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Article Excerpt
ANA-BARBARA KUNCIC, HEAD OF IR, OMV AG: Welcome, ladies and gentlemen, to today's full year results and Q4 conference call. With me here today is Mr. Wolfgang Ruttenstorfer, our CEO, David Davies, our CFO. And as always with the full year results, we also have a particular focus on the E&P business and Helmut Langanger, Head of the E&P Division, will then focus on the E&P segment.
With that, I'd like to hand over to Wolfgang Ruttenstorfer.
WOLFGANG RUTTENSTORFER, CEO, OMV AG: Thank you, Barbara. Ladies and gentlemen, it's a pleasure for me to present to you a very good set of results for 2008.
Clean EBIT was up by 31% and reached EUR3.1b. Clean net income increased by 5% and cash flow by 56% to EUR3.2b. CapEx was slightly lower, by 14%, and has come down to EUR3.5b.
We attach a lot of importance to a solid financial structure and we have already informed on the occasion of the Capital Markets Day that we want to live within our means. And therefore, we reduced and have already reduced our CapEx from substantially more than EUR3b in 2008 to substantially less than EUR3b in 2007 (sic).
Our gearing ratio at the end of last year was 37%. And our proposal to the General Assembly regarding dividend will be EUR1 per share.
2008 was not only successful in terms of financial results, but also as far as further continuation of our strategy is concerned. In E&P, we succeeded in bringing on-stream the new field in Austria and New Zealand actually followed yesterday. Helmut will come back to that. Kazakhstan will come on-stream in the first half of this year and will allow us to have an average higher production of oil and gas in 2009 than in 2008.
In Refining & Marketing, I think it's important to mention that the upgrading of our western refineries has been completed. We have upgraded Schwechat, especially on the petrochemical side, in 2006, Burghausen in 2007, Bayernoil followed in 2008. Now this is completed.
And in Gas & Power we are proceeding with our trading hub in Baumgarten. We have started the construction of our first power plant in Romania. and we think that Nabucco -- the chances for Nabucco are better than ever.
Of course, we stay to be focused on the restructuring of Petrom and have indeed made good progress in 2008. The well modernization program, 5,000 wells, is completed, oil production stabilized and we have also brought first discoveries on-stream. And a real success story is the turnaround of marketing in Romania, which has been completed on refining but there are still steps ahead of us. But we have overall a quite strong position, not only in Central and South Eastern Europe but also increasingly in Turkey.
The overall picture of OMV is shown on the next slide. Our market, and we are the market leader in this market, stretches from South Germany down to Turkey and Eastern Anatolia. That's our market, both for Refining & Marketing but also for the gas business. And around this market, we have our -- in this market and around this market we have our E&P assets. [Our treasure] are the 1.2b of proven reserves and -- while the production last year reached 317,000 barrels a day.
If we move to the next slide, I think it's important to state that we stick to our strategy, and this strategy rests on three pillars. The first is the regional focus. The regional focus is very clear, on Central and Eastern Europe, South Eastern Europe and in the future increasingly Turkey. This strategic thrust, this regional strategic thrust, is very important for us because it leads us also to very important supply areas in the Middle East but also around the Caspian area. And we are definitely committed to this regional focus.
As far as portfolio and our activities as such are concerned, we think that right now, in the crisis, of course, carbon -- de-carbonization is not really the issue but this will come back. And therefore we should stick also to our more longer-term objective, to strengthen E&P and Gas & Power in relation to the Refining & Marketing business, which in the long run will of course be affected by the de-carbonization of our economies.
And of course, costs and synergies are a main focus for us. Therefore, we informed on the occasion of the Capital Markets Day last October that we want to implement a cost-cutting program of EUR300m until 2010.
We distinguish ourselves from other competitors by first of all being a central hub for upstream, downstream and gas integration in Europe, especially in the markets of Central, South Eastern Europe and in future also Turkey. We are committed to sustainable growth and to contribute to the de-carbonization of the European energy market. And of course, this all can only be done if we really observe a prudent financial policy and at the same time focus our investments on the projects that are really creating value for our shareholders.
