Omv Ag

Welcome to the OMV results January to March 2025 conference call and webcast. After the speaker's presentation there will be a question and answer session. To ask a question during the session you will need to press star 1 and 1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question please press star 1 1 again. Please be advised that today's conference is being recorded. At this time, I would like to refer you to the disclaimer, which includes our position on forward-looking statements. These forward-looking statements are based on beliefs, estimates and assumptions currently held by and information currently available to OMV. By their nature, forward-looking statements are subject to risks and uncertainties that will or may occur in the future and are outside the control of OMV. Therefore, recipients are cautioned not to place undue reliance on these forward-looking statements. OMV disclaims any obligation and does not intend to update these forward-looking statements to reflect actual results, revised assumptions and expectations and future developments and events. This presentation does not contain any recommendation or invitation to buy or sell securities in OMV. We'd now like to hand the conference over to Mr. Florian Greger, Head of Investor Relations. Please go ahead, Mr. Greger.

Thank you. Good morning, ladies and gentlemen. Welcome to OMV's earnings call for the first quarter 2025. With me on the call are our CFO, Reinhard Florey, Martijn van Kooten, Executive Vice President, Fuels and Feedstock and Chemicals, and Barry Garjo, Executive Vice President, Energy. Our CEO, Alfred Stern, sends his regards. He's hosting a high-ranking government delegation that is visiting us today and therefore cannot participate in today's call. Reinhard will walk you through the highlights of the quarter and will discuss OMB's financial performance. Following his presentation, the gentlemen are available to answer your questions. And with that, I'll hand it over to Reinhard.

Thank you, Florian. And ladies and gentlemen, good morning and thank you for joining us. In the first quarter of 2025, the macro environment showed a mixed picture with growing concerns about the global economic outlook driven by uncertainties surrounding U.S. trade policy. Oil was part of a broader sell-off which started to briefly dip below $70 per barrel in mid-February before posting a moderate recovery at the end of the quarter. European gas prices rallied to mid-February on large draws on inventories due to elevated demand, but prices eased in the second half of the quarter as LNG inflows increased and as demand tailed off seasonally. The refining indicator margins were very volatile, on average showing some recovery compared to the previous quarter, but it remained significantly below the strong prior year quarter. Oliphant indicator margins improved quarter on quarter, supported by stronger demand and tighter than expected supply due to outages at crackers and refineries. European crack operating rates saw a significant increase, rising from 67% in the fourth quarter of 2024 to 76% in the first quarter of 2025. However, macroeconomic challenges persisted. The construction sector remained stagnant. The automotive industry experienced only a modest recovery. As a result, the increase in olefin prices could not be fully passed on to customers leading polyolefin indicator margins to average slightly below the levels of the previous quarter, but remaining slightly above the prior year quarter. Our polyolefin sales volumes, including joint ventures, grew by 10% year-on-year. Fuel sales volumes remained broadly stable, and hydrocarbon production was 12% down year-on-year, impacted by the divestment of our Malaysian assets. Cash flow from operating activities reached almost 1.4 billion euros, an increase of more than 30% compared with the previous quarter. Clean CCS operating result was solid, coming in at around 1.2 billion euros, 22% below the prior year quarter level and 16% lower than the fourth quarter of 2024, which had benefited significantly from the arbitration award in gas marketing and power. Clean CCS earnings per share amounted to €1.26. Before I will go into the details of the first quarter financial results, let me give you a short update on OMV's strategic progress. At the beginning of March, we reached a major milestone in the implementation of our Strategy 2030. OMV and ABNOK, have signed a binding agreement to combine Borales and Boruche along with the simultaneous acquisition of Nova Chemicals to form the new company, Boruche Group International. This strategic partnership with ADNOC in polyolefins will bring clear benefits to OND and our shareholders. The new company will be the fourth largest polyolefin player globally with access to the largest, most attractive, and fastest growing markets across the Americas, Europe, the Middle East, and Asia. It will benefit from a highly competitive cost position with around 70% of its production capacity in feedstock advantage regions, complemented by a best-in-class specialties business. Following a €1.6 billion cash injection into the new company, OMV will hold a 36.9% stake in Borussia Group International with equal shareholdings and joint control with Adnok. Borussia Group International will serve as a substantial platform for organic growth in polyolefins, supported by a robust