In 2018, OMV’s sales increased by 16% YoY. EBITDA increased by 27% YoY and net income increased by 64% YoY. The company also proposed a dividend of RON 0.027 dps (8% dividend yield).

OMV Petrom published their preliminary 2018 results.

According to the report, their sales in 2018 have increased by 16% YoY, amounting to RON 22.5bn. The increase in sales was driven by higher commodity prices and electricity sales volumes, which was somewhat offset by lower sales volumes of gas and petroleum products. Of the total consolidated sales, Downstream Oil represents 76%, Downstream Gas represents 22% and Upstream 2%.

Meanwhile, their 2018 EBITDA amounts to RON 8.4bn, which represents a 27% increase YoY.

When looking at their EBIT, OMV Petrom observed a 59% increase YoY, amounting to RON 5.2bn. The growth was driven by above mentioned higher commodity prices and ongoing cost optimization. Next, their Upstream benefitted from better-realized prices and lower OPEX, depreciation and exploration expenses, offsetting the impact of production decline. The Downstream Oil result reflects their strong sales performance, partly compensating the effects of the refinery turnaround in Q2/18 and the lower refining margin.

Furthermore, net income amounted to RON 4bn, which is an increase of 64% YoY.

Source: InterCapital, Research

The investments for 2018 amounted to RON 4.3bn, mostly in Upstream, which is 44% higher YoY. The management notes that recent regulatory instability has led them to revise their growth investment plans, so they plan on lowering investments in 2019 to around RON 3.7bn, of which about 75% in Upstream.  They state that their focus remains on extracting the highest value from the existing Upstream portfolio, therefore they estimate the daily average production decline to be contained at around 5% YoY, excluding portfolio optimization.

Note that in 2018, the Romanian Government approved the Emergency Ordinance no. 114, which also impacts OMV Petrom. The main aspects impacting them include regulated gas and power pricing over a three-year period and an increased financial contribution applied to the gas and electricity turnover. The management of the company states that they are, at the moment, assessing the impact of it on their operations.

Turning our attention to the dividend policy, the company proposed a dividend of RON 0.027 per share, which is subject to the approval of the Supervisory Board at GMS in April 2019. This would mean a payout ratio of 38%, while, at the current share price, the dividend yield would be 8%.

Source: InterCapital, Research

*compared to the share price day before the dividend announcement