Yesterday, Petrol published a report from its latest GSM, including information regarding Geoplin, the business scenario for 2023, as well as the activities taken to receive compensation for the damage from the regulated energy prices of 2022.
Starting off with Geoplin, in 2022 the Company was faced with a supply of natural gas cut off under the long-term contract with the Russian company Gazprom, resulting in a realized damage of EUR 140.3m. They note that in order to prevent further damage, Geoplin terminated the unsustainable contract with Gazprom at the end of 2022 and reduced the negative effect of the damage by offsetting the claims to Gazprom.
According to the preliminary and unaudited estimate, Geoplin’s sales revenue amounted to EUR 1.4bn in 2022, an increase of 80% YoY. Even with this growth, however, due to the aforementioned reasons, it recorded a gross loss of EUR 118.9m and a net loss of EUR 28m. Geoplin plans to generate positive results in 2023. According to the current estimate, Geoplin’s sales revenue will amount to EUR 1.1bn, gross profit to EUR 33.8m, while the net profit will amount to EUR 14.9m in 2023.
Moving on the Petrol’s business scenario for 2023, they note that the estimated effect of price regulation in Slovenia and Croatia on the Group’s EBITDA has been prepared by taking into account the current situation. Based on the currently effective Decrees and regulations, the negative effect of regulated prices on the Group’s EBITDA would amount to EUR 82.4m, of which the majority, EUR 62.5m, on the account of motor fuel price regulation in Croatia. The Management Board (MB) also informed the shareholders about the comparison of average motor fuel margins between Slovenia and other EU member countries in the period between 2020 and 2022, where Slovenia is at the bottom end among the EU countries and strongly behind the EU average in terms of both diesel and petrol margins. A key challenge presented by such low margins is that they do not enable making investments in green transformation.
Between 2018 and 2022, Petrol invested a total of EUR 276.2m in the energy transition. In 2022, the originally planned investments in the amount of EUR 100m were reduced to the most urgent ones in line with the available funds, that is, to EUR 60m, of which only EUR 24.4m for the energy transition. For 2023, the originally planned investments of EUR 135m were reduced to EUR 70m, of which only 30% of the total is planned for the energy transition.
At the Meeting, the MB provided a detailed presentation of the structure of retail price of regulated fuels in Slovenia and Croatia. Margin per litre of petrol or diesel accounts for much less than a tenth of the price on both markets, whereby it needs to be emphasised that such margin does not enable covering the increased labour costs, the cost of energy commodities, the costs of transport and warehousing and the financial costs of procurement. Based on the Group’s role in Slovenian and Croatian economic and social environments, Petrol emphasized that an unsuitable regulatory framework, if it stays in effect for a longer period of time, may have extensive economic and social consequences. The excise duties, taxes and contributions paid by Petrol d.d. contributed EUR 1.1bn to the budget of Slovenia, and in Croatia, the charges paid by Petrol d.o.o. (including Crodux derivati dva d.o.o.) contributed EUR 533m to the budget of Croatia.
According to the MB, Petrol d.d. was the largest company in terms of annual turnover in Slovenia in 2022. The Petrol Group has 3,320 employees in Slovenia and a broad network of more than 3.7k suppliers. In Croatia, Petrol Group has 2,211 employees and cooperates with more than 1.5k Croatian suppliers. For 2021, dividends paid by Petrol d.d. amounted to EUR 61.7m, of which EUR 20.2m was paid to state entities. They estimate that EUR 3.4m was deducted from domestic natural persons’ income tax based on the paid dividends. Because of this, the consequences of too low margins will affect all stakeholders of the Petrol Group.
Finally, Petrol commented on the actions taken to receive compensation for the damage resulting from the regulated energy prices in 2022. They note that certain concrete steps were already taken for this in Croatia and Slovenia, as the regulated energy prices had a strong negative effect on the business result presented in the preliminary unaudited estimate of Petrol Group for 2022 (click here to read more about this). Petrol emphasized that in Slovenia and Croatia, proposals for amicable dispute resolution have already been submitted to the State Attorney’s Offices, In Slovenia in the amount of EUR 106m and in Croatia in the amount of EUR 56m. A notification on the effect of price regulation on operations and market competitiveness in the Republic of Croatia has been sent to the European Commission, and initiatives to put an end to the petroleum product price regulation have been sent to the governments of both countries.
The main findings from a study on the petroleum product price regulation in Slovenia conducted by the School of Economics and Business of the University of Ljubljana were presented at the Meeting. The findings show that the regulation in Slovenia does not deliver any social benefits; moreover, margins in Slovenia are among the lowest in the EU, which is reducing market competitiveness, and the regulation does not support the ambitious goals in the field of renewable energy use for transport. It also suggests that the reasonableness of the motor fuel market regulation should be reconsidered.