pipeline of near-term projects. Boruch Group International has tremendous growth potential through the cycle with EBITDA projected to exceed US$7 billion. In addition, we anticipate substantial synergies of approximately US$500 million per annum on a run rate basis by 2030. These transactions create immediate value for OMV as they are free cash flow and clean CCS EPS accretive. At the same time, OMV maintains its investment-grade credit rating and keeps its leverage ratio well below 30%. The combined strength of the three companies will position Baruch Group International well to generate attractive shareholder returns. We expect a floor dividend net to OMB of around $1 billion per year, which will further strengthen OMB's shareholder distributions. We anticipate completing both transactions by the end of the first quarter 2026. The OMB supervisory board has also given its approval. As is customary, closing the transaction is subject to the relevant regulatory approvals. In this case, merger control clearances in markets where the companies sell their products, and foreign direct investment clearances in Austria, Canada, and the U.S. Until completion, Borealis and Bruges will continue to pay dividends according to their current schedules and commitments. In Romania, we have reached another major milestone. We have commenced drilling operations at the Neptune Deep Project, located 160 kilometers offshore in the Black Sea. The project is progressing very well, according to plan and within budget, with first gas estimated for 2027. Neptune Deep, the largest offshore gas project in the European Union, will add around 70,000 barrels today to our portfolio. In addition, OMV Petron is advancing exploration activities in the Black Sea at Hanaspo offshore bloc. We have also successfully started up the re-oil plant in Austria with an annual processing capacity of up to 16,000 tons of hard-to-recycle plastics. This is a significant milestone in the chemical industry following 15 years of pioneering research and development. Complementing mechanical recycling, re-oil processes plastic waste that would otherwise remain unrecyclable and reintegrates it into the value chain. The re-oil technology is expected to reduce CO2 emissions by up to 34% compared to plastic waste incineration. We have also secured an 81 million euro grant from the European Union to support the next phase of our chemical recycling initiative the industrial scale re-oil plant with a then processing capacity of up to 200,000 tons. This morning, we announced the startup of the green hydrogen plant at Schwechat with an annual capacity of up to 10 megawatts. The green hydrogen will be used to produce more sustainable fuels and chemicals, including sustainable aviation fuels and renewable diesels. Let me now return to the performance of our business segments in the first quarter of this year. Compared to the first quarter of 2024, the clean operating result of chemicals was almost flat at €126 million. In our European business, we recorded positive market effects of €57 million, attributable mostly to rising olefin indicator margins. Inventory effects were positive, but 11 million euros lower compared to the first quarter of 2024. The utilization rate of our European crackers increased by three percentage points to 90%. The contribution of Borealis, excluding joint ventures, declined to 71 million euros. The base chemicals business decreased considerably as higher olefin indicator margins were more than offset by lower inventory valuation effects, a decreased like feedstock advantage, and higher customer discounts. Polyolefins came in lower as well, mainly as a result of higher fixed costs and lower realized margins. We were able to expand polyolefin sales volumes, excluding joint ventures by 11%. Sales volumes in the consumer products and infrastructure industries increased as more demand was captured, while sales volumes in the mobility industry declined in line with the market sentiment. The contribution of the joint ventures grew to 45 million euros, mainly due to better Perugia performance and the exclusion of Baystar's result from the clean operating result effective of March. The contribution from Boruche increased following higher sales volumes, while softer polyethylene prices in Asia partly offset this. Overall, the result was positively impacted by around 40 million euros due to the reclassification of Borealis as an asset held for sale following the signing of the transaction on March 3rd to combine the shareholdings of Borealis and Boruche into Boruche Group International. The clean CCS operating result of fuels and feedstock declined considerably to €117 million, mainly due to a lower refining indicator margin and a reduced contribution from ad-hoc refining and global trading. The European refining indicator margin dropped by $4 per barrel, resulting in a negative impact of 110 million euros. The overall refining utilization rate improved compared to the first quarter of 2024, driven by higher utilization rates at Schwechat and the Petrobras refineries. The contribution of the marketing business increased compared to the first quarter of 2024. Retail performance was better, due to higher fuel margins and sales volumes, as well as stronger performance of the non-fuel business. The result of the commercial business was similar to the first quarter of last year. The