Orlen (PKN) Q2 2024 earnings summary

Executive summary

• Q2 revenue was PLN 69.510bn and LIFO EBITDA PLN 5.030bn; reported net income was a PLN 34m loss.

• The PLN 7.7bn gas-related regulatory charge weighed on Q2 results; LIFO EBITDA excluding regulatory effects was PLN 11.306bn, up from PLN 10.441bn YoY.

• H1 revenue was PLN 151.8bn, EBITDA PLN 12.3bn and net income PLN 2.8bn, all materially below restated H1 2023.

• H1 LIFO EBITDA adjusted for inventory valuation and excluding net impairments was PLN 13.4bn, down PLN 17.5bn YoY; Q2 adjusted LIFO EBITDA on that basis was PLN 5.0bn.

Financial highlights

• Q2 revenue fell to PLN 69.510bn from PLN 79.029bn YoY; LIFO EBITDA declined to PLN 5.030bn from PLN 10.934bn.

• Q2 operating cash flow was PLN 6.0bn versus PLN 7.1bn YoY; free cash flow was negative PLN 2.6bn versus positive PLN 3.6bn.

• H1 operating cash flow was PLN 17.6bn, supported by an PLN 8.7bn working-capital release; investing cash outflow was PLN 16.7bn.

• Cash and cash equivalents were PLN 10.4bn at June-end, down PLN 2.9bn from year-end; net financial debt rose PLN 555m to PLN 2.4bn.

• Q2 regulatory charges and compensation were PLN 7.7bn and PLN 1.4bn, respectively; lower gas-market prices also reduced revenue.

Outlook and guidance

• 2024 capex guidance was reduced by PLN 3.3bn to PLN 35.3bn; H1 capex was PLN 14.0bn.

• H2 outlook flagged lower refining margins and differential, a difficult petrochemical market, seasonally lower cogeneration and higher feedstock costs; retail results were expected to remain stable.

• H2 upstream outlook anticipated higher hydrocarbon prices, stable production and no regulatory charge; gas sales volumes were expected to be seasonally lower as procurement costs rose.

• Strategy targets 9 GW of renewable capacity by 2030 and carbon neutrality by 2050; a strategy update extending the planning horizon to 2035 was expected by year-end 2024.

• 2024 macro assumptions included Brent at ~$85/bbl, natural gas at ~PLN 160/MWh and electricity at ~PLN 400/MWh.