The Cepsa company has improved its EBITDA (gross profit before taxes, expenses, interest and amortization) by 48% until September, reaching 1,346 million euros. According to the company, this result is due to “a solid performance” carried out “thanks to the continuous focus of the organization on capturing efficiencies and operational excellence, coupled with an improvement in the market environment.” All this, “despite the challenges posed by rising energy prices and demand still below pre-pandemic levels.”
The EBITDA achieved represents an increase of 48% compared to the same period of 2020 (910 million euros), driven by the rise in oil prices and the increase in crude production, the improvement in margins and the increase in the Refining production, and the “consistent performance” of both the Commercial and Chemical areas, he adds.
The company also highlights that it continues to advance in its multi-year efficiency program, the objective of which is to improve gross margin and capture sustainable savings in operating costs. Until September 2021, 295 million euros of EBITDA improvement have already been captured, in addition to the 73 million in 2020 as part of the Contingency Plan.
Results by business units
In Exploration and Production, Cepsa registered a significant improvement in its results, reaching an EBITDA of 615 million euros in the first nine months of the year, 83% more than in the same period of 2020, it details. This year-on-year increase was mainly due to the rise in crude oil prices (+ 66%), the reduction in production costs -with an 11% year-on-year decrease in operating expenses-, and a slight increase in production (+ 1%).
In Refining, despite the fact that margins were affected by the increase in energy prices, the increase in production in the refineries and the satisfactory application of cost efficiency measures, translated into an EBITDA of 117 million euros in the period from January to September, compared to the 34 million euros registered in the same months of 2020 (+240%), explains the company.
The EBITDA of the commercial area continued to improve, with an increase of 12% compared to September 2020, to 345 million euros, thanks to “a good performance of margins and a rigorous approach to cost efficiency, despite the fact that Sales volumes are 15% below pre-pandemic levels, “the company explains.
The Chemicals business continued to offer very solid results, with an EBITDA of 355 million euros in the first nine months of the year, which has represented an increase of 39% compared to September 2020 (and 91% compared to the same period of 2019), mainly driven by the positive impact of an improved business strategy, coupled with a sustained trend of record operating performance since 2019. During the quarter, Cepsa’s Chemicals business achieved an important milestone with the production of the first volumes of LAB , raw material to produce biodegradable detergents, from vegetable oils.
Cepsa explains that the adjusted net profit (Clean CCS) during the first nine months of the year was 295 million euros, a significant improvement compared to the 31 million euros registered in the same period of the previous year. Net profit according to international accounting standards (IFRS) was 498 million euros, which was positively affected by the increase in oil prices and is substantially above the losses of 810 million euros registered in the same period of 2020, affected by the deterioration of assets, the environment of low prices and the reduction in demand.
The company affirms that it has continued to “optimize” in this period investments up to 310 million euros, compared to 464 million from January to September 2020.
Free cash flow before working capital until September experienced “a significant improvement, from 55 million euros in 2020 to 918 million euros in 2021, mainly due to improved results.”
Appointment of the future CEO
On October 15, Cepsa announced the appointment of Maarten Wetselaar as CEO of the company, effective January 1, 2022. The current CEO, Philippe Boisseau, will remain in the company after the transfer as advisor to the CEO and the Board .
Philippe Boisseau, CEO of Cepsa, said that “a good performance has been achieved to date and the outlook is good for the remainder of 2021, despite the recent volatility in world energy markets and rising prices. of energy in Europe “. In addition, “the strong results in 2021 are due to the initiatives put in place since the beginning of the COVID-19 crisis and the continued focus on efficiency, both in costs and investments. These results provide a solid foundation on which build our energy transition plan, “he added.
“In 2021 we have made significant progress in building a new organization and in preparing and reorienting the business to take full advantage of the opportunities offered by the energy transition. In addition, we have launched an ambitious optimization plan, which is already providing very good results, with approximately 300 million euros of positive impact on EBITDA achieved in the first nine months of the year “, he detailed in a statement.
Third quarter results by business units
Cepsa has published the results, by business unit, which are as follows:
Exploration and Production
Crude prices in the third quarter continued to rise, with an average price of Brent of 73.5 dollars / barrel, consolidating the rebound experienced since the first quarter of the year.
The results of the Exploration and Production activities continued to improve, with an EBITDA increase of 5% compared to the second quarter, exceeding 227 million euros, thanks to the increase in production due to the progressive expansion of OPEC quotas and the increase in crude oil prices (+ 8%).
Refining
Refinery utilization continued to rise, significantly above second quarter figures (81%) and already close to pre-pandemic levels, with utilization averaging 88% during the third quarter.
The Refining business experienced great volatility in gas and electricity prices, especially towards the end of the quarter. Natural gas prices in Europe doubled in the third quarter compared to the second, reaching € 47 / MWh, while the price of the Spanish pool increased by 64%, to an average of € 118 / MWh.
All figures are based on Adjusted Net Profit (Clean CCS), unless otherwise stated.
The refining margin decreased to an average of $ 4.1 / barrel in the third quarter of the year compared to $ 4.5 / barrel in the second quarter of 2021, due to the significant increase in variable costs derived from the increase in energy prices, which are not yet reflected in the prices of final products. Consequently, EBITDA during the quarter was 30 million euros, 62% less than in the previous quarter.
Commercial
Spanish fuel demand continued to show signs of improvement in the third quarter of 2021, with an increase of 8% compared to the second quarter. Third quarter commercial sales showed a continued positive trend, albeit still below pre-pandemic levels, with volumes increasing 12% from the second quarter and 21% from the first, as restrictions mobility have been declining. EBITDA registered an increase of 40% compared to the second quarter, reaching 155 million euros, thanks to solid margins and strict cost control.
Chemistry
The Chemicals business continued to post very solid results, with an EBITDA of 123 million euros, which represents an increase of 39% compared to the third quarter of 2020.
However, compared to the second quarter of 2021, EBITDA was 6% lower, due to the deterioration of margins in the phenol / acetone market and lower results in the solvent segment as a consequence of the reduction in loads. production of refining customers. These impacts were partially offset by the good performance of the LAB segment (which increased by 22% compared to the previous quarter) derived from higher sales and margins, and the increase in production volumes after the switch to Retail technology at the Mayorga Bridge.
During the quarter, Cepsa’s Chemicals business achieved an important milestone with the production of the first volumes of LAB, a raw material for manufacturing biodegradable detergents, from vegetable oils.
Cash flow and balance sheet
The cash flow from operations before working capital during the third quarter was 392 million euros, which represents a decrease of 14% compared to the second quarter, due to the higher payment of taxes in the period.
Free cash flow during the quarter decreased compared to the second quarter, to 369 million euros, due to the accumulation of working capital as a consequence of the increase in the prices of raw materials.
All figures are indicated on the basis of adjusted net profit (Clean CCS), unless otherwise indicated Cepsa maintained a strong liquidity position of more than 4.1 billion euros. The company has a long-term maturity profile of 4 years, with minimum debt maturities until 2024, and a net debt as of September 30 of 2,348 million euros, which represents a decrease of 475 million euros compared to the end of 2020, despite the interim dividend of € 211 million paid during the third quarter of 2021.
