THE SUPERVISORY BOARD ENDORSES THE ANNUAL REPORT OF THE PETROL GROUP AND PETROL D.D., LJUBLJANA, FOR 2021
Ljubljana, 17 March 2022 – At its 9th meeting held today, the Supervisory Board of Petrol d.d., Ljubljana, discussed and endorsed the Annual Report of the Petrol Group and Petrol d.d., Ljubljana, for 2021. The Petrol Group successfully responded to the pandemic and the energy crisis and consistently pursued its strategic objectives and annual business goals. The key business highlights in 2021 were: the adoption of an ambitious strategy of the Petrol Group for the 2021–2025 period, a volatile business environment, the exceeded annual targets, the strengthening of the Group in the region, and diversification aimed at achieving the energy transition.
A volatile business environment
The business environment was anything but peaceful and supportive in 2021. Among external circumstances that co-created the conditions of the Petrol Group’s operations are the continuation of the COVID-19 epidemic and the government measures to mitigate its consequences. The measures were less restrictive in 2021 than in the year before. To mitigate the negative effects of the epidemic, comprehensive packages of measures were adopted at the national level and by the ECB and the European Commission.
Another factor that has directly affected all energy companies and, indirectly, many industries and other subsystems of society, is the energy crisis. In 2021, it manifested through a high and unpredictable rise in the prices of fuels and energy products, especially electricity and natural gas, which reached historical price levels. Price shocks demanded interventions by the state, such as a temporary restriction on the price of heating oil in Slovenia and fuel prices in Croatia, and even led to some providers exiting the market.
Regardless of the consequences of the pandemic-related restrictions and the energy crisis, the energy transition focused on finding a way to transition to a low-carbon economy where the Petrol Group already plays an active role has remained high on the business community’s agenda. After significant declines in economic activity in 2020, we witnessed an economic recovery in 2021 despite the continuation of the pandemic. Stable economic growth in Slovenia and other markets where the Petrol Group is present positively affected the Petrol Group’s operations in 2021.
The Petrol Group responded with an ambitious strategy and decisive action at home and in the region
The volatile developments in the business environment did not obscure the Petrol Group’s clearly defined path. In January 2021 it adopted an ambitious Strategy of the Petrol Group for the 2021–2025 period with a clear vision to become an integrated partner in the energy transition with an excellent user experience. The Petrol Group is committed to making a transition to green energy. By offering integrated services with a high added value, it wants to remain the first choice for energy transition projects in the region. The Petrol Group’s basic guidelines are ensuring business growth and increasing the profitability of operations while staying committed to driving sustainable development.
The key milestones in 2021 on the way to achieving the new strategy include: the Petrol Group’s reorganisation, the closing of the E 3, d.o.o. acquisition, the placement of a new generation of Q max fuels on the market, the introduction of innovative approaches to customers and the upgrade of digital services. In 2021, the Petrol Group left a strong mark in the region with the two core milestones being the launch of the Ljubač wind power plant, which is the Petrol Group’s second wind field, and the closing of the acquisition of Crodux Derivati Dva d.o.o., which will play an important role in the Petrol Group expanding its operations beyond Slovenian borders and its portfolio of customers in the field of energy products and energy transition services.
Regarding the energy crisis it should be highlighted that the Petrol Group successfully mitigated the consequences of the negative trends in the energy market through a comprehensive energy offer and effective adaptation to the situation. By leading an efficient procurement process, the Petrol Group ensured a stable and reliable supply of fuels and energy products and offered comprehensive support to its customers, and through the loyalty programme it provided its customers with additional benefits to reduce the consequences of the energy crisis.
The annual goals and strategic objectives were exceeded despite the unfavourable market conditions
Regardless of uncertainty in the business environment, the Petrol Group achieved its ambitious annual goals in 2021 and even long-term ones set for the strategic period until 2025 even though not all the assumptions from the annual plan for 2021 were met, such as the one about the pandemic being contained in the first half of 2021.
