITDA indicator (earnings before interest, taxes, depreciation, and amortization) is negative at 54.2 million kuna.

Along with the high gas price as the primary cause of the reported loss, Petrokemija states that the next most important factor is the impact of reduced production and sales volumes, which affected the increase in fixed costs per unit of product. In 2012, Petrokemija achieved a 10.2 percent lower production compared to 2011, largely due to market reasons, in order to balance the dynamics of fertilizer stocks and deliveries at an acceptable level, and partly due to unplanned production stoppages.

The business revenues of the Petrokemija Group last year amounted to 3.03 billion kuna and were 2.8 percent higher than in 2011, despite a decrease in sales – total fertilizer sales fell by 6.2 percent last year.

At the same time, business expenses increased by 13.3 percent, to 3.18 billion kuna, reflecting the rise in input prices of raw materials, primarily natural gas, considering that the average price at which Petrokemija procured gas in 2012 was 31.1 percent higher than in 2011 and even 71 percent higher compared to 2010 (cumulative growth).

Petrokemija emphasizes that such a high increase in the price of the primary raw material, which accounts for 57 percent of total expenses, could not be covered by measures to increase revenues and savings undertaken by management, leading to the reported loss.

They add that Petrokemija was not covered by the Government’s Decision on the maximum price level of gas for privileged consumers from September 2011 to September 2012, and in the regulatory part of the gas market, it did not have the opportunity to purchase simultaneously from multiple suppliers, thus bearing the full burden of the significant rise in the price of natural gas, which reflected on the financial result.

However, since the third quarter of 2012, based on government decisions related to the regulatory definition of the gas market in Croatia, Petrokemija has gained the ability to purchase gas from multiple suppliers, so gas procured at a lower price from the foreign supplier E.ON Ruhrgas AG and Prvo plinarsko društvo d.o.o. from Vukovar partially mitigated the cost impact.

Among the significant events from the business year 2012, Petrokemija highlights the acquisition of a 79.72 percent ownership stake in Luka Šibenik d.o.o., which, as they state, is of strategic interest for the operations of the Kutina fertilizer factory, as most raw materials are imported from overseas, and a significant portion of finished product exports is shipped through that port.

Thus, the report, in addition to Petrokemija d.d. and Luka Šibenik, also pertains to the subsidiary companies Restoran Petrokemija d.o.o. Kutina and Petrokemija d.o.o. Novi Sad and Novo Mesto.