Message of the Chairman and CEO to Shareholders
In 2018, the period of surveillance for the Greek economy came to an end, following the successful conclusion of the final economic adjustment programme in August. The recovery of the Greek economy accelerated in 2018, with GPD growth rate at 1.9% and expected to reach 2.4% in 2019.
Those significant factors improved confidence in the Greek economy and drove the developments which enabled the increased bank liquidity and further relaxation of restrictions on capital movement, the upgrade of Greece’s credit rating and the successful issue of a five-year bond in February 2019, the first step in the country’s process towards normality.
2019 is a challenging year for Greek economy; having as main objective the strengthening of export-orientation and international competitiveness, it is also required to formulate and implement a sustainable development model, in an uncertain and volatile international environment.
The slowdown in global and European economies, due to intensified commercial protectionism and growing geopolitical risks, as well as existing inequalities, which contributed to the emergence of nationalistic and extremist political forces, create a challenging environment in which Greece is expected to achieve the restructuring of its economic model, with the adjustment requirements relating to the new socio-economic structures shaped under Industry 4.0 and the transition to the post-digital era being key considerations.
In the international oil sector, Brent crude prices continued to recover for the largest part of 2018, despite high volatility and a significant decline in 4Q18, partly offsetting the increase recorded earlier in the year. At the same time, there was a significant increase in CΟ2 emission rights prices, as they tripled on average, adding to the burden of production cost in the refinery sector and highlighting the competitiveness deficit of European refineries.
However, despite the negative impact of the crude oil price drop in the 4th Quarter and the increased environmental compliance cost, HELLENIC PETROLEUM maintained its profitability at particularly high levels throughout 2018, with Adjusted EBITDA amounting to €730 million, while the Group’s balance sheet improved, with Net Debt below €1.5 billion and gearing ratio reaching 38%, the lowest since 2009.
Strong performance in Refining, Supply & Trading, as well as Petrochems, with refinery production higher (15.5m MT) and a new export sales record at €9.4 MT (+12%), as well as a historical high in polypropylene production, had a notable contribution in high profitability.
In Fuels Marketing, the company operated petrol stations network continued to grow, while Aviation and Bunkering benefited from the positive trend due to higher tourism. Our International Marketing subsidiaries sustained high levels of performance.
Furthermore, in 2018, the Group’s portfolio in Exploration and Production was further developed, due to the award of three exploration areas in Western Greece, and the finalisation of four additional exploration areas in the Ionian Sea and west and southwest of Crete, as a result of international tenders in which the Group participated in partnership with leading companies in the sector, such as Total, ExxonMobil and Repsol.
However, the evolving international environment, combined with increased requirements for Greece’s successful journey towards European regularity, as well as its transition to a sustainable economic model, do not allow for complacency and require the Group to regularly redefine its strategy and goals, in order to continue its successful course in the future.
The Group’s strong growth for the fourth consecutive year (production, sales and exports record high), the stabilization of profitability at high levels (the average EBITDA for the last 4 year period was €763 million), the significant increase of capitalization (€2.6 billion in 2019 vs. €0.9 billion on 11-2-2016), increased dividend pay-out (0.75 euro/share), increased employee benefits and remuneration and, finally, the Group’s international presence as a key player in the energy sector developments in South-Eastern Europe, reflect its successful export-oriented and competitive course.
However, in order to maintain this level and to develop further, a new sustainable development model is needed, which requires the implementation of a programme providing for the Group’s active participation in the rapid changes of the external environment, in energy transformation to reduce carbon footprint and to tackle climate change, as well as digital transformation.
The Management has completed the design of new sustainable growth model and already started to implement the five-year development plan for 2019-2023, as part of the Group’s transition program to the post-digital era. The key features of the new sustainable development model, aiming mainly to strengthen export orientation and international competitiveness, are:
- adoption of Corporate Governance international best practices
- increased awareness for Safety and Environmental Protection
- modern Human Resources Management and IT systems
- investments for achieving the transition to the post-digital era and low carbon economy
- critical enhancement of the knowledge triangle (education, research, innovation)
- increased contribution in social cohesion through appropriate Corporate Social Responsibility programs
In this context, the main medium-term goals of the 2019-23 plan focus on Safety and Environment, Energy and Digital Transformation, the development of Renewable Energy Sources and positioning in Natural Gas and Explorationa and Production, as well as the Exploration and Production. At the same time, the Group continues to implement its targeted Corporate Social Responsibility program.
In concluding the five-year period 2014-2018, which proved to be the most successful period in the history of the Group, with high expectations for the future, with export-orientation and competitiveness shaping the vision for the Group’s role in SE Europe in the next 10 years, the Management of HELPE SA would like to thank all of the Group’s employees for their significant contribution, as well as the shareholders for their continued support and trust.
Chairman of the Board of Directors and CEO