Low refining margins, an early retirement plan, and write-downs of subsidiaries pushed Oil Refineries Ltd. (TASE:ORL) to a loss of $58 million for the fourth quarter of 2013. The full-year loss was $167 million, and its cumulative loss over the past three years is $440 million. Israel Corporation (TASE: ILCO) owns 37.1% of Oil Refineries and Israel Petrochemical Enterprises Ltd. (TASE:PTCH) owns 29.7%.
In addition to the heavy losses, Oil Refineries' cash flow from operations fell sharply in 2013. Although in early 2013, it forecast cash flow of $347 million, the actual cash flow was just $33 million. At the same time, the company predicted that it would distribute a dividend of $115 million, a distribution that now seems improbable and is missing from the cash flow report for the next two years.
The cumulative losses and low cash flow forced Oil Refineries to take a number of financial steps in late 2013 in order to meet its bond payments on time and to meet its financial covenants with the lender banks. These steps include an agreement with the banks to postpone current payments and increase the company's credit line, a $292 million bond issue, and a $151 million rights issue.
Today, Oil Refineries CEO Arik Yaari officially announced his departure this summer, after just one year. He preferred to focus on the more positive aspects of the company's financial report, saying, "In 2013, Oil Refineries demonstrated better operating results than in 2012, thanks to the implementation of its business strategy and investment plan in the past few years." He added, "2014 will be a more stable, efficient, and competitive year, with improved financial capabilities."
Oil Refineries' share price fell 0.8% today. The share price has fallen 48% since the beginning of the year, and the company is currently traded at a market cap of NIS 3 billion.
Revenue totaled $10 billion in 2013, 3% more than in 2012. The increase was driven by higher prices for crude oil and refined oil products, even though refining output was 0.5% lower than in 2012. Average usage of refining capacity by Oil Refineries' plants fell to 86.7% in 2013 from 88.3% in 2012.
After Israel Electric Corporation (IEC) (TASE: ELEC.B22) again began using natural gas in 2013, Oil Refineries' net sales of refined products to the utility fell, and the company directed the surplus fuels it produces to foreign markets. The proportion of exports rose from 23% of sales in 2012 to 37% in 2013. Most exports were to Turkey (40% of exports) and to Cyprus (23%).
Psagot Investment House Ltd. analyst Noam Pinko told "Globes" today, "The refining margins environment still looks bad. At these margins, Oil Refineries can present a positive operating profit and EBITDA, but not a net profit."
Published by Globes [online], Israel business news - www.globes-online.com - on March 24, 2014
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