David, may I hand over to you?
DAVID DAVIES, CFO, OMV AG: Thank you, Wolfgang.
If I can start my short presentation by pulling out the highlights of quarter four, as it were. Our clean EBIT was down by 56%, to EUR301m. However, a major item within this EUR301m was the fact that we had inventory losses, and excluding that we would have had actually a clean EBIT of EUR785m.
What we've done historically is speak to investors and analysts precisely about what we thought the inventory gains and losses were. But I'm happy to inform you that from quarter one 2009 we'll be formally integrating the so-called CCS effect, current custom supply effect, in our reporting for the refining business, consistent with the rest of the industry.
We'll also, by the way, be introducing an incorporate eliminations column because we've historically also had the challenge of eliminating profits from the E&P business in Petrom, to the extent that the products hadn't yet been sold by the Marketing business in Romania. That is also something we will adapt, so we'll place our reporting onto a far more industry-consistent basis.
Clean net income after tax was actually a loss of EUR4m, in particular affected by foreign exchange losses at Petrol Ofisi and a loss at Borealis, who had a particularly challenging fourth quarter, as I'm sure you can imagine. The FX losses of Petrol Ofisi in fact hide what, underlying, was actually quite a strong performance for the Turkish business. But given the decline in the value of the Turkish lira against the US dollar, in quarter four particularly, that produced a loss which we clearly had to reflect in terms of [our show].
Excluding inventory effects, again, the clean net income after tax was actually EUR302m.
Net special charges were EUR431m. I will come on in a moment to talk in more detail about precisely what they are. But the biggest positions were personnel restructuring, various impairments, but in particular a further increase in the provision for litigation provisions booked at Petrom.
The gearing ratio rose in quarter four to 37%. And also in quarter four we entered various hedges, securing a price range for the 65,000 barrels a day of our oil production, and also for EUR1b of our cash flow.
Coming to the results in more detail. Quarter four EBIT was an operating loss of EUR129m, versus EUR723m in the quarter three of the same year and EUR492m a year earlier. Inventory losses in quarter four, as I mentioned a moment ago, were EUR484m, whereas in quarter three they were EUR73m. Special charges, which are also reflected in this EBIT number, were EUR431m, as I mentioned a second ago, whereas in the previous quarter they were EUR206m.
The financial result in the quarter was a substantial loss of EUR153m, producing a full year result of minus EUR31m. Previously we had income, clearly, to report on this line. What we reflect on this line, as well as our net financing charge, is the share of income of Borealis, our 36% stake, and a slightly under 42% stake of Petrol Ofisi. And both of these businesses, for the reasons I mentioned a moment ago, produced losses in quarter four and that's clearly been the major reason for us going into the negative area on this particular line.
Taxes for the year, given that the tax charge in quarter four was a particular complicated exercise. If we look at the full year number, I think it's more indicative of the actual situation. We had an effective tax rate of 34%, 10 percentage points higher than the previous year.
And there are two key factors which particularly affect this, clearly the reduction in the financial result, which is basically taxed income and therefore doesn't attract any further tax liability. Going from an income of EUR228m to a loss of EUR31m is a major part of it. What is also of significance here is also the fact that we now have the renegotiated Libyan contracts, which were extended during 2008, being reflected here in terms of their new structure, which is clearly consistent with the much higher rate of tax on those particular operations.
Net income after tax for the quarter was a loss of EUR365m versus EUR354m of income the year earlier.
Minorities was a credit, in fact, of EUR156m. This is predominantly the 49% stake not owned by OMV in Petrom. And to the extent that it was a credit, that indicates clearly that Petrom had a loss of just over EUR320m in the fourth quarter.
Net income after tax and minorities was EUR208m. The clean net income after minorities was a loss of EUR4m. On a CCS basis, as I mentioned a second ago, that would have been [EUR302m]. As Wolfgang mentioned, the dividend per share that we'll be proposing to the General Assembly is adjusted in line with the -- broadly in line with the lower net income and will be reduced by 20%, to EUR1.
Coming now to...
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