The effects of negative macroeconomic climate for oil refining sector and the results of tests for impairment of fixed assets required according to financial standards, significantly affected the level of ORLEN Lietuva financial results in H1 2014, said the company in a statement.
© DELFI / Kiril Čachovskij

"ORLEN Lietuva financial results were mitigated only by implementation of our Contingency Plan's measures, which have helped improve the financial condition of the Company. Slight upswing in refining margins in the second quarter of 2014 had also a positive impact, reducing the Company's negative cash flow. However, the essential conditions for further stable activity of Mažeikiai refinery remain in reducing all costs, especially in the area of logistics," said Ireneusz Fafara, CEO at ORLEN Lietuva.

ORLEN Lietuva says it has flexibly reacted to improved refinery margins in Q2 by increasing the production level. Therefore EBITDA LIFO decreased by USD 834 million in H1 2014 year-on-year mainly due to negative impact of impairment of fixed assets in amount of USD 769 million.

The continuous degradation in the oil refining sector is reflected by ORLEN Lietuva impairment test of fixed assets. Quarterly impairment testing is required under the applicable accounting framework and according to the international accounting standards, assessing expected future cash flow generating capacity. The indications to ORLEN Lietuva perform tests were, among others huge competitive pressure on global refinery margins as well as very poor local logistics conditions.

Lower total sales volumes in H1 2014 compared to the same period of 2013 decreased by 24 percent due to 37 percent lower seaborne sales and lower Inland sales in Latvian and Estonian markets by 7 percent.

Reduced throughput caused by unfavourable macro environment resulted in H1 2014 also in the increase of the Refinery's internal usage by 0.7 pp (year-on-year) and lower utilization by 24 percent (year-on-year).

ORLEN Lietuva's financial results remain under pressure of unfavourable macroeconomic conditions. In the upcoming months the Company will focus on looking for and implementing solutions that may contribute positively to ORLEN Lietuva's situation in short term perspective, especially in the area of logistics. In this regard ORLEN Lietuva does not expect special support from Lithuanian cooperatives, only equal treatment as a business partner.

"Therefore in order to achieve market valued tariff offers for railway transport, ORLEN Lietuva turned directly to the Lithuanian Government, as the owner of LG. However, so far we have heard only declarations, and no concrete activities were undertaken by authorities in Lithuania," the company says in the statement.

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