Oil Refineries shows signs of recovery

Oil Refineries

The company posted a profit of $55 million in the first quarter of 2021, after a loss of $274 million in 2020.

Oil Refineries Ltd. (TASE:ORL) (Bazan) is showing signs of recovery from the coronavirus crisis, with positive financials for the first quarter of 2021, for which it reports a net profit of $55 million.

In the first quarter of 2020, Oil Refineries, controlled by Idan Ofer's Israel Corporation (TASE: ILCO), posted a loss of $146 million. In 2020 as a whole, the company lost $274 million.

Oil Refineries is Israel's largest refining and petrochemicals group, with a refining capacity of 9.8 million tonnes of crude oil annually. The company produces oil distillates and raw materials for industry.

The company's revenue fell 10% in the first quarter in comparison with the first quarter of 2020 to $1.28 billion. Despite this, the company reports a gross profit of $113 million, which compares with a gross loss of $128 million in the corresponding quarter. The main reason is the sharp rise in prices of polymers and in oil refining margins.

Oil Refineries CEO Moshe Kaplinsky said today, "Oil Refineries has started 2021 with a gradual exit from the coronavirus crisis, and recoded consolidated EBITDA of $74 million. The polymers segment, which benefitted from a following wind in the form of a positive macro-economic environment, demonstrated impressive strength, with EBITDA of $59 million in the quarter"

In Israel, orders for benzene and diesel fuel have returned to normal, but internationally the picture is different. Demand for jet-fuel, for example, remained low in the first quarter, but it is expected to improve later in the year. The fall in demand led Oil Refineries to adjust production quantities and to institute cost-cutting measures.

Last week, Oil Refineries reported a fault in its CCR (continuous catalytic reforming) plant. It had to shut down the plant to carry out repairs which will take several weeks. The company estimated a loss of profits of $20-30 million from the shutdown. It now appears that action taken in the past few days will keep the loss at the lower end of this estimate.

Kaplinsky also commented on the plan for evacuating the petrochemicals industry from Haifa Bay. "The government directors-general committee recently released its draft conclusions on the future of Haifa Bay, from which it emerges that the committee understood the importance of continuity in the energy sector, and recommended setting up a special team to negotiate with the industry in a cooperative spirit to plan the future of Haifa Bay together."

The company believes that the idea of transferring its operations to the south of Israel is not realistic, since its oil refinery needs to be close to a seaport. The choice being considered is either to close the oil refinery, or to repurpose it for production of cleaner energy sources, such as hydrogen.

Oil Refineries naturally opposes the closure option, and it is therefore taking action to transition to fuels that will power transport around the world in the future. Kaplinsky himself was recently appointed chairman of the company, a post he will take up when a replacement CEO is appointed.

Oil Refineries has a market cap of some NIS 3 billion, after a 38% drop in its adjusted share price in the past three years. In the past three months, however, the share price has risen 44%, as the Israeli economy reopened and expectations for Oil Refineries' business improved. In today's session, the share price is up 3.78%.

Published by Globes, Israel business news - en.globes.co.il - on May 9, 2021

© Copyright of Globes Publisher Itonut (1983) Ltd. 2021

Oil Refineries
Oil Refineries
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