Financial results of Rompetrol Rafinare Semester 1 2020

Rompetrol Rafinare, a member company of the KMG International Group, recorded declining financial results in the first half of 2020, due to unprecedented volatility in the oil market, but also the impact generated by the influences of COVID-19 on the demand for petroleum products.

In the context of the restrictive measures imposed with the onset of the pandemic that led to very low market demand, as well as the prolonged misunderstandings and negotiations by OPEC + members that led to a very low historical crude oil price, massive and cheap stocks of products were generated in the oil market. After the relaxation of measures and, in conjunction with the recovery of crude oil prices due to OPEC + agreements to reduce production, cheap oil products stored at full capacity, during the 2 months of isolation of the population in Europe, have created enormous pressure on refinery margins.

These external factors brought a major negative effect on the company's gross refining margins, which reached -16.6 USD / tonne between April and June 2020 and 5.5 USD / tonne in the first half of the year.

In addition, the Petromidia N?vodari refinery (KMGI's main asset in Romania) was shut down between March and April for the general turnaround, a mandatory and necessary measure to ensure the operation of production units in maximum safety. During this period, preventive and corrective maintenance works, technological inspections and verifications, catalyst replacement and other works related to refining and petrochemical installations were performed.

Through the investments made during the general turnaround, Rompetrol Rafinare continues its program of modernization and transition to the fourth industrial revolution (Industry 4.0), which involves a more rigorous control of the products obtained, but also increased stability and operational efficiency of facilities and technological flows.

Rompetrol Rafinare's gross turnover in the first half of the year reached 1.52 billion dollars, the indicator being directly influenced by the evolution of quotations for raw materials and petroleum products, which recorded a decrease of about 40% compared to the level for the similar period in 2019.

Against the background of unfavorable factors in the global environment, but also the rapid decline in domestic and regional demand for petroleum products (especially car and aviation fuels), caused by the restrictive measures imposed since the beginning of the pandemic with the new coronavirus, the company noted in S1 2020 an operational profit (EBITDA) of -43.7 million USD and a net negative result of 126.5 million dollars.

Rompetrol Rafinare continued to be an important contributor to the Romanian state budget in the first part of the year, the activities and products obtained generating a contribution of almost 200 million USD in Q1 2020, respectively over 468 million USD in S1 2020.

The main shareholders of Rompetrol Rafinare SA are KMG International (54.63% - directly and indirectly) and the Romanian State through the Ministry of Economy, Energy and Business Environment (44.7%).

The gross turnover of the refining segment reached over 436 million USD in Q2 2020 and over 1.2 billion dollars in S1 2020, recording a decrease compared to the same periods in 2019.

In the first half of the year, the Petromidia N?vodari refinery processed over 2.1 million tons of raw materials, obtaining over 520 kt of gasoline and about 1.18 million tons of diesel and special aviation fuel.

In the first half of 2020, Petromidia refinery managed to obtain good results in the yield of white products (87.31%wt), technological loss (0.847%wt) and the energy intensity index (102.05%).

Petromidia Refinery has continued its production process optimization programs (increasing processing capacity along with increasing the productivity of valuable products, reducing technological losses, optimizing raw material recipes, etc.) and streamlining operating costs (energy efficiency and reducing production costs for processing), programs started in 2014 and continued until now.

Regarding the Vega Ploie?ti refinery, the only domestic producer of bitumen and hexane, the unit recorded good results in the following chapters: technological loss (0.84%wt), energy consumption (2.84 GJ/t) and mechanical availability (98,7%).

The refinery in Ploie?ti is in perfect synergy with the Petromidia N?vodari refinery - the largest in Romania and one of the most modern in the Black Sea region. Thus, Petromidia entirely provides the refinery in Ploie?ti with the raw materials / semi-finished products necessary to obtain special products with a high added value.

In S1 2020, the petrochemical segment of the company processed a total of 48 kt of propylene, a level decreasing compared to S1 2019. However, the amount of processed ethylene registered, during the same mentioned period, a significant increase, reaching a total of 28 kt.

The results of the petrochemical division continued to be affected by market pressure on margins, and as a result of volatility, polyethylene plants continued to operate at the most economical rate, so that the High Density Polyethylene (HDPE) plant continued to be in non-operation during the first half of 2020.

The Low Density Polyethylene (LDPE) plant of the petrochemical segment works with 100% imported ethylene, and the Polypropylene (PP) plant works with raw materials produced and delivered internally by the Petromidia refinery.

The petrochemical segment is the only producer of polypropylene and polyethylene in Romania, constantly managing to increase its market share by secondary product categories.

The consolidated gross turnover for the distribution segment was over 1.04 billion USD in S1 2020. Amid rising demand between April and June, as a result of increased mobility in large cities, the distribution segment recorded an increase of 35% of the operational profit (EBITDA) - 15.5 million USD in Q2 2020, respectively an increase of over 40% in net profit - 8.5 million dollars in Q2 2020. Thus, the recovery in the second quarter offset the losses in the first quarter of the year, reaching a net profit of 5.5 million USD in the first half of 2020.

The application of restrictive measures in the two months of the state of emergency generated strong decreases, which led to significant losses in the distribution segment. They canceled the higher sales than last year in January and February. Towards the end of the first half of the year, there were slight adjustments, but they could not compensate for the deficit in the months affected by the restrictive measures. Thus, total fuel sales for S1 2020 amounted to 850 kt.

The recovery was recorded despite the general unfavorable conditions in the first half. For example, compared to the same period in 2019, Platts quotations expressed in the reference currency (USD) were, on average, about 38.5% lower for both diesel and petrol.

At the end of June 2020, Rompetrol Downstream's distribution segment comprised 1017 points of sale, including its own network of stations, partner stations and mobile stations (express, internal bases of 9 and 20 cubic meters).

Communication and Public Relations Department

KMG Internatio

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