Enea Group’s good financial results for Q1 2016. In summer, the Group will present assumptions to a new strategy.
Financial results standing out among the competition, generated in a very difficult market environment, confirm a stable financial position of the Group. Enea builds the investment potential for the future and works on a new strategy of an innovative raw materials and energy concern. The assumptions for the document will be presented by the company in H2 2016.
The goal of Enea and Bogdanka - two integrating, although autonomous public companies - is constant enhancement of the Group’s efficiency in all the links of the chain of values.
- We will present the assumptions of the new strategy, on which we are intensely working, in summer. The document will demonstrate new development directions for the innovative raw materials and energy concern. Having a complete chain of values at our disposal, we wish to look into our Group’s future responsibly, optimising the business model in order to guarantee a sustainable development potential, in a longer than previously perspective. In particular, we will take into account challenges related to the regulatory environment, energy security of the state and dynamics of changes on the market, considering customer requirements on whom we will focus. Our objective is to build a strong and innovative Group which, based on its own raw materials, will hold an appropriate investment potential and will guarantee reliability and security of supplies of competitive energy and products to our Customers - said Mirosław Kowalik, president of Enea.
Building synergies and realisation of optimisation tasks brings indicative financial effects
In Q1 2016 Enea Group generated PLN 2,937 mln net sales revenue, which is 20.0 per cent more than in the same period of 2015. Consolidated EBITDA, after a growth by 31.3 per cent yoy, amounted to PLN 668 mln. Net profit totalled to PLN 290 mln, i.e. by 9.4 per cent more than in Q1 2015.
In the period of January - March 2016, the highest EBITDA, PLN 305 mln, was generated in the area of distribution. The greatest growth in EBITDA occurred in this area as well, by PLN 32 mln, in relation to Q1 2015 (growth by 11.9 per cent.). The area of generation's EBITDA, after a growth by PLN 27 mln (15.4% yoy), amounted to PLN 204 mln. Adverse conditions on the electricity market affected the result of the area of trade which in Q1 2016 generated EBITDA totalling to PLN 18 mln. In relation to the acquisition of LW Bogdanka, Enea CG’s operations in Q4 2015 were extended with the area of mining, which in January March 2016 generated PLN 150 mln EBITDA.
- Looking on the demanding situation in the market and regulatory environment which affects all the market players, our results must be positively assessed. We are increasing production and sales volumes of electricity and heat, we are actively operating on wholesale markets and connect Customers in distribution quicker. We are introducing new products for individual Customers and are dynamically developing trade in gas - emphasised Mikołaj Franzkowiak, vice-president of Enea for financial affairs.
Since 2014, the Group has consistently implemented the cost reduction programme which foresees savings totalling to PLN 362 mln in 2016. 24 per cent of this year's plan was executed in Q1.
Good first quarter of Bogdanka
In Q1 2016, Lubelski Węgiel Bogdanka Group generated sales revenue on the level of almost PLN 421 mln, which were by 1.8 per cent lower than in the same period of the previous year. At the same time, the other key financial results improved: EBIT amounted to PLN 79 mln (growth by 63.8 per cent yoy), EBITDA PLN 173 mln (growth by 20.0 per cent yoy) and net result PLN 54 mln (growth by 66.6 per cent). Generation of good results was possible due to flexibility of operations and consistent realisation of the optimisation of capital expenditures and cost reduction programme commenced last year. The cost of sold production was reduced by PLN 39 mln (i.e. 10.3 per cent) in relation to Q1 2015 and total production costs by PLN 25 mln (i.e. 6.4 per cent). As a consequence, profitability ratios improved. EBITDA margin was above average totalling to 41.2 per cent (against 33.7 per cent in the same period of the previous year). It is however worth mentioning that it was affected by the increase in the level of production and stock in Q1 2016. As a result, maintaining profitability ratios on such a high level in subsequent quarters seems very improbable.
In Q1 2016 commercial coal production reached the level of 2.3 mln tonnes (by 17.3 per cent more than on an annual basis) and sales 2.2 mln tonnes (growth by 12.2 per cent). The length of the performed corridor excavations performed in that period amounted to 6.4 km and was greater by 23.1 per cent as compared to Q1 2015. Total expenditures incurred for new excavations and modernisation of the existing ones totalled to almost PLN 45 mln.
Increasing production and sales of coal allowed Bogdanka to strengthen the market position in Q1 2016. The share in the supplies of the raw material to the commercial power industry in that period amounted to 25.5 per cent (in Q1 2015 it was 20.9 per cent, and in the whole 2015 22.5 per cent). The share in the fuel coal market grew to 15.8 per cent in general (against 14.3 per cent yoy and 14.4 per cent in the whole previous year). In Q1 2016 the situation on the coal market remained difficult. Average prices of fuel coal dropped by 10.9 per cent as compared to Q1 2015 and prices of coal sold to the commercial power industry - by 11.5 per cent. The oversupply of coal continued on the Polish market together with high level of stock in mines and power plants. Bogdanka coped very well in these very unfavourable conditions due to a flexible response to the market situation and continuation of the cost and capital expenditure optimisation programme.
- We are keeping safe financial liquidity. We remain the most efficient and modern bituminous coal mine in Poland. Even though the results for Q1 are satisfactory, we are observing a continuing strong pressure on prices and sales volumes. We can see no grounds to expect any change in the existing market trends in the near future. Therefore, we estimate our annual coal sales on the level of 8.5 - 9 mln tonnes - said Krzysztof Szlaga, the president of Bogdanka.
No growth without investments
An important event in Q1 2016 in the area of generation was commissioning of Baczyna wind farm with the capacity of 14.1 MW. Within the adaptation of conventional energy sources to the environmental standards the company continues investment projects relating to the flue gas denitrification installations in Kozienice Power Plant and desulphurisation installations in Białystok Heat and Power Plant. 1,075 MW unit is being constructed - in spring a water and pressure tests of the boiler were successfully conducted. The project’s progress in 83 per cent.
In January - March 2016 in the area of distribution, Enea Operator significantly improved the key ratios of security and reliability of supplies. In relation to the same period of 2015, in the case of unplanned interruptions, SAIDI index dropped by as much as 71 per cent and SAIFI - by 50 per cent. Planned interruption indices dropped by respectively: SAIDI - by 26 per cent and SAIFI - by 22 per cent.
In Q1 2016, Enea completed the Customer data migration process to a new central billing system. The new tool for contacting the company - an electronic Customer Service Centre - is already available for all the interested entities, both households and companies. The Company extended also its range of products for households with ENERGY+ Expert service, connecting energy sales at favourable price with an electrician’s service.
Enea is a renowned seller, distributor and producer of electricity and heat. It is responsible for safe supplies of energy to 2.5 mln Customers. Enea’s grids cover the area of 20 per cent of Poland. The Group incorporates also the largest Polish power plant fired with bituminous coal Kozienice Power Plant. Lubelski Węgiel Bogdanka on the other hand is the most efficient mining enterprise in Poland. Enea is the key recipient of the mine’s products and Bogdanka is the largest supplier of coal for the concern’s generation assets. The both companies are listed on the Warsaw Stock Exchange. In fall 2015, Enea Group became the owner of a total of 66 per cent of LW Bogdanka’s shares.