STRONG IMPROVEMENT IN ALL BUSINESSES
MOL Hungarian Oil and Gas plc. today announced its 2005 first quarter preliminary results. This report contains consolidated financial statements for the period ended 31 March 2005 as prepared by management in accordance with International Financial Reporting Standards (IFRS).
In Q1 2005, operating profit increased by HUF 29.8 bn, to HUF 91.6 bn (USD 489.8 mn), supported by previous years’ investments in quality downstream assets, higher product sales volumes of our downstream and petrochemical products and by the consistent application of a fair, EU compliant regulation in the gas business. Net income grew by HUF 19.3 bn to HUF HUF 71.0 bn (USD 379.7 mn), primarily reflecting the strong operating performance, which was partially compensated by higher financial expenses, due to a loss on foreign currency denominated debt.
Overview of the environment
The average CIF Med quoted price of Ural Blend increased by 49% in USD terms and 34% in HUF terms, compared to Q1 2004. More importantly for MOL, the Brent-Ural differential grew to 4.4 USD/bbl in Q1 2005, due to increasing demand for sweet crude oil and increased sour crude production. Average USD denominated crack spreads of FOB Rotterdam gasoline and naphtha decreased by 22% and 15%, while the crack spread of gas oil increased by 79%, compared to Q1 2004.
Exploration and Production operating profit in Q1 2005 increased by HUF 4.9 bn, to HUF 16.9 bn (USD 90.4 mn), as a strong increase in international crude production and higher transfer prices could compensate for the lower domestic hydrocarbon production and increasing royalty charges.
Refining and Marketing contributed operating profit of HUF 37.5 bn (USD 200.5 mn), an increase of 59% (in USD terms 77%) over Q1 2004, supported by higher sales volumes, the increased Ural to Brent discount, higher diesel crack spreads, integrated Group operations and the positive effect of inventory holding. Estimated clean USD ased CCS profit rose 29%.
The Petrochemical segment’s operating profit increased to HUF 9.6 bn (USD 51.3 mn) in Q1 2005, compared to a HUF 3.8 bn (USD 18.3 mn) profit in Q1 2004. Higher sales, efficiency improvement measures and an improvement in the business environment contributed to the significant strengthening of operational results.
Capital expenditure and investments decreased to HUF 41.2 bn (USD 220.3 million) in Q1 2005, compared to HUF 90.0 bn (USD 432.7 million) in Q1 2004, due to the lower acquisition expenditure. The Group's main investment was the acquisition of Shell’s operation in Romania. MOL’s gearing ratio on March 31, 2005 reached the lowest level of the past five years at 20% (the gearing ratio was 24% on December 31, 2004). Net debt at the end of March 2005 was HUF 221.6 bn.
Mr Zsolt Hernádi, Executive Chairman of MOL commented:
“The further improvement in our profitability justifies our previous investment decisions. The increase in sales volumes and in the profit contribution of our international investments provides further growth and appropriate returns to our shareholders. Furthermore, our strong financial position provides a solid base for the continued execution of our strategy. ”
