Motor Oil Q3 - 9M Performance Review
Motor Oil has reported its financial results for the first nine months of 2024, revealing a significant drop in net profitability. The company faced pressures due to global energy instability, geopolitical tensions, and a catastrophic fire at its refinery in Kalamaki, Corinth.
Significant Profit Decline
Motor Oil’s financial data showed a 68.9% reduction in net profits, amounting to €224.05 million, down from €717.25 million in the same period of 2023. The third quarter was particularly unfavorable, recording net losses of €137.9 million, offsetting positive performances in the earlier part of the year.
This decline in profitability was attributed to:
Reduced refining margins
Increased operating costs due to the refinery fire
Geopolitical tensions in Eastern Europe and the Middle East, which heightened energy market volatility and disrupted operations
Stable Revenues but Lower EBITDA
Revenue for the nine months reached €9.368 billion, a marginal decline of 6% compared to €9.968 billion in the same period in 2023. However, EBITDA dropped by 34% to €768 million, reflecting lower efficiency in refinery operations and reduced product margins.
Notable changes in product margins:
Jet Fuel margins decreased from 331.6/BBL in Q3 2023 to 115.7/BBL in Q3 2024.
Increased Investments and Negative Cash Flow
Despite challenges, Motor Oil maintained its investment strategy:
Capital expenditures (Capex) rose to €298 million in 2024, compared to €246 million in 2023, underscoring its commitment to clean energy and sustainable development.
However, free cash flows turned negative at -€129 million, a stark contrast to the positive €746 million in 2023. Net debt also increased to €1.836 billion from €1.518 billion at the end of 2023, due to higher investments and liquidity pressures.
Extraordinary Refinery Taxation
The company’s tax obligations have been affected by new policies:
In July 2024, Law 5122/2024 introduced a temporary solidarity contribution of 33% on taxable profits exceeding 20% of the average taxable profits for the 2018-2021 period, as defined by EU Regulation 1854/2022.
The Pillar II Global Tax initiative mandates a 15% minimum tax rate for multinational enterprises with annual revenues above €750 million, effective from January 2024. While this affects Motor Oil’s activities in the UAE, Croatia, and Cyprus, the impact is expected to be minimal.
Dividend Distributions
Motor Oil continues its tradition of rewarding shareholders:
For 2023, a total gross dividend of €199.41 million (€1.80 per share) was approved and distributed in two phases.
An interim dividend of €0.30 per share was declared for 2024, payable on January 3, 2025.
Risk Management and Corporate Governance
Amid geopolitical tensions and economic instability, Motor Oil has strengthened its risk management framework:
Three Lines of Defense Model:
Operational units assess and manage risks.
Risk Management and Compliance Units provide oversight and guidance.
The Internal Audit Unit independently evaluates the system’s effectiveness.
Financial risks, including commodity price, currency exchange, and interest rate fluctuations, are managed using financial derivatives.
Additionally, the company remains committed to transitioning to clean energy and sustainable practices, integrating Environmental, Social, and Governance (ESG) criteria into decision-making processes.
Challenges and Resilience
Motor Oil has faced significant challenges in 2024, including:
Geopolitical tensions in Eastern Europe and the Middle East.
Fluctuations in energy prices and exchange rates.
The decline in Brent crude prices from 887/BBL in Q3 2023 to 880/BBL in Q3 2024.
Recent developments include:
Competition Fine: A €9.2 million fine from the Hellenic Competition Commission, contested by the company.
Fire Incident: A fire on September 17, 2024, reduced refinery capacity to 65-80%. Repairs are underway, with full capacity expected by Q3 2025.
Leadership Changes: Following the passing of Chairman Vardis I. Vardinogiannis, the Board appointed Ioannis V. Vardinogiannis as Chairman and Georgios Prousanidis as Vice Chairman.