By responding effectively to changing market conditions, adjusting and diversifying the range of products and services offered, through cost optimisation and operational streamlining, the Petrol Group has managed to mitigate the negative effects of the pandemic and energy crisis on its operations, and what is more, it has even exceeded the ambitious goals. In 2021, the Petrol Group generated EUR 5.0 billion in sales revenue or 13% more than in the pre-pandemic year 2019, 61% more than in 2020 and 41% more than planned. The adjusted gross profit totalled EUR 543.4 million, which is 15% more than in 2019, 27% more than in 2020 and 11% above the plan. The achieved EBITDA in the amount of EUR 238.1 million exceeded that from 2020 by 43% and the plan by 12%, and the net profit in the amount of EUR 124.5 million exceeded the same indicator from the previous year by 72% and the plan by 19%. The EBITDA structure by activities shows that the non-oil part of the Petrol Group’s operations has already exceeded 40%, as it generated 56.6% of EBITDA with the sales of petroleum products, 17.6% with the sales of merchandise, 13.6% with the sales of other energy products (natural gas, LPG, electricity) and 12.2% with the sales of energy and environmental solutions. In 2021, the Petrol Group earmarked EUR 233.2 million net for investments in property, plant and equipment, intangible assets and for long-term investments.
Regional indicators show the strengthening of the Petrol Group in the SEE region where it generated 28% of its operating profit and 31% of the EBITDA in 2021. As many as 47% of the Petrol Group’s employees are from this region. At the end of 2021, the Petrol Group’s retail network included 593 points of sale, of which almost a half outside of Slovenia.
As set in its new strategy, the Petrol Group, as a partner in the energy transformation of companies, the public sector, local communities and households, showed promising results in terms of diversifying its operations towards the energy transition. This segment’s EBITDA accounted for 26% in 2021. As many as 62% of investments were earmarked for the energy transition. The Petrol Group generated 130.7 thousand MWh of electricity in 2021, which is 51% more than in 2020.
Record-high results as a solid foundation for the complex year of 2022
According to the Supervisory Board, the Petrol Group was very successful in adjusting its operations to the pandemic-related measures in 2021 and it successfully tackled the exceptional situation on the global energy markets. Despite the year-long challenges, it pursued its strategic objectives and annual business goals with confidence. The Petrol Group’s stable business and financial position was also confirmed by Standard & Poor's which has reaffirmed its BBB- long-term credit rating and a stable outlook. The Supervisory Board assesses the Petrol Group’s business performance as very good and as a solid foundation for operations in the demanding and turbulent circumstances in 2022.
The Supervisory Board also took note of the current market situation resulting from the Ukraine crisis and growth of energy product prices.
The Petrol Group does not have its own companies or representative offices in Ukraine, the Russian Federation and Belarus. The share of sales revenue generated by the Petrol Group in these markets is negligible, and the purchase of energy products in these markets, except for natural gas, represents a small share in the Petrol Group’s procurement portfolio. In 2021 and the first two months of 2022, Russia as a source of supply has accounted for less than 7 percent as regards Petrol d.d., Ljubljana’s middle distillates (diesel and extra light heating oil), and as for petrol, we do not import it from Russia.
The largest part of the Petrol Group’s operations with companies from the Russian Federation is the purchase of natural gas, which takes place through Geoplin d.o.o., Ljubljana. For the time being, deliveries from Russia are going smoothly and in accordance with contractual obligations. Geoplin d.o.o., Ljubljana has a diversified supply portfolio and will do everything in its power to ensure the uninterrupted supply of natural gas to its customers.
As regards the direct exposure to companies from the Russian Federation, we assess that no material effect on the Petrol Group's business results occurred in the time of the preparation of the Annual Report for 2021.
In 2022, energy prices continue their upward progress, to which governments are responding with various regulatory measures in the markets where the Petrol Group is active. As an indirect effect, certain disruptions in supply chains have been recorded. The company regularly analyses and keeps a close eye on the effects of regulation and supply chains and responds properly; however, due to the constant changes it is unable to accurately assess the potential effect on the achievement of the Petrol Group's plan for 2022 in the time of Annual Report preparation.
On the basis of the presented analyses, the Supervisory Board assesses that the Management Board of the Petrol Group has responded properly to the current situation.