KN stabilises its performance, despite difficult circumstances
KN earned adjusted net profit of 3.9 million Euros in the first quarter of 2020
KN says it earned an adjusted net profit of 3.9 million Euros in the first quarter of 2020, despite the difficulties of this period which has presented significant challenges for the global economy and business. This net profit is a 30 per cent increase on the figures for the same period in 2019. The company’s EBITDA (adjusted) was 7 million Euros or 7 per cent higher than a year ago, when it amounted to 6.5 million Euros, and KN also earned 20 million Euros of revenue during the first quarter.
In the first quarter of 2020, the global oil industry was hit hardest by an unusually warm winter, the spread of COVID-19 and failed OPEC negotiations. The Baltic countries were mainly affected by the stalled negotiations on oil supplies between Belarus and Russia. As a result, the Belarusian oil refineries, the main customers of oil terminals in the Baltic States, were operating at minimum capacity and there was a corresponding decrease in the volumes of oil products exported by sea.
Despite all these difficult circumstances, the KN oil terminals earned a net profit of 1.8 million Euros in the first quarter, 12 per cent higher than in the same period a year ago. EBITDA (adjusted) from oil terminal operations remained at a similar level as last year – 3.6 million Euros compared to 3.5 million Euros a year ago. The operating income of the KN oil terminals was 7.5 million Euros for the first quarter of 2020.
Almost all terminals operating in the region have faced the challenges related to the shift in operating volumes – reduced oil refining margins affect the volume of oil production and, consequently affect the transit of oil products. This was also reflected in the activities of KN’s main customers. Nevertheless, the KN oil terminal remains a highly competitive terminal with the most efficient capacity in the Baltic region. In the first quarter of this year, more than 400 thousand tons of crude oil were imported through the KN oil terminal in Klaipėda.
“Despite a really difficult beginning of the year, KN has managed to secure a financially strong result. During the first quarter, the KN oil terminal operated as a comprehensive terminal for the import and export of oil products. We were able to take advantage of such opportunities only through previous investments in infrastructure, which increased our flexibility and our opportunities to diversify services depending on demand,” says Darius Šilenskis, CEO of KN.
Klaipėda LNG terminal continues to maintain a record high level of degassing – 5.2 TWh of gas was degassed at the LNG terminal during the first quarter of this year. Nevertheless, the revenue of Klaipėda LNG terminal decreased by 37 per cent to 11.4 million Euros – the revenue of the LNG terminal this year already reflects the decisions of 2019, which allowed optimizing the infrastructure costs of the LNG terminal in Klaipėda and reducing the security component for Lithuanian gas consumers accordingly. The net operating profit from this KN operation remains broadly unchanged, with a net adjusted profit of 2.4 million Euros in the first quarter of this year, compared to a net adjusted profit of 2.39 million Euros a year ago.
“The LNG terminal in Klaipėda continues its record-breaking activity – in the first quarter of this year, the gas supplied through the Klaipėda LNG terminal competed with the gas supplied by pipelines. As much as 74 per cent of gas supplied through the Lithuanian gas transmission network was imported through Klaipeda. This is due to the extremely favourable LNG prices on the world markets, which in many cases compete with the gas supplied by pipelines,” says the CEO of KN.
In the first quarter of 2020, the revenue from LNG commercial activities, including Klaipėda LNG distribution station and international LNG projects, reached 1 million Euros. This was also influenced by the intensification of LNG distribution activities, as favourable gas prices led to a 37 per cent increase in the demand for LNG tanker handling and revenues from international operations.
Perhaps the most striking highlight of the first quarter of 2020 was the impact of COVID-19 on the global and Lithuanian economy, and the consequent impact on the company’s operations. KN has effectively implemented measures to prevent the development of COVID-19 in the company and has successfully ensured business continuity, despite the fact that some of the company’s employees work remotely.
“We are assessing the COVID-19 situation carefully,” said Darius Šilenskis, CEO of KN. “We were not one of the sectors whose activities were immediately affected by quarantine restrictions, although it is understood that with the accession of global economies, the demand for energy resources may decrease, leading to a reduced demand for logistics services. Of course, due to our investments in infrastructure, we have diversified our services and can offer not only handling, but also storage options for oil products. In such an uncertain context, this is one of the most highly demanded services in the world.“
The financial (accounting) result of KN is affected by the 16th International Financial Reporting Accounting Standard “Leases”, which entered into force last year. This standard significantly unbalances the published financial results, as the recorded result adjusts according to the influence of the exchange rate on the last day of the reporting quarter, and it does not provide a comparison with the actual operating results. By showing the managerial (adjusted) result, it is easier for investors and those following the company’s activities to have an accurate understanding of how the company has performed during the reporting period, eliminating the influence of factors that did not affect the company directly.
The main financial indicators of KN for the first quarter of 2020, in comparison with the indicators for the first quarter of 2019, changed as follows:
|
Financial indicators for the first quarter of 2020 |
Change compared to the first quarter of 2019 |
Managerial result for the first quarter of 2020 (excluding IFRS and reduction of security component) |
Change compared to the first quarter of 2019 |
|
|
Sales revenue |
20.0 million Euros |
-24.0 % |
20.0 million Euros |
-24.0 % |
|
Net profit (loss) |
-0.4 million Euros |
70.0 % |
3.9 million Euros |
30.0 % |
|
EBITDA |
7.0 million Euros |
-45.0 % |
7.0 million Euros |
7.7 % |