Outlook
Motor Oil remains focused on adapting to evolving market conditions, maintaining its resilience and commitment to long-term sustainability and growth. While 2024 has been marked by challenges, the company’s strategic direction and robust risk management frameworks position it for recovery and continued success.
Significant Profit Decline
Motor Oil’s financial data showed a 68.9% reduction in net profits, amounting to €224.05 million, down from €717.25 million in the same period of 2023. The third quarter was particularly unfavorable, recording net losses of €137.9 million, offsetting positive performances in the earlier part of the year.
This decline in profitability was attributed to:
Reduced refining margins
Increased operating costs due to the refinery fire
Geopolitical tensions in Eastern Europe and the Middle East, which heightened energy market volatility and disrupted operations
Stable Revenues but Lower EBITDA
Revenue for the nine months reached €9.368 billion, a marginal decline of 6% compared to €9.968 billion in the same period in 2023. However, EBITDA dropped by 34% to €768 million, reflecting lower efficiency in refinery operations and reduced product margins.
Notable changes in product margins:
Jet Fuel margins decreased from 331.6/BBL in Q3 2023 to 115.7/BBL in Q3 2024.
Increased Investments and Negative Cash Flow
Despite challenges, Motor Oil maintained its investment strategy:
Capital expenditures (Capex) rose to €298 million in 2024, compared to €246 million in 2023, underscoring its commitment to clean energy and sustainable development.
However, free cash flows turned negative at -€129 million, a stark contrast to the positive €746 million in 2023. Net debt also increased to €1.836 billion from €1.518 billion at the end of 2023, due to higher investments and liquidity pressures.
Extraordinary Refinery Taxation
The company’s tax obligations have been affected by new policies:
In July 2024, Law 5122/2024 introduced a temporary solidarity contribution of 33% on taxable profits exceeding 20% of the average taxable profits for the 2018-2021 period, as defined by EU Regulation 1854/2022.
The Pillar II Global Tax initiative mandates a 15% minimum tax rate for multinational enterprises with annual revenues above €750 million, effective from January 2024. While this affects Motor Oil’s activities in the UAE, Croatia, and Cyprus, the impact is expected to be minimal.
Dividend Distributions
Motor Oil continues its tradition of rewarding shareholders:
For 2023, a total gross dividend of €199.41 million (€1.80 per share) was approved and distributed in two phases.
An interim dividend of €0.30 per share was declared for 2024, payable on January 3, 2025.
Risk Management and Corporate Governance
Amid geopolitical tensions and economic instability, Motor Oil has strengthened its risk management framework:
Three Lines of Defense Model:
Operational units assess and manage risks.
Risk Management and Compliance Units provide oversight and guidance.
The Internal Audit Unit independently evaluates the system’s effectiveness.
Financial risks, including commodity price, currency exchange, and interest rate fluctuations, are managed using financial derivatives.
Additionally, the company remains committed to transitioning to clean energy and sustainable practices, integrating Environmental, Social, and Governance (ESG) criteria into decision-making processes.
Challenges and Resilience
Motor Oil has faced significant challenges in 2024, including:
Geopolitical tensions in Eastern Europe and the Middle East.
Fluctuations in energy prices and exchange rates.
The decline in Brent crude prices from 887/BBL in Q3 2023 to 880/BBL in Q3 2024.
Recent developments include:
Competition Fine: A €9.2 million fine from the Hellenic Competition Commission, contested by the company.
Fire Incident: A fire on September 17, 2024, reduced refinery capacity to 65-80%. Repairs are underway, with full capacity expected by Q3 2025.
Leadership Changes: Following the passing of Chairman Vardis I. Vardinogiannis, the Board appointed Ioannis V. Vardinogiannis as Chairman and Georgios Prousanidis as Vice Chairman.
Outlook
Motor Oil remains focused on adapting to evolving market conditions, maintaining its resilience and commitment to long-term sustainability and growth. While 2024 has been marked by challenges, the company’s strategic direction and robust risk management frameworks position it for recovery and continued success.
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