Last week, we had the opportunity to meet with NIS in Belgrade where we discussed several topics.
Our meeting with NIS’ Management began with an overview of the company’s 9M results. During the first nine months of 2019 oil and gas production amounted to 0.97m tonnes of oil and gas equivalent. In the same period, the total output was 2.3m tonnes of crude oil and semi-finished products, while the total volume of sales was 2.6m tonnes. After a poor performance in the H1, the third quarter showed a significant improvement of the Group’s financial results compared to the two previous quarters of this year. To put things into a perspective, the Group recorded a net profit of RSD 7.5bn in Q3 solely, while in the first six months of 2019, they recorded a net profit of RSD 3.2bn. However, it is noteworthy that when comparing solely Q3 and 9M YoY, both of the company’s results are lagging compared to their Q3 2018 and 9M 2018 results.
Such an outcome is a consequence of macroeconomic developments and NIS’ planned activities. First of all, the average price of oil on the world market in the 9M 2019 was USD 64.7 per barrel, which is 10% less YoY. On the other hand, in March and April, a planned capital workover was carried out in Pančevo Oil Refinery, which reflected on the total volume of oil refining and financial results.
Regarding the Pančevo Refinery, the Management noted that the Bottom of the Barrel project is nearing the end of construction. According to the Management the construction and installation works are currently at 91.41% completion. As a reminder, the “Bottom-of-the-Barrel with a delayed coking technology” Project is an investment of capital within the second stage of the Pančevo Refinery modernisation. The completion of project along shall increase the refining depth to 99,2% from the current 86%, which practically means the cessation of the output of high-sulfur-content fuel oil, along with the increased output of high-quality petrol and diesel, as well as liquefied petroleum gas. Furthermore, the new facility will enable the Pančevo Refinery to enrich its product range with coke, up to now imported into Serbia. Currently a total of EUR 260m is invested into the project, while the total cost amounts to EUR 300. The project is expected to launch during 2020.
When talking about the company’s dividend the Management stated that the company’s dividend policy envisages a minimum pay-out ratio of 15%, however the company usually pays out 25% of the company’s net profit.