contribution of ad-hoc refining and global trading decreased significantly, close to a break-even result, mainly due to a weaker refining margin environment and lower trading results. The clean operating results of the energy segment declined by 140 million to 910 million euros as a better EMP result could not compensate for the lower gas marketing and power contribution. The performance of EMP improved, driven by positive market effects of around 140 million euros. gas prices rose significantly compared with the first quarter of 2024, while oil prices decreased. Production volumes declined by 42,000 barrels per day, primarily due to the divestment of the Malaysian assets and natural decline in Norway and New Zealand, partially offset by increased output in Libya. Production costs increased slightly to $10.1 per barrel due to lower production volumes. Sales volumes decreased in line with production, also impacted by the lifting schedule in Norway and Libya. The result of gas marketing in power declined sharply by 102 million euros with reductions seen both in East and West. The gas waste result amounted to 120 million euros, mostly driven by a lower storage result due to decreased summer-winter spreads, partially offset by arbitration award of roughly 50 million euros for the Austrian supply contract with Gazprom. Gas East came in negative down by 104 million euros compared to the first quarter 2024, which was primarily due to the change in legislation for the gas and power sector in Romania that came into effect in April 2024. At around 1.4 billion euros, cash flow from operating activities was strong, rising by 32% compared with the previous quarter. However, it was 26% below the very strong first quarter of last year, which had benefited from a higher result and higher dividends from APNIC refining. Networking capital effects were around neutral. The organic cash flow from investing activities was around 1 billion euros, mainly related to ordinary ongoing business investments and major growth projects such as Neptune Deep, the PDH plant in Belgium, and the sorting plant in Germany. As a result, the organic free cash flow before dividends for the first quarter of 2025 came in at 441 million euros. Our balance sheet remained very strong. Net debt was stable and our leverage ratio stayed low at 12%. At the end of March, OMV had a cash position of 6.5 billion euros and 4.2 billion euros in under-owned committed credit facilities. Looking ahead, we anticipate that volatility will persist. driven by uncertainties surrounding the outcome of ongoing tariff discussions and the Ukraine peace talks, which significantly limit our visibility. We do not expect to be directly impacted by the import tariffs as our operations are less export-oriented. We primarily produce and sell regionally. However, tariffs will influence the global economic environment, and this will in turn have an impact on OMB. We have adjusted our expectations for the average brand price for the full year 2025 from 75 to around $70 per barrel. Our assumptions for European natural gas prices remain unchanged. However, we now anticipate the average TAG price for the full year to trend closer to 40 euros per megawatt. In the chemicals markets, we saw stronger olefin indicator margins during the first quarter, with a further increase in April. However, the potential impacts of tariffs implementation on the markets remain uncertain. Hence, we are maintaining the full-year outlook for olefins and polyolefins provided in February. We expect to grow polyolefin sales volumes of Borealis, excluding joint ventures, to around 4.1 million tons. higher an increase of 200,000 tons compared with 2024. The refining indicator margin has been highly volatile in the first three months, peaking in February before trending downward. We continue to project approximately $6 per barrel for the entire year. All other full-year assumptions remain unchanged. In the first quarter of 2025, our organic capex came in at around 800 million euros, significantly below the previous quarter. We remain highly disciplined in managing our expenditures, both operationally and in terms of investments. Our full year outlook for organic capex is unchanged at 3.6 billion euros, lower than the prior year. And we remain strongly committed to our efficiency program targeting additional cash flow of at least half a billion euros by 2027. We have already achieved around 180 million euros last year, and we are well on track to meet our 2027 target. As highlighted in the trading update following the Boruche Group international deal, the reclassification of Borealis as an asset held for sale is expected to have a positive impact of around €140 million per quarter on the clean operating result. Additionally, the exclusion of the Baystar result will further contribute to this positive effect. There will be no effect on cash flow. We expect substantial dividend payments once again from Boruch. In the second quarter of this year, we are due to receive around €220 million as the second installment for the 2024 dividends. Rouge announced this month that total cash dividends for 2025 will be about $1.3 billion. The first tranche of around €220 million net to OMV will be paid in the fourth quarter of 2025 and the second in 2026. Thank you for your attention. My colleagues and I will now be happy to take your questions.