Business operations in the first nine months of 2023: stable despite the challenges on the energy market
At its 40th meeting, the Supervisory Board of Petrol d.d., Ljubljana discussed the Report on the Operations of the Petrol Group and Petrol d.d., Ljubljana in the First Nine Months of 2023. Despite the volatility and challenges on energy markets, the Petrol Group’s business performance was in line with expectations. Having been focused on ensuring a secure supply and adapting to the market situation, the Petrol Group managed to ensure that its operations were stable and energy transition objectives pursued. In September, Petrol d.d., Ljubljana published the Petrol Group Sustainability Report 2022, which is prepared in accordance with the European Sustainability Reporting Standards (ESRS).
Still under the influence of price regulation
Despite the challenges, such as changes in energy prices and the influence of the geopolitical situation, the Petrol Group kept its operations stable and adjusted skilfully to the market situation in the first nine months of 2023. The measures taken by governments to mitigate the energy crisis, the mild winter and the sufficient stocks of natural gas contributed to a downward energy commodity price trend. Nevertheless, the Petrol Group is prudent in its expectations for the continuation of the year since geopolitical tensions are still causing uncertainty in the energy sector.
The first nine months of 2023 were marked by the capped prices of energy commodities and the adaptation to the global energy trends. The Petrol Group’s operations are still influenced by the government-capped prices of fuels and energy commodities, primarily on its key markets in Slovenia and Croatia. This year, business conditions are quite different than in the same period last year. While the selling prices of certain petroleum products in Slovenia and Croatia were set even below their cost for some time in 2022, the regulation is less strict in Slovenia this year. In June 2023, Croatia also eased the regulation.
The prices of electricity and natural gas were market-determined throughout most of the first nine months of 2022 in Slovenia and Croatia, whilst they were regulated in the first nine months of this year.
Business results on a par with the plan
"Despite the uncertain conditions on energy markets, the Petrol Group kept its operations stable in the first nine months of 2023 and achieved a better result compared to that in the same period last year. Business operations have returned to normal and are in line with the plan," explained Nada Drobne Popović, President of the Management Board of Petrol d.d., Ljubljana. “The Petrol Group’s operations in the first nine months of 2023 reflect our ability to respond quickly to the dynamic market situation and regulatory changes, and at the same time the results confirm that our strategic focus on the energy and green transition is correct.”
In the first nine months of 2023, the Petrol Group generated sales revenue of EUR 5.2 billion, a year-on-year decrease of 26 percent, owing to the lower prices of petroleum products, the reduced volume of electricity and natural gas trading and the lower prices of electricity and natural gas on spot and futures markets. Volumes of fuels and petroleum products sold dropped by 6 percent on account of the regulated petroleum product prices in 2022 which were lower than in the neighbouring countries for most of the period, resulting in boosted sales at that time. In the segment of merchandise and services, the Petrol Group’s sales revenue increased by 12 percent. The Petrol Group sold 11.4 TWh of natural gas, 9.4 TWh of electricity and 97.4 thousand MWh of heat.
Due to the strong impact of external factors on changes in sales revenue, the adjusted gross profit, increased by the net derivatives and compensation claims to Borzen for the lost sales revenue as a result of the capped electricity and natural gas prices is a more suitable indicator for assessing the Petrol Group’s performance. Compared to the same period last year, it increased by 45 percent to EUR 544.3 million. Operating costs increased by 19 percent to EUR 424 million, principally in consequence of the higher prices of energy commodities and labour costs.
EBITDA totalled EUR 201.9 million, a year-on-year increase of 105 percent, chiefly due to the stabilization in the fuel market and the resulting less strict price regulation. Operating profit in the first nine months of 2023 stood at EUR 126.9 million and net profit increased to EUR 95.0 million.
“The stabilization on the energy market has contributed to the normalisation of our operations, enabling us to pursue our investment plans set in the annual plan 2023. We believe that we can exceed the planned business results, if there are no unexpected events by the end of the year,” explained Matija Bitenc, Member of the Management Board of Petrol d.d., Ljubljana.
Digitalization and investments in the green transition and retail network renovation
In the first nine months of 2023, we earmarked EUR 57.7 million for investments in fixed assets and long-term investments. In the period concerned, 34 percent of investments was earmarked for the energy transition and 66 percent for other activities, of which the majority for the retail network renovation.
At the Petrol Group, we have continued the Oil&Gas E2E supply chain digitalisation project, the aim of which is to optimise logistics. Our investments have stayed focused on renewable electricity generation. The project to construct one of the largest solar power plants in the region, on three locations surrounding our Ljubač wind park (Suknovci, Vrbnik and Pliskovo) in Croatia, is in the final phase of connecting the power plants to the grid and commissioning them. This is planned for November 2023. In Croatia, we have also continued developing the Dazlina wind power plant project.
In the context of the Petrol Green project, the solar power plants are currently being installed at 87 locations (a total of 4.5 MW). The first power plants have already been connected to the grid and it is expected the project to be completed by the end of 2023. Simultaneously, activities are in place to obtain documentation and the necessary permits for the next project phase in Slovenia and expansion to Croatia and Serbia.
In the context of the strategic retail network renovation in Slovenia, we completed a comprehensive renovation of the Koper – Šmarska service station in the first nine months of this year. Barje AC – sever and Barje AC – jug service stations are currently under complete reconstruction and are expected to start operating at the end of this year. In Croatia, seven service stations were fully renovated. Replacement construction was implemented at three locations, and the Dragalić AC – sever service station is being newly constructed. In Serbia, the Vetrnik service station was renovated.
Commitment to the environmental, social, and governance accountability
In August, we published the ESG rating that was awarded to Petrol d.d., Ljubljana by S&P Global Ratings. The received ESG score of 56 Adequate is above the average score of 54 in the global oil and gas sector (source: Sustainable Finance Newsletter, August 2023). This was an important step forward in Petrol’s commitment to the environmental, social, and governance accountability. In its report, S&P Global Ratings pointed out that Petrol d.d., Ljubljana’s adequate preparedness reflects its agility in adapting and responding to a volatile business environment, also during the pandemic and the energy crisis. According to S&P Global Ratings, Petrol d.d., Ljubljana, endeavours to build a more resilient business portfolio by offering clean energy and performing other activities focused on the energy transition.
In September 2023, we published the Petrol Group Sustainability Report 2022 in which we report on the achievements in 2021 and 2022. The reporting on strategic targets by 2025 was upgraded in accordance with the European Sustainability Reporting Standards structure (ESRS) and the Task Force on Climate-related Financial Disclosures methodology (TCFD), meaning that in addition to the targets we also defined the performance indicators and actions and responsibilities to achieve them.
“At the Petrol Group, we will continue to pursue our vision to become an integrated partner in the energy transition with a “wow” customer experience. However, we are aware that the only way to pursue the sustainable development goals is in cooperation with employees and other stakeholders. In the future, the Petrol Group will pay even greater attention to managing all aspects of sustainable development, thereby helping to further increase sustainability awareness and behaviour among its stakeholders,” highlighted Nada Drobne Popović, President of the Management Board of Petrol d.d., Ljubljana.
Supervisory Board’s opinion
According to the Supervisory Board of Petrol d.d., Ljubljana, the Petrol Group operated successfully in the first nine months of 2023. The Petrol Group's business results and other achievements reflect its successful adaptation to the complex market situation and its commitment to the sustainable growth and energy transition.