AB Klaipėdos nafta interim financial information regarding the six months of 2019

AB Klaipėdos nafta (hereinafter – KN, the Company) announces the unaudited financial results for the six months ended 30 June 2019.

In the first half-year of 2019, compared to the first half-year of 2018:

• loading of oil products decreased by 18.6% (total loading -2.9 million tons);
• LNG regasification and reloading increased by 42.1% (total - 6.4 million MWh).

KN’s financial accounting indicators of the first half-year of 2019, compared to the first half-year of 2018, were negatively affected by IFRS 16 “Leases” amended as of 1 January 2019. This change has significantly affected KN’s statement of financial position, statement of comprehensive income, and financial indicators. In 2018, the costs of lease were registered in the statement of comprehensive income and had no impact on the statement of financial position. Upon coming into effect of the amendments to the standard, leases have been recorded as assets and liabilities (right of use the assets and financial lease liabilities). In the statement of comprehensive income the impact of changes in exchange rates additionally formed, because of lease payments denominated in US dollars, however in reality the Company is not affected by this.

Regarding of the reasons mentioned above, in order to represent the real result, the adjusted result without the influence of IFRS 16 is provided next to accounting result with the impact of IFRS 16.

In the first half-year of 2019, compared to the first half-year of 2018, the main KN’s financial indicators changed as follows:

Million EUR	H1 2019 accounting result	Change 2019 vs 2018	H1 2019 adjusted result (exd. IFRS 16)	H1 2018 accounting result	Change H1 2019 Adjusted vs H1 2018
Sales revenues	51.2 million EUR	-2.8 %	51.2 million EUR	52.7 million EUR	-2.8 %
Net profit	2.5 million EUR	-75.1 %	4.7 million EUR	10.2 million EUR	-54.0 %
EBITDA	32.3 million EUR	87.2 %	11.4 million EUR	17.2 million EUR	-34.1 %
EBITDA margin	62.9 %	30.2 p.p.	22.2 %	32.7 %	-10.5 p.p.

Management comment :

The first half-year of 2019 presented a number of challenges to KN, which were often caused by circumstances beyond the company’s control. Despite these challenges, both KN Klaipėda Oil Terminal and the Liquefied Natural Gas (LNG) Terminal in Klaipėda demonstrated high performance indicators.

The new KN Oil Terminal infrastructure has been successfully employed

The development of infrastructure of Klaipėda Oil Terminal in the last 3.5 years (investments amounting to EUR 45 million) produced the first results in the first half-year of 2019 – the new KN tank farm, operating in trial mode, accepted several oil products in June 2019. Thanks to ongoing investments, Klaipėda Oil Terminal – being one of a few multimodal terminals in the Baltic countries – has been increasing its flexibility and competitiveness.

The contaminated oil incident in the Druzhba pipeline highly affected the first half-year loading results of KN and also those of many other companies of neighbouring countries. This event has also slowed down the operations of our main competitors. KN loading results have been also negatively affected by the decision of AB Orlen Lietuva to refer bigger quantities of production to neighbouring markets by rail. Nevertheless, the loading results of June 2019 show that clients have been returning to their planned operation volumes. It should be noted that despite the challenges and a particularly harsh competitive environment, this year Klaipėda Oil Terminal is most efficient among all Baltic oil terminals.

LNG Terminal in Klaipėda supplied gas not only in Lithuania

A favourable international gas market situation determined the most efficient operation in the history of the LNG Terminal in the last months of the first half-year of 2019. The capacities of the LNG Terminal have been fully booked until October, which marks the end of the current gas year. The volume of operation of the LNG Terminal hit the record heights in June: about 2.4 TWh of natural gas were regasified and supplied to the natural gas transmission system – approximately the same quantity as consumed in all three Baltic countries in the first summer month. Besides, in June the LNG Terminal regasified 1.5 times more gas than consumed in Lithuania, thus the Terminal supplied gas not only in Lithuania – users of the Terminal directed some gas to Inčukalns storage, as well as to Latvia’s and Estonia’s consumers. The successful first half-year of LNG Terminal operation in Klaipėda can be also witnessed by an agreement signed with the third user of Klaipėda LNG Terminal, i.e. UAB Imlitex. This signifies that business has noted KN’s focus on the provision of more flexible and more efficient LNG loading and regasification services.

After the Seimas passed a decision at the end of last year with regard to acquisition of the FSRU after 2024, KN plans to ensure long-term LNG import to Lithuania, with optimum distribution of the terminal costs throughout the period from 2019 until the end of 2044. Among other KN goals for 2019, there is a goal to contribute to reduction of LNG Terminal maintenance costs with respect to all gas consumers as of this year. The best alternative of performance efficiency improvement has been selected – clarification of the LNG Terminal operation by transferring operations regulated by the LNG Terminal to the subsidiary UAB SGD terminalas. Despite the adjusted plan, KN’s management expects to implement necessary decisions to achieve the said goal.

A responsible community member

While boosting motivation and engagement of KN’s team, the package of employee benefits includes an additional health insurance for all company’s employees for another year. In May, as many as 357 employees of the company became its shareholders having been paid out up to a half of the annual employee’s premium in shares. The company is glad to see that all implemented decisions contribute to its positive evaluation as the employer: KN has been included in the top 20 most desirable employers in Lithuania in the competition of the most desirable employer organized by Verslo žinios.

In the first half-year KN was actively engaged in various social initiatives. To celebrate the World Environment Day, KN prepared an overview of environmental protection of oil terminals and presented it to neighbouring communities and responsible institutions. KN also initiated and contributed to civil protection training to local communities which expressed the need for such training and invited the members of Melnragė community to become better acquainted with the operations of the oil terminal as well as environmental protection measures applied during the loading of oil products.

The results achieved in the first half-year of 2019 encourage KN to continue to strive for the defined strategic goals: to increase added value both in respect of the company and the main shareholder – the state of Lithuania – and to pursue an even more efficient growth by improving internal processes and implementing the investment projects provided in the company’s long-term strategy.

We are proud to have such professional and motivated KN employees who can jointly face and overcome the greatest challenges, and in order to maintain strong motivation we will continue focusing on the strengthening of organizational culture.

Enclosed:

1. Interim condensed Financial Statements of AB Klaipėdos nafta for the six months period ended 30 June 2019 together with interim report for the first half of 2019 (unaudited).
2. Presentation of the financial results for the 6 months period of 2019.

Jonas Lenkšas, Chief Financial Officer, +370 694 80594

Attachments

• IFRS_2019_EN_H1
• KN_activity results for_2019_Q2_EN

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