GRI Index: G4-EC1
Management's discussion and analysis
Our 2015 results show how successful we have been in exploiting the opportunities created by the favourable macroeconomic environment to strengthen our financial foundations. LIFO-based EBITDA before non-cash effects of impairment losses on non-current assets reached an all-time high of PLN 8.7bn, up PLN 3.5bn on the previous year. As at the end of 2015, net financial leverage was below 30%, the safe level assumed in the ORLEN Group’s strategy. This allowed the Group to consistently pursue its investment programme and recommend dividend distribution in line with our policy to gradually increase dividend per share.
In 2015, the ORLEN Group recorded a record-high LIFO-based EBITDA of PLN 8.7bn in 2015, before impairment of non-current assets, up PLN 3.5bn on the previous year.
The positive effect of macroeconomic factors, associated with a USD 2.4/bbl (yoy) improvement in the model downstream margin and depreciation of the złoty against the US dollar, was PLN 4.0bn (yoy).
The positive effect of increased sales volumes across all operating segments totalled PLN 1.3bn (yoy).
The combined impact of other effects was PLN (1.8)bn (yoy) and included mainly:
- PLN (1.3)bn (yoy) − effect of accounting for the repurchase of the 5th and 6th tranche of mandatory stocks in 2015, of PLN (0.3)bn and PLN (0.8)bn (yoy), respectively, and absence of the positive effects reported in 2014, including a PLN (0.2)bn (yoy) gain on the repurchase of the 4th tranche and sale of the 6th tranche of stocks;
- PLN (0.3)bn (yoy) – absence of the positive effects from 2014 associated with the optimisation of operating stocks and processing of crude oil purchased in the previous years;
- PLN (0.2)bn (yoy) – mainly negative effect of change in net other income/(expenses) before impairment of non-current assets, caused mainly by PLN (0.1)bn (yoy) lower profit on a bargain purchase of shares in Česka Rafinerska by Unipetrol a.s. from ENI in 2015, compared with the purchase of shares from Shell in 2014.
Based on tests conducted in accordance with IAS 36 Impairment of Assets, the ORLEN Group recognised net impairment losses on non-current assets of PLN (1.0)bn, attributable primarily to impairment of the ORLEN Upstream Group’s exploration assets in Poland of over PLN (0.4)bn, recognised in Q2 2015; impairment of the Unipetrol Group’s petrochemical assets of over PLN (0.1)bn, recognised in Q3 2015 due to the breakdown of the ethylene unit in August 2015; and impairment of production assets in Canada of over PLN (0.4)bn, recognised in Q4 2015. In 2014, net impairment losses on non-current assets amounted to PLN (5.4)bn and included chiefly impairment of the ORLEN Lietuva Group’s assets of PLN (4.2)bn, and of the Unipetrol Group’s assets of PLN (0.8)bn, as well as impairment of the assets of the ORLEN Upstream Group in Canada of PLN (0.3)bn.
Taking into account impairment losses on non-current assets, the ORLEN Group’s LIFO-based EBITDA in 2015 amounted to PLN 7.7bn.
As a result of the global decline in crude oil prices, the non-cash effect of the revaluation of inventories (the LIFO effect) was PLN (1.5)bn, bringing the ORLEN Group’s 2015 EBITDA to PLN 6.2bn.
ORLEN GROUP PERFORMANCE BY SEGMENT BEFORE IMPAIRMENT OF NON-CURRENT ASSETS
ORLEN Group LIFO-based EBITDA in 2015 by segment [PLNbn]
Change in segment performance at the ORLEN GROUP [PLNbn]
*) Before impairment of non-